Quant Strategy: Arbitrage Trading Algorithm (Cross-Exchange)

===== Likes: 116 👍: Dislikes: 2 👎: 98.305% : Updated on 01-21-2023 11:57:17 EST =====
Interested in Arbitrage? Ever hear what Arbitrage is? Well, look no further! I go in depth on what arbitrage is and how it can benefit you! Remember, speed is key for a good trading algorithm!
If you are interested in a specific quant strategy, let me know down in the comments!
****IMPORTANT NOTE****
As of 11/22/2021, you can't trade crypto (BTC) on Eikon/Reuters. However, Reuters does keep track of BTC prices. In the notebook I provided, I *assumed* (for educational purposes) that Reuters would be an **exchange**. So, in the notebook, treat Reuters as if it were another crypto exchange.
Github for Notebook: github.com/SpencerPao/Quantit...
0:00 - What is Arbitrage?
2:47 - Cross-Exchange Arbitrage Theory
4:35 - Beginning Cross-Exchange Code Demo
8:54 - Identifying Spread Opportunity
11:06 - Cross-Exchange Signal Identification
12:55 - Potential Trading Profits
14:18 - Cutting Transaction Costs
DISCLOSURE: As of 11/22/2021, I do not hold any positions in Bitcoin (BTC).
DISCLAIMER: All information and data on my KZbin Channel, blog, email newsletters, white papers, Excel files, and other materials is solely for informational purposes. I make no representations as to the accuracy, completeness, suitability or validity of any information. I will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use. All information is provided AS IS with no warranties, and confers no rights. I will not be responsible for the accuracy of material that is linked on this site. Because the information herein is based on my personal opinion and experience, it should not be considered professional financial investment advice or tax advice or broker dealer advice. The ideas and strategies that I provide should never be used without first assessing your own personal/financial situation, or without consulting a financial and/or tax professional. My thoughts and opinions may also change from time to time as I acquire more knowledge. These are, as discussed above, solely my thoughts and opinions. I reserve the right to delete any comments for any reason (abusive in nature, contain profanity, etc.). Your continued reading/use of my KZbin Channel, blog, email newsletters, whitepapers, Excel files, and other materials constitutes your agreement with and acceptance of this disclaimer.

[@kenhan168]

Great content

[@marcocastangia4394]

Great content Spencer. I think the problem with cross-exchange arbitrage opportunities is the delay to transfer your coins between the two exchanges and the transaction fees involved in the operation.

[@SpencerPaoHere]

Absolutely! I can imagine that someone (or some company) has addressed those issues and is making a mint.

[@nelsorex]

you can have crypto and usdt on both exchanges, and then you sell and buy on both exchanges, and the transfer is immediate

[@nedbuster1]

Great and easy to understand content, but I have a question regarding the profits. These are unrealised gains surely as if you were to sell your BTC you would then be using the ask price, which would likely erode any possible gains made?

[@jodhvirsingh8677]

Great video...I tried arbitrage trading a while back wherein the bot would buy say BTC for USDT, then buy LTC for BTC and then sell the LTC for USDT. However there were too many variables to control and I eventually found it to be loss making although in theory it sounded good. Can you try the same thing and see if you come up with a different view. Would be nice coding exercise.

[@mmmar7317]

Nice video - I think oyu should apply the taker fee 100% and not use midprice. If you want to execute arb you are going to have to eat liquidity - or else you might get stuck in a lim order

[@franklee2924]

Nice work

[@sbh_nft7587]

Hey there , what a great vid , but may i ask can i proceed with the same technique but with a different coin

[@SpencerPaoHere]

Hi! You most certainly can :)

[@muralk3153]

Good for practicing remembering Japanese

[@syr3472]

So with the API and coding would transactions between exchanges be faster? I imagine if I have 1 BTC and it's priced 18k on my exchange and 20k on another, that I could then simply send the BTC to the second exchange and sell it for profits. Transaction time would be slow but would there be a way to automate it?

[@SpencerPaoHere]

So, trading between exchanges using a public API will inevtiably slower than someone who is directly connect to the exchange. (Those are what the big players do); It's like trying to win formula 1 with a lama. Theoretically yes. You can capitalize on that spread between different exchanges that trade that commodity. The automation aspect would be as seen in this video. You create a rules based approach and make your algorithm execute based on those signals.

[@syr3472]

@@SpencerPaoHere thank you

[@amralfy7549]

why the volume number increased the profit?

[@SpencerPaoHere]

Liquidity!

[@markreynolds6220]

dunno is yor ebay example actualy arbitrage as price culd change on ebay b4 pens r sold? isnt tht y its typicaly applied to finace markets as u can make the trade in an instant ?

[@nelsorex]

you can do that by having crypto and usdt on both exchanges, and then you sell and buy on both exchanges, so the transfer is immediate

[@darrenwray285]

Can anyone recommend a good trading platform for automated cross-exchange arbitrage trading (for passive income). I don't mind if there are fees involved. Thanks! 😊

[@SpencerPaoHere]

Have you checked out interactive brokers ? They are pretty good.

[@budsme7083]

Hi Spencer is it possible to do this arbitrage without Coding ?

[@SpencerPaoHere]

Arbitrage is essentially finding inconsistent prices of the same object. You technically COULD do arbitrage without coding. But, I would imagine that being quite difficult and the margins slim for equities. This might be a different story for e-commerce or pawnshops.

[@budsme7083]

@@SpencerPaoHere great..Could you assist me on cross exchange arbitrage..

[@SpencerPaoHere]

@@budsme7083 Hmm. What do you mean? Live exchanges? Could you provide an example?