Hi friends from today lecture from @fredquantum, I learn a very new concept of Crypto Assets Diversification and Arbitrage Tradings also.

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Thanks for making it like a wonderful lecture to us.

Explain Crypto Assets Diversification

As per the coinmarketcap, we having nearly we having 12189+ assets in our crypto market. Day by day those count increasing.

But those are we divide into 3 types based on their market cap. Like High cap, Midcap and low cap.

But we don't have that's many portfolios to invest in each project. So we filter some projects based on their Supply, Market cap, Social Activeness, Road map, Events and many more.

In those projects, we invest generally. But in some cases our Research does not work properly, we choose the wrong project for investing needs.

If that project not performed well, then we lose all our portfolio. Here for retrieving back, it took a long time.

If we invest in 2 to 4 projects on dividing our portfolio into 4 projects. If 1 project not performed well, then the other 3 invested projects save our portfolio. Here less risk is involved and also we can manage our portfolio very well.

Simply Don't put all Eggs in One basket, the same strategy we follow in our crypto investments also.

Crypto Assets Diversification means divide portfolios into parts and invests that money in different projects. This strategy is known as Crypto Assets Diversification.

_{Divide And Invest}

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Here is possible to mitigate risk if one or more projects perform poorly. So possible to manage our portfolio very well.

Any Investor main goal is to maximize Profits and Eliminate risks. For this, they use a lot of strategies based on their portfolio. From this Crypto Assets Diversification strategy is the most powerful and most used strategy in the crypto industry.

Not only in crypto we follow this strategy in our real-life also. ..

For Example in traditional investment, we invest in stocks, Mutual Funds along with Gold, and also routine money for small interests sometimes. All those we do on deciding our money, then invest different ways. Here we follow this strategy for maximizing our profits and eliminate risks.

If one investment of stocks dump harbour Gold investment money save us. If Gold dump harbour Mutual Investment money save us. For these needs, we always try to invest in different ways.

Here indirectly we following the Diversification strategy.

This Strategy not only in Traditional Market work but also works well in Crypto assets Investments needs also.

Why Is Crypto Portfolio Diversification Important?

Now we understand the meaning of Diversification. Now we try to understand its Importance.

Unlike a majority of traditional assets, the digital assets market is quite volatile. Because here we see 50% dump in single asset within 15 mi its time frame also. Like those situations, we don't get in the traditional market.

In the crypto market prices of different assets move in different directions. Those changes we see in every day, every hour or some times in very short period we see big pumps or dumps in market.

We handle all those situations very easily by applying Crypto Portfolio Diversification Strategy. Here we invest different coins. If one asset dumps another investment save us.

For Example, Bitcoin gets a 50% dump, Ethereum dump 25% but Defi coins start moving opposite of Bitcoin move. The pump is 30% against the Bitcoin move.

If we invest in Bitcoin, Ethereum and Defi coins.

In this situation, your overall portfolio does not get any changes in this Downtrend market also. Because your Defi coin investment saves you from the brutal dump.

So here you reduce your risk by using a Diversification Strategy.

That's why the Crypto Portfolio Diversification strategy plays a big role in managing our portfolio to minimize our risks and Maximizing our profits.

What are the Benefits/effects of Diversifying one's assets?

In any strategy, we having some positive points along with negative points also.

So before applying any strategy on our investment, we must aware of both.

Benefits of asset diversification

Reduces the impact of market volatility

Crypto is a volatile market. No one knows what happens next. From investing in different coins it reduces major losses due to volatility. Because if one asset not performed well, other coins performed well, from this we can average our Total Portfolio very easily.So possible to reduce the impact of market volatility on our portfolio.

Reduces the time spent in monitoring the portfolio

Here we investing our money in different coins based on our research. So here it doesn't take a lot of time to monitor those, Already we did need research.

So here we don't get any changes in our portfolio. So need further monitoring on our portfolio.

Helps seek advantage of different investments.

Here we invest in different assets. Some offer staking opportunities, some offer airdrops for holding, some is useful for participating in IDOs.

Like that different benefits, we get on holding different assets.

Helps achieve long-term investment plans

Here we investing our money in different assets. Some coins performed well in volatile markets also. From this, we get good returns.

In the long run Diversification investments give good returns.

Helps avail of the benefit of different Trends

We know in crypto trade may change very faster. Some days we see IDOs Trend, Then NFT, Then Defi and many more changes we see daily.

But identifying trends at the correct time is not so easy.

