(26th-December-2019)
Typical timeframe for different trading styles
Arbitrage Trading:
Think back some time ago when cryptocurrencies were skyrocketing and Bitcoin was about 20.000 USD. Since then the crypto market is in the decline. A good news is that even in these times you can make money on cryptocurrencies: by using arbitrage.
Here is a step by step guide how to Trader makes money on arbitrage with cryptocurrencies:
Step 1: Find opportunities (between exchanges or within exchange) Step 2: Take a decision whether to buy or not to buy: 1) Estimate amount of fees: transaction, transfer, network, wallet fees 2) Be aware of risks: transaction and transfer time, market volatility 3) Estimate the amount of taxes
In this article we consider each step in great detail. The first step is of course essential, but please do not underestimate the following steps as well.
If you are experienced crypto trader, then you might skip the next section and jump to the finding opportunities. Otherwise we remind you on the terminology we will use in this article.
Terms to know
Arbitrage — “is the simultaneous purchase and sale of an asset to profit from an imbalance in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.” Investopedia
Types:
Simple arbitrage. Buying and selling the same coin immediately on separate exchanges.
Triangular arbitrage. This process involves taking advantage of the price differences between three currencies. For example, buy BTC in USD, sell it to make EUR, and then exchange those EUR back to USD.
Convergence arbitrage. This approach involves buying a coin on one exchange where it is undervalued and short-selling the same coin on another exchange where it is overvalued. When the two separate prices meet at a middle point, you can profit from the amount of convergence.
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