Topic: Friendly note: You might want to be careful of the so-called arbitrage trading (Read 349 times)

That's true, there are pros and cons to this method too.
But also sometimes there are cases where you already have funds on different exchanges, like having some bitcoin and dollars on Coinbase for your bitcoin trading where you've also linked your bank account then also having some altcoins and tether on Binance for your altcoin/token trading.

Arbitrage trading is short way to earn profit but at the same time it is too risky because many times you have to process saveral dex/bridge to use arbitrage and it is not for every one. arbitrage trading became profitable when any exchange stop the withdrawal or deposit which lead to price change in different exchanges.

I traded two time arbitrage trading and lost 1k$ when Solona faced network problem and all exchanges stopped Sol network deposit/withdraw. That time many people used arbitrage trading for GMT token which deposit was only opens in Bitget exchange. This was a straight 20% change/profit and only way is to use warmhole bridge to get SOL. unfortunately I used wrong network where I got Sol(warmhole). I was not aware of it and I send tokens to Binance and my didn't got any fund because it was not real Solona token and the only usecase was to bridge back.

My friend did saveral time and Bitget didn't banned his account. I think this is not true and i have not hear that any users account has been banned by exchange for arbitrage trading.

Exchange accounts are locked/terminated for various reasons but if any exchange is done without valid reason then the exchange's reputation is at stake here. As far as I know, arbitrage trading is not against their terms as I said previously so even if they prove that you are doing it still it can't be a reason to serve to lock your funds.

As much as I wasn't directional in that, it's not impossible. And if I may ask, have you ever tried to research how exchanges lock accounts and give no valid reason for some? Maybe that will tell you why you should be protective of your account without drawing suspicious activity to it to avoid giving them an edge to do so.

Says who?

I've lived in the regulated financial market environment for a very long time to know the sharp practices happening there, and brokers, financial institutions and banks are not innocent in this at all. There are manipulations everywhere, not to talk of the highly unregulated cryptocurrency market. You should trust yourself alone, all those companies are always looking for loopholes and the slightest opportunity to make more money. Manipulating prices for a little while for arbitrage gain by their associates can't be a hard task since they control the system.

When it comes to businesses, trust none absolutely, they won't just do it too obviously. But saying it's not possible means you are too trusting humans and don't know that sharp practices happen even in the sanest places.

I must say you shared the most value here as I never thought of this way and I'm sure many would not. But it requires a whole lot of money to gain through this approach as it would have been more earning for the arbitrageur if the whole money is moved in and out entirely rather than dividing them among exchanges. Take for example, if you are arbitraging with $50,000 and see the opportunity in two exchanges, you get to make more when the whole $50,000 performs the action successfully, but would make less, properly half of the deal if you share the money into two among the two exchanges.

Regardless, your style is the best I've seen so far, it lessens the risk and suspicion even if one is trading with exchanges that frown at it.

That's one way of doing arbitrage trading but another way which is less risky is to have funds in both places and perform the trades using those funds. For example you have both bitcoin and dollar on exchange A and B. If bitcoin price is higher on exchange A compared to B, you sell some of your bitcoins in A and buy the same amount (or more) in B. This way your net-worth increases while not moving any funds at all.

After some time and many trades where the equilibrium between your balances is no longer there, you can transfer some funds to reach equilibrium again.

From mid-2021 to late 2021 I participated in crypto Arbitrage which I made some cool cash,  but here are some risks involved in engaging in crypto Arbitrage.

1. The risk of Moving funds back and forth whenever the opportunity presents; Here you stand at risk of losing your funds at any time because you will always be in a ghast to catch up with that slight price difference with the other exchange before it goes back to normal and may not be that careful, plus other mistakes you could encounter on the process.


2. Some exchanges where you can catch up on this arbitrage opportunity don't have enough liquidity and you may be at risk of not getting your others executed ASAP, thereby reducing your chances of profiting, and you may run at a loss due to withdrawal fees in a case where profit is not realized.

