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Understanding arbitrage

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komdo
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Joined: Sat Mar 25, 2017 8:58 pm

Understanding arbitrage

Postby komdo » Sun Mar 26, 2017 12:28 pm

Hi. I was wondering if someone could help me understand arbitrage. Specifically this kind:

I buy NXT at ex1 when the price is low there in relation to other exchanges and if the price i sold NXT for last time is higher than what the price is now. Simultaneously i sell at ex2 when it's price is high in relation to the other exchanges and if the price i initially bought at is lower than the current price.

Then if the situation becomes reverse i buy and sell again if the prices are lower/higher than the last time i bought/sold.

Is this how it works? Am i missing something here?

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Theo
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Re: Understanding arbitrage

Postby Theo » Tue Mar 28, 2017 12:52 pm

Yes that is the basic idea :)

komdo
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Re: Understanding arbitrage

Postby komdo » Wed Mar 29, 2017 11:21 am

Ok, because now im thinking it doesn't matter if the price is higher than the last time i bought because the end result will nevertheless be more units of that currency... If you are trading a somewhat stable currency you shouldnt care about the price the last time you bought, just the difference between exhanges. Is this correct?

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Theo
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Re: Understanding arbitrage

Postby Theo » Thu Mar 30, 2017 12:32 pm

Aribitrage is taking advantage of a price difference between exchanges.
You will need to wait for prices to move again to compleate the arbitrage circle.

Price : exchange A 1.01 exchange b 1.00
Sell A 1.01
Buy B 1.00

now when A is lower than B do the reverse
exchange A 1.09 exchange b 1.10
Sell B 1.10
Buy A 1.09

Trade
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Re: Understanding arbitrage

Postby Trade » Thu Mar 30, 2017 7:59 pm

Hi Theo,

I haven't dabbled with Arbitrage Trading between 2 exchanges yet.
The last time I thought about it, I was concerned that I would run out of 1 currency in the trade pair buying on the opposite exchange.

Does the Arbitrage Bot just flip the position logic so it can continue trading without balancing currencies and/or making transfers out of the opposing exchange?

I hope the way I composed the above makes sense.

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Theo
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Re: Understanding arbitrage

Postby Theo » Fri Mar 31, 2017 9:11 am

Hi,
Yes it does flip the logic, and yes you can run out of funds on one side. You need to rebalance by hand.
-Theo


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