[Cryptocurrency Triangular Arbitrage]-Steemit Crypto Academy | S4W4 | Homework Post for @reddileep by || @azamrai

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Question no. 1

Define Arbitrage Trading in your own words.

In Crypto, market traders use different techniques and methods in order to gain profit. Arbitrage Trading method is one them that trader use to gain profit. In this method, we are playing with more than one market. In this method, few amounts of profit are gained by circulating the asset between more than one market.

In Arbitrage Trading, we gain minor profit in a short period of time. We make a profit without getting involved in risk. We just change the place of our assets. Arbitrage Trading does not require enough technicalities to make a profit. In Arbitrage Trading, we can easily make a profit.

We can make a profit by sending our assets from one exchange to another. In this method, we purchase assets at low prices at one exchange and sell our assets on another exchange with a slightly up price. Every exchange offers a different price for the same asset. But the difference between prices is minor. We can make a profit by performing exchanges between coins. We will discuss further this Arbitrage trading.

Question no 2

Make your own research and define the types of Arbitrages (Define at least 3 Arbitrage types)

1. Arbitrage Trading Between Exchanges

It is a type of Arbitrage Trading in which assets are traded between two or more different exchanges. In this type of Arbitrage trading, we purchase an asset at a slightly low price on one exchange and transfer these funds to another exchange. Next, we sell our assets at a slightly high price on other exchanges.

In this way, Traders get profit by just trading between two exchanges. As we know that different exchanges offering different prices of the same asset. Traders first identify the exchange that offers a low price with respect to other exchanges. After identification traders purchase assets on a low price at one exchange and sell on another exchange with a slightly high price.

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2. Triangular Arbitrage Trading

It is a type of Arbitrage trading in which traders get profit by exchanging the coins with one another. In this method traders just exchange coins. As mentioned in the name Triangular, means that three. It means that traders first buy a second coin and again with a second coin purchase the third coin.

And at last, with the third coin traders again buy the first coin that the trader uses the first time to buy the second coin. In this method traders just exchange coins and get profit without taking too many risks. In this method, traders make a profit within a short time.

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3. Funding Rate Arbitrage Trading

This is also a type of Arbitrage Trading in which traders are interested in futures contracts. As we know that the volatility of the market is high due to this cause number of traders hedge the values of their funds. They paid more than two percent of their funds to for hedge the price of their assets.

Traders take profit from this type of trading when they enter into a future contract with funding prices. In this way, they take advantage of this trading strategy.

Question no 3

Explain the Triangular Arbitrage Strategy in your own words. (You should demonstrate it through your own illustration)

In the Triangular Arbitrage Trading Strategy, we earn profit through exchanging the coin with two coins. First, we trade our initial coin with the second coin. After the first trade, we do the second trade by exchanging the second coin with the third coin. The last step of this triangular strategy is to convert our third coin into our initial coin and take profit.
We will understand this strategy with practical illustration and graphical illustration. In the following figure, you understand this strategy easily. In this figure, we have 37 Steem coins. We bought ETH with 37 Steem. We Get 0.0057794 ETH. Next, we will buy BTC from 0.0057794 ETH. We get 0.000397 BTC. The next and the last conversion is BTC to Steem. We get 38 Steem after selling 0.000397 BTC. In this way this process is complete.

Here we will discuss the practical way of Triangular Strategy. In this particular, I use all the above graphical calculations.

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Steem/ETH

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ETH/BTC

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Steem/BTC

In this way Triangular strategy is working.

Question no 4

Make a real purchase of a coin at a slightly lower price in a verified exchange and sell it in another exchange for a higher price. (Explain how you get your profit after performing Arbitrage Strategy, you should provide screenshots of each transaction showing Bid, Ask prices)

To perform the practical part of this question I chose to buy an asset on Poloniex Exchange. And for selling purposes I chose Binance exchange. Here I buy an asset on Poloniex exchange at a slightly low price and sell on Binance at a slightly high price. All the processes I do in a few steps let's start.

Step 1:

• I have 7.67 USDT in my Poloniex wallet at Poloniex exchange. I chose to buy TRX with 7.67 USDT.