Exchanges can not use arbitrary trading to enrich themselves. A coin price in one exchange will be different from the price on another exchange. Sometimes a coin price difference one exchanges can be significant enough to be used for arbitrage trading in a way that some people will see it as an opportunity for arbitrage trading. So far that is not on the same exchange that a trader is using for the arbitrage, it is not against any the ToS of any exchange.

Arbitrage trading is not about you to trust an exchange or exchanges. Arbitrage trading is profitable. But if not done rightly and if the arbitrage did not go rightly, it may lead to loss. Trading generally is either you gain or you lose, but it is you that will look for strategies that can let you make profit.

Well, arbitrage trading is complex and requires a trader to be fast and precise at same time with some risks attached as op has mentioned. But so far as there's profit in arbitrage market traders will not keep off from it not withstanding any risk of asset seizure.

The opportunity in price discrepancies in the market  is the waxing strength of arbitration trading and in as much as these discrepancies persist arbitrage trading won't go extinct.  Some people have got bills to pay and need take risk where opportunity lies to be able to cover those bills.

I don't think that arbitrage trading is going to lose, back in the days 2014-2015 there is a ton of my friend doing arbitrage trading but yeah nowadays i don't find one I don't know why.
and the concept of arbitrage trading is still happen on Decentralized Exchange if you play on DeFi there is Dex Aggregator like 1inch it is basically buy on the cheapest dex and you can sell it on other dex that have higher price.

Maybe in Centralized Exchange there is not going much because there is a transaction fee and speed of transaction like bitcoin doesnt match with the price spike on other exchange. Simply I dont think its worth on Centralized Exchange nowadays.

Arbitrage is part and parcel of the market, it can not be eliminated and it is both good for the system and the exchanges as it will keep the price at an equilibrium in all exchanges and also it can increase the liquidity in the small exchanges that desperately need it.

As for profitability, I've done some arbitrage trading for a while a couple of years back and it can be profitable but the risks make it a very stressful thing to do. The only way I can ever justify it is if there were some automation involved so that you don't waste time trying to execute trades, move coins around, etc. which also decreases the chance of making mistakes.

Some youtubers hype it since this is catchy and easy strategy to be done or understand by newbie so they push this to get huge views. But this is so risky since we can't assure that price will stay when we start to deposit transfer our bough crypto to another exchange since price spread is also unpredictable and need to consider. So hopefully many will realize that this is not easy as they think and best to avoid relying on this strategy to avoid at risk of losing money.

Here's something that might surprise you: Alameda Research, back when it was a legit trading company, made its money off of arbitrage trading during its beginning but all the opportunities for that were closed eventually (and for other, well-document reasons, it drove off a cliff).

Only a foolish exchange that is not making any money would resort to arbitrage trading to make up for the losses, and using accounting fraud to cover the activity up.

With arbitrage trading, you must check withdrawal status on different exchanges, not only prices and trading volumes. Because it is useless if after you withdraw from a first exchange, it takes too long to be approved and proceeded to come to a second exchange. It sucks if when it comes to a second exchange, your arbitrage trading opportunity no longer exists.

If this so called arbitrage trading isn't good for banks then it's something worst to see or have with exchanges or in cryptocurrency trading, users have to be careful especially those that are new to trading thinking of it prowess in making quick source of income, the risk is never worth it, using arbitrage could be as worst than using a centralized exchange, but the two aren't perfect decision enough, if we want to be a trader, there are ways we could learn and started well without going through some sort of activities that could renders our trading asset into ransome to forfeit everything we have labour for, thank you for bringing this sound warning to the community.