If we invest our money in different trending coins, then possible to grab more returns on it.

Helps keep the capital safe

Investors always give first preference to protect their portfolio. Then only he thinks for profits.

In a crypto volatile market, he always tries to play on the safe side, Don't take high risks.

Diversification allows investors to achieve their investment plans very well. Because Diversification main moto is Minimizing Risk and Maximizing Profits.

Lets you shuffle amongst investments

Diversification allows investors to invest in different coins based on Market Movement. So possible to garb huge opportunities, possible to increase its overall profits also.

Offers peace of mind

Due to Diversification, we can manage our portfolio in any volatile market. So we don't see major changes in our portfolio so we get peace of mind in any market condition.

Here it avoids Fomo, fud, and Allow Controlling our emotion on seeing Dumping or Trending Market also.

From all this, we get peace of mind.

Like that lot of benefits, we get from Diversification Strategy.

Disadvantages of Diversifying one's assets:-

Reduces Profits:-

Diversification not only minimizes the risk but also reduce profit.

Here we investing our money in different coins.

If one performed well, remaining not performed not possible to get good profit but we reduce our risk.

Besides this, if we invest all our money incorrect assets at the correct time, then possible to get high returns in a short period.

Like that opportunity, we miss in the Diversification strategy.

Too Complicated

Here we investing the money in different coins. For selecting coins we need to do a lot of research on it. For this need, we need to invest a lot of time.

Filtering coins is too complicated, it's not an easy task.

Transaction fees:-

For investing different coins we also need to pay huge transactions fees for each purchase needs.

Here we losing our hard earning money for Transaction needs.

In Exchange is ok for a fee, but you choose different coins in ETH related, those only available in DEX, then huge money simply go for swaps needs only.

For small investors, this strategy is not possible to use.

Bad Investment Vehicles

If our coin selection is wrong, then again we see a huge dump in our portfolio. So in this situation Diversification strategy does not work well.

Hard To Manage Different Assets:-

In the Diversification strategy, we invest in different coins. Managing those at a time it's very hard for us.

Checking each projects updates, charts, and other things every day, it's not so easy.

Managing plenty of coins in a wallet is not so easy task.

Like that lot of Disadvantages, we having in Diversification Strategy.

Construct Crypto Assets Diversification according to the 1 - 4 Rule - Choose 4 crypto assets to discuss each of the assets, and perform a detailed fundamental/technical analysis on them.

Now we need the meaning of Diversification, It's Benefits and Effects along with its Importance too.

For applying this strategy now we need to pick coins from the market. For this we need to do some Fundamental and Technical analysis, Then only in those coins, we can do our investments.

I choose DOT, VeChain, Cake and FTM as present and Upcoming trend needs.

PolkaDot Fundamental and Technical Analysis:-

When my writing Time Dot trading around $27.29 with a market cap of around $26,847,771,547.

_Polkadot

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Its Total supply of 1,103,303,471 Dot coins. Current circulation supply 987,579,314.96.

_{Dot Basic Details}

PolkaDot is listed in coinmarketcap with 9th rank and having around 1.45 Dominance in crypto market.

_{Dot Dominance}

We can trade Dot coin in different pairs, All most of all Top Exchanges listed Dot coin with good liquidity. So we can do tradings in any exchanges very easily.

Even available in Dex also.

_{PolkaDot Markets}

About Polkadot:-

Polkadot is an open-source sharding multichain protocol. This means it offering cross-chain transfers of any Data/assets and also making bridges between different blockchains.

It's an amazing concept, Many projects build using different blockchains, If they wish to move their project into another blockchain then they must do recoding and many more things to do. It needs huge money and took time also.

Like those all issues, we can solve them here very easily. Because Polkadot providing cross-chain transaction support. On using this any project can move to other blockchains based on their needs very easily.

Polkadot is a fully Decentralized and private web, controlled by its users, and simplify the creation of new applications, institutions and services. This means it's connected Private and Public chains and offering permissionless networks, oracles and future technologies to them.

And allow them to share their data and transactions into different blockchains in their PolkaDot Relay Chain.

Dot is the native coin of the Polkadot protocol. So dot having some real use cases in their protocol. It plays a big role in providing network governance and operations and creating parachains by bonding.

Polkadot was founded by the Web3 Foundation for providing user-friendly decentralized web in open-source.

Polkadot founders are Dr Gavin Wood, Robert Habermeier and Peter Czaban.