• Here I place buy TRX order at Poloniex.
• In the figure you can see that, I place a buy order TRX for 7.62747677 USDT at a bid price of 0.08570565.
• In return I received 88.99619535 TRX.

In the following figure, you see the buy trade information.

Step 2:

• Next step is to transfer these TRX to another exchange.
• I chose Binance exchange.
• So, in the following figure you see the withdrawal detail of TRX from Poloniex to Binance.

In the following figure, you see the TRX amount of 88.86945. Few TRX lose in transaction fees.

Step 3:

• Next process is to again exchange into USDT. For this purpose, I place a sell TRX order at Binance with TRX/ USDT pair.
• Here you can see that I place TRX Sell order of 88 TRX at a bid price of 0.08813.
• I received 7.75544 USDTs. In the following figure, you can check all details.

• When I press the sell TRX order it will show me the pop-up message in which they mentioned alert message that you can not able to sell TRX amount that having the worth less than 10 USDT. So, this is why I buy more TRX for 10.99 USDT.
• In this way I am able to do transactions.

• Here you can see the trade detail of buying more TRX with 10.99 USDT. I received 125.6 more TRX.

• In the following figure you can see the sell trade of TRX and Buy USDT.

I have 6.67 USDT at Poloniex
Buy 8.99 TRX on Poloniex.
Sell 88 TRX on Binance
Get 7.75 USDT
Profit Gain = USDT at Binance - USDT at Poloniex
Profit = 7.75-7.67


Profit =0.08 USDT

Amount profit is dependent on the amount of your investment. I do trade with just 7.67 USDTs.

Question no :5

Invest for at least 15$ worth of a coin in a verified exchange and then demonstrate the Triangular Arbitrage Strategy step by step using any other coins such as BTC and ETH. (Explain how you get your profit after performing Cryptocurrency Triangular Arbitrage Strategy, you should provide screenshots of each transaction)

I chose to trade with Steem, Ethereum, and Bitcoin. In the following figure, you see that I have 37 Steem in my Binance Wallet. The worth of 37 Steem is about 17$.

Steem/ETH

Here I place Sell 37 Steem order at bid price of 0.0001562.
I received 0.0057794 ETH. As mentioned in the figure.

Here is evidence of Trade.

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ETH/BTC

Here I place Sell 0.0057 ETH order at Ask price of 0.069738.
I received 0.000397 BTC. As mentioned in the figure.

Here is evidence of Trade.

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Steem/BTC

Here I place a Buy Steem order at a bid price of 0.00001042.
I received 38 Steem. As mentioned in the figure.

I have more BTC in my wallet that is greater than 0.000397 as you see in the figure. So, I place the whole amount to buy Steem. In the trade section, you see that the 39 Steem That gets after selling the 0.00040685. I do this because the remaining amount after 0.000397 BTC is useless.
Here is evidence of Trade.

Profit gain = Steem After - Steem Before
Profit= 38-37
Profit= 1 Steem
Currently 1 Steem is equal to 0.4344USD

Question no :6

Explain the Advantages and Disadvantages of the Triangular Arbitrage method in your own words.

Advantages	Disadvantages
We can make profit without getting involved in too much risk	Profit gain through Arbitrage Trading is comparatively low.
If we do Arbitrage Trading it will increase the market Liquidity that is a good sign	Price of crypto coins are not moved as we expected. Unexpected price movement of coin caused serious loss
We can make profit is short time period	In this trading type we carefully make an entry in to market, if we make any little mistake then it will be caused to huge loss.
In Arbitrage Trading the speed of trading is increased	If we want to gain huge profit then we need to do huge investment

Conclusion

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Arbitrage is a strategy in which traders play with more than two coins and exchange with one another. In this strategy traders also buy from one exchange and sell on the other exchange and book profit from this strategy. It is a very interesting strategy in which traders book profit without putting their assets at risk.
Triangular is a type of Arbitrage Trading strategy in which traders exchange one coin for another coin and again another coin converts to the first one. In this way, traders take few amounts of profit from this strategy without putting their assets at risk.
There are many advantages and disadvantages of this strategy. If we do a complete homework of technical and fundamentals about the particular asset pair, then we will become successful in this trading strategy.

Cc:

@reddileep

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Written by:

@azamrai

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