It is truly possible that the exchanges are also doing that on their own, IIRC, there has been some exchanges that has been sued because of what they do but unsure if it was arbitrage and they're going against their own users. We don't know what plays behind these exchanges but one thing there is for sure that they're also taking advantage of some of their own features and also the market situation. Whilst for the individual traders, it is true that this has always been asked as if it is an easy thing to be made. They see it from people sharing it on how they're gaining profits through arbitrage but they never show the possibility that they can also lose. I didn't know that when a user does this, this can trigger the potential closure of account. Much better to read first what's written on the TOS so that every trader is going to be aware of what are the do's and don'ts of exchanges that you use. Because if that's one of the reasons of some problems that users deal with, they are aware of this strategy that's been done for many years as it's already been there.

I agree that arbitrage trading is somehow risky, but I think it is kind of important for the ecosystem. So the price of different exchanges are nearly the same.

When I discovered bitcoin, in 2017, BTC price was about 15% higher in Brazil. If a Brazilian had a bank account which any other exchange in Europe/USA could accept, it was possible to buy BTC cheaper and sell it with 15% more in Brazil.

However, all costs were high and in the end I was able to get about 5-8% only (at most)
I did it a few times. It was not illegal, AFAIK.

Nowadays the price is exactly the same, but I believe those people buying bitcoin in USA/Europe and selling them in Brazil where important, to increase the volume of BTC in local exchanges.

Arbitrage trading makes you do excessive trades which is bad for your mental health and overall portfolio health. If you want to succeed in Trading, you need to focus on improving the quality of trades that you take and not the quantity of them. better than that, just go for Hodling and keep your mental peace and only invest the amount which you can afford to lose. How about DCA? Why not go with that instead of this shitty ones?

I can not agree more with you. Because I also mentioned in my previous post that " besides the fact that we should avoid CEXs" I said it because I knew CEXs should not be pur first priorities. And the level of priority changes from person to person. Means one might use them but without KYC, one might have no issue in using it with KYC and there will be one who do not want to even use it because of " Not your keys, Not your coins".

Point being made here is, I know and agree with you that CEXs must not be our priority and we should avoid their usage at the first hand.

Thanks for confirming that, I did not checked if their is any rule in the policy. But thanks to you.

The moment we deposit our funds into an exchange's wallet, we lose our authority over our funds and the exchange can hold anyone's account for any reason that is why we keep saying' not your keys, not your cryptos', but why particularly about arbitrage which doesn't strike me.

AFAIK, Arbitrage trading is completely legal in the crypto world and as far as I researched no country has any policy against it in their regulations and also went over the exchange's terms and conditions there is nothing against it so my point is arbitrage trading is allowed but highly risky and not possible to achieve consistent success more often.

I completely agree here because it's quite sad to see arbitrage trading being pushed on so many occasions. Mostly due to (YouTube) traders itself making money from "recommending" their "good" trading strateies (we should ask if these strategies are really that profitable, why are the YouTubers not trading themselves but advertising their strategies instead) but not limited to (YouTube) traders but also many trading sites because high frequency trading is a good revenue source for trading sites.
Arbitrage trading is often advertised as low-risk trading but when considering fees, uncertainties etc., arbitrage trading is really very risky.

Being careful and staying away from arbitrage trading is definitely a good idea. 

AFAIK, still there are plenty of people who don't know how to be an arbitrage trader, A few months back I heard about some protocols directly allowing you to explore the multi-exchange market for the best prices to trade using a platform mult-exchange supported wallet, until now I haven't heard of it again. Most of the time, the trading pairs with high liquidity perform quite similarly in every exchange except for those with lower liquidity. Arbitrage trading with the Centralized exchanges Until now I haven't heard of such a case, but it is really concerning that such type of trading can grow in the DeFi space where the money capitalist can easily manipulate the market markers for such actions.

You have made a valid point here. I was not aware of the fact that arbitrage trading is prohibited on Forex or on any type of trading. But those exchanges are using this in their own favor. In my opinion, it is not bad to ban or lock the accounts of users who are caught doing AT, but creating an environment for people to fetch them into this field after their accounts are locked is not a legal thing. And that shall be investigated.

And thanks for the heads up; even though I am not involved in arbitrage trading, I will try to warn others who do this.

