40 Percent Profit in One Day with Arbitrage?
I stumbled upon an opportunity yesterday on Cryptopia, and I'm pretty excited with the results of this experiment.
Note: Your results may vary - in fact, they likely will vary - and, of course, this is not trading advice and don't invest more than you can afford to lose and see your financial advisor, accountant, lawyer, and other professionals.
But, also, this is all sorts of WOW for me.
Welcome to the world of "Arbitrage"
You're taking advantages of inefficiencies in the market, and, in this case, I'm using Cryptopia - which, though I love it, is not the most mature market. This means inefficiencies. We're going to take advantage of one of those.
This is an actual trade that I conducted, although I've sanitized the amount to $1000. Could be more, could be less, but I wanted us to work with a nice, round number.
One of the things I noticed on "Topia" yesterday was a difference in the price movement between a coin I've been trading - ArcticCoin, ticker ARC - and two of its three "pairs," BTC and LTC. (It also trades with DOGE.)
It seemed that the BTC price was down, but LTC was up. And I did a little math and realized that I was looking at a potential big spread.
Using yesterday's prices, ARC was valued at 13 cents when coupled with BTC, and 19 cents when coupled with LTC.
Time. To. Trade.
I'll admit this took just a tiny bit of math and a leap of faith. And a little patience.
I set up the sell orders for ARC in two "tranches" - the first with a little profit, and the second with quite a bit more profit.
And these amounted to a little bit of what I've heard some friends call "moon orders," in that you want to be prepared in case one of your coins starts moving north very quickly.
Anyway, I was also able to "set it and forget it" - noting that there was a chance that I'd walk away from my computer (I actually turned it off yesterday afternoon) and wake up to an order that wasn't filled.
But it was filled. And I like the results.
What can we learn here?
- You have to know where to look.
- You have to be prepared to lose.
- You have to take profits and run.
I looked at some other coin arbitrage opportunities - using others I'm trading or HODLing, like FRN or XMY (Myriad) and didn't see the same opportunity for profit.
And I'm also sitting on some LTC, which could drop in value, right?
Again, your experience may vary.
Good luck, happy trading!
Is Cryptopia safe?
As safe as any of the others.
You're always at risk of a Mt. Gox moment. So keep that in mind with any trade.
Avoid single point of failure.
This happens when trading volume is extremely low in on pair and high in another. So the low-pair is showing a historic price on cryptopia. As soon as you make the trade the price should be adjusted and your coins won't be worth as much.
True; in some respects, I became an LTC bagholder.
But then I moved my coins out of LTC and into something else, and I feel as if my trading is buoyed a little bit more, and I'm happy.
You raise good points, though. Thanks for weighing in.
I wrote an article that explains a simple way to arbitrage across cryptocurrency exchanges, and the math involved. Important to know what you are getting into so that you will not be trading at a loss. https://steemit.com/arbitrage/@kesor/the-math-behind-cross-exchange-arbitrage-trading