Tips to remember before attempting cryptocurrency arbitrage
As this article has so far highlighted, a lot of risks are attached with cryptocurrency arbitrage. However, if your research shows you that you are ready to start cryptocurrency arbitrage, there are a few more tips you should have in mind;
i. Do not transfer in BTC– the transaction speed of BTC is very low and speed is one of the major factors for cryptocurrency arbitrage. Consider using other coins such as ETH which have faster transaction speed.
ii. Use trusted exchanges– smaller exchanges may present a chance for higher cryptocurrency arbitrage profits. However, always remember the risks involved with having your money on exchanges. Research as extensively as possible before trusting the exchange with your money.
iii. Look for new listings- When coins are newly listed on a certain exchange, they present an opportunity for arbitrage. Therefore keep track of such news by following forums and crypto sites for such announcements.
iv. Have a plan– Know which exchanges you will trade on, the amount of money you will trade with and the amount you will store on the exchanges. Know the kind of cryptocurrency arbitrage strategy you will use.
v. Monitor the market- when there is high volatility in the market, this is the time that prices can be different on the exchanges. Monitor the market for developments and news that might affect the prices so that you can know when to trade.
vi. Limit your exposure- in cryptocurrency arbitrage, never risk an amount that you cannot afford to lose. Play it safe and remember to trade limits and not market orders.
vii. Hedge- read on hedging strategies and how you can use them in order to protect you against sudden moves that are very common in cryptocurrencies.
viii. Diversify– spread your money around. Use different exchanges. Trade different cryptocurrencies. This will help minimize your risks.
ix. Bots– there are cryptocurrency arbitrage bots in the market that can help you find arbitrage opportunities faster. However, remember there are others with these bots and will most likely make the same trade decision as you. Therefore, you need to be fast in making the first order since the first one will most likely get the arbitrage while the rest will be left with an order filled in one exchange and nothing on the other exchange. This will affect your balances as you are left highly exposed to losses through volatility in the market.