As far as I know, it won't be a problem for crypto exchanges, as last time I read a post, someone said the Korean exchanges are best for AT. Because the difference between prices in that country and other countries is like a lot. And I personally checked it, and it really was. But I did not give it a try because I thought money could not be that easy to make and there must be some catch in it.

He did not mean to say that. Instead, he made it clear in his post that Forex Exchanges had written in their policy that such practices would not be tolerated and, once detected, the accounts would be locked. And as a result, the owner will lose access. He also said that many forex exchanges have been tagged and investigated because they were luring people into arbitrage trading so that they could lock their accounts later and make some good money.

The point is, he was providing us with a new set of information to avoid such conditions where our assets would be gone while performing arbitrage trading in crypto exchanges.

PS: I am not sure what the source of the OP is, so do not take my words for granted that forex has some policy like that because I really do not read policies. Ask the OP for that. And besides the fact that we should avoid CEXs, which many people still do, they should keep this information in mind before doing arbitrage trading.

AFAIK, different prices on various exchange is to the open order place by the traders that using single exchange only. Some exchange has different price to others because some of their user is buying or selling more volume than different exchange. The difference on liquidity in the orderbook gives a huge impact on why arbitrage trading is possible.

There’s nothing wrong on arbitrage trading because exchange gets profit from transaction fee and not from user trade losses. They are not like casino that relies on customer losses for their profit.

I do not know when I became acquainted with the cryptocurrency market, but in 2017 the difference between one price and another was more than 2000 dollars, at that time 2000 dollars may equal 30% of the price of bitcoin.

Therefore, as long as there is a possibility of profit, arbitrage will continue to exist, and in the end it requires a fast bot and you need to have an account in central platforms. The only problem is making it a guaranteed way to earn thousands of Bitcoins, which is not real and becomes more difficult as days pass. even if there are no regulations, I expect arbitrage to disappear within 10 years.

So you are saying exchanges are locking/suspending accounts or trades because they believe the person is doing arbitrage trading?

I don't think so and there is no reason for them to do so because they are not going to lose anything even the other exchange because it is going to bring more transaction fees and withdrawal fees for them which mostly contribute to the exchange's profits.

I agree that arbitrage trading is highly risky but doing it not going to upset the exchanges so if traders can able to find price differences in exchange for a particular coin and they successfully manage to execute the trade within the timeframe that will end up in profit for them but its highly unlikely for anyone to succeed consistently.

It's so unfortunate that arbitrage trading is now gaining more relevance in the crypto industry, to the extent that people have started including it as a way to earn in the industry, which is supposed not to be so. This is largely due to the fact that cryptocurrency and the activities of exchanges are highly unchecked, if not, arbitrage could not have gained so much traction that people would start taking easy advantage of the so-called suspected manipulation that is now happening in the crypto world.

It's true that arbitrage trading is not illegal and has been for ages in the traditional market but you hardly see people enriching themselves easily with it since the lapses are not always there and the condition is not always encouraging and might be unappealing too (that's how a true market should be). Also, everyone has to be very careful as some businesses frown at it once it's too obvious. This could partly explain why some exchanges lock some people's accounts without telling them the reason. Even in the terms and conditions of Forex brokers, they plainly state it there that it's not allowed. This is despite that it's not illegal, and if caught, the account will be blocked.

It's so unfortunate that the lapses and lack of central coordination and cooperation among crypto exchanges cause what should have been a rare occuring phenomenon to now become common.

I won't also be surprised if exchanges are deliberately using this to enrich themselves. It's easy to manipulate prices against the prevailing price for their gains.

Many big brokers and banks (market makers & liquidity suppliers) have been heavily sanctioned with huge amounts in the past while caught with such unfair practices. But who will coordinate or sanction the global branch of exchanges?

Above all, my plight here is that you should think more about your account before you are engrossed with arbitrage trading, exchanges can't be trusted. Ask yourself, is the risk worth it?