Set It and Forget It: Automate Your Crypto Arbitrage

Set It and Forget It: Automate Your Crypto Arbitrage


The good news about trading crypto for arbitrage opportunities is that you can set a limit order and just wait it out. Just like trading currency or stocks, you can tell your trading platform when to make the exchange for you and then go on with your other money-making tasks.

A limit order is an order to buy crypto at a certain price. For instance, LTC is trading at $145.67 US while I write this post. Since, by this pattern seen below, it is building a second rally (see the beginning of the W?), I want to sell my LTC when it reaches higher. 

LTC20210805

 

I might pick a level amount, say, $150, but I'd rather catch the sale just before what I assume are other people's limit orders, so I will set the sale at $149.97.

That's a limit order.

Let's talk about arbitraging crypto using limit orders. This week, I traded BTC for ETH because it was a good trade. Here's the ETH/BTC chart now:

ETHBTC20210805

I bought my ETH shares at a price of 0.06799 BTC. To make a profit, I need to trade back to BTC at a higher ETH price. That doji that hit overnight signals me to pay attention. If ETH kicks back up to 0.0725, then my 1 share of ETH converts to 0.0725 of BTC, or a profit of 0.0026 in about 2 days, or 4% increase. (I'm sharing this example without the trade fee for simplicity but I cover that in the next step.)

Do I have to sit here and watch for that, though? No, I don't. I can set an increase percentage that I want, usually under 20% to make sure that the trade can happen in the short term, and then set the limit order and forget it. Here are the steps.

1. I pick the price increase I want. Since ETH rose over 5% against BTC, I'll set my limit order at 10%, which would be enough to justify paying the fee.

2. I multiply my purchase price for ETH (0.06799) by 1.1 (adding 10%): 0.07489

3. I also must consider the exchange fee, which often is why people don't do these trades. For an ETH/BTC trade, the fee is 0.35%, so I do step 2 again with the fee in consideration: 0.06799 * 1.135 = 0.07716865. This is my limit price.

4. I place the limit order in my trading platform. And voila.

My habit is to cancel limit orders that have not been executed within a week, but how long you'll wait is up to you. Remember that you want to focus on teeter-totter markets -- the coins bounce up and down against each other so you can just keep laddering up. 

 

Remember that I'm not your financial advisor and I can't make financial decisions for you. What you do with your money is your choice. 

 

 

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StarkDead
StarkDead

Statistician who loves playing crypto games


Can You Arbitrage Crypto?
Can You Arbitrage Crypto?

Yes! You can arbitrage crypto. Cryptocurrency is a very volatile market, so volatile that getting into it is a risky venture, as much as you are reading about Dogecoin millionaires. But the volatility itself makes the gamble. Find the teeter totter between two coins and you'll ladder up your value. Read on about arbitrage here: https://www.investopedia.com/articles/trading/04/111004.asp And then check out crypto pairs that move against each other and change frequently.

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