What Makes Polkadot Unique?

For Transactions need in Polkadot protocol use a shared Multichains network, so here transaction occurs in parallel. So here it reducing transaction cost and Time.

It supporting cross-chain functionality, so we can move our projects from one blockchain to another blockchain very easily. Here we connect our projects into Dot chain with a minute. After connecting we can access all necessary support from them.

It's the network has a highly sophisticated user-driven governance system that also helps to secure a complete system. The team, services and more things make Polkadot unique from all other projects.

After knowing all those things about Polkadot I choose this coin for my investment needs.

Polkadot Technical Analysis:-

Its present price is around $27.29. It's an all-time high of around $49.69. Present trading nearly 44% low price compared to its ATH. Its all-time low price is around $2.69. At preset it trading 922% above from its low price with a $30,375,730,305.53 Fully Diluted Market Cap.

_{Dot Technical Analysis Chart}

As per my Technical Analysis if I Invest my money in Dot, If it hit my all Targets I earn 72.96% returns. If go opposite way, then reach the next support level here I lost 35.47%. If it dumps hard again I do Dollar Coat Average on using additional money.

VeChain(vet)Fundamental/Technical Analysis:-

When my writing Time Vet trading around $0.085 with a market cap of around $5,477,665,242.

_VeChain

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Its Total supply is 86,712,634,466 vet coins. Current circulation supply around 64.32B. It is around 74% means the remaining 26% of coins need to add.

_{VeChain Basic Details}

Vechain is listed in coinmarketcap with 29th rank and having around 0.29 Dominance in crypto market.

_{Vechain Dominance}

We can trade vet in different pairs, All most all top Exchanges listed with good liquidity. So we can do tradings in any exchanges very easily.

Even available in Dex also.

_{Vechain Markets}

About VeChain:-

Vechain is a Blockchain-based Supply chain project. Its main aim is to provide governance between IoT devices through blockchain. It tries to solve major issues in Supply Chain.

We all know in the upcoming future we use a lot of Internet of Things (IoT) technology devices, They work based on a lot of instructions from different devices, all together here need to work to reach their destination. So here they must trust another device signals, so here we need to increase the Trust factor between devices.

VeChain project main goal is to improve Trust ness between IoT devices with help of Blockchain. In the supply chain, this is a major issue at present, so VeChain Try to solve this problem.

This concept is very new, they are very less projects that come with this concept. Their team also working hard to reach their goals. But it's not an easy task, so it taking time to prove them in the crypto market.

On considering all those I choose VeChain as one of my Investment projects.

This project Begun in 2015 and launched in June 2016. It took one year for lunch itself.VeChain creator and co-founder Sunny Lu, an IT executive who was formerly CIO of Louis Vuitton China.

It having Two types of coins on its platform. VET and VTHO, manage and create value based on its VeChainThor public blockchain.

What Makes VeChain (VET) Unique?

They try to change the centralized supply chain into a Decentralized way by using Blockchain Technology.

They try to solve a lot of issues we facing presently in the supply chain.

Using their Transparent Technology they controlling weaknesses in the supply chain and try to improve security, efficiency, ease of tracking products and many more things. From they trying reducing cost for maintaining those. Because all those are automation. So no need for any additional manpower to organize those.

After knowing all those things about Vechain I choose this coin for my investment needs.

VeChain Technical Analysis:-

Its present price is around $0.085. It's an all-time high of around $0.27, Present trading nearly 69% low price compared to its ATH. Its all-time low price is around $0.0016. At preset it trading 4978% above from its low price with a $7,387,658,524.43 Fully Diluted Market Cap.

_{VeChain Technical Analysis Chart}

As per my Technical Analysis if I Invest my money in Vechain, If it hit my all Targets I earn 185.23% returns. If go opposite way, then reach the next support level here I lost 30.47%. If it dumps hard again I do Dollar Coat Average on using additional money.

PancakeSwap(Cake) Fundamental and Technical Analysis:-

When my writing Time Cake trading around $19.21 with a market cap of around $$4,353,802,659.

_Pancakeswap

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Its Total supply is 226,648,325 cake coins. Cake having an unlimited supply, those increase based on staking. Its maximum supply is unlimited, no one knows. The current circulation supply is around 226,648,324.55.

_{Pancakeswap Basic Details}

The cake is listed in coinmarketcap with 36th rank and having around 0.22 Dominance in crypto market.

_{Cake Dominance}

We can trade Cake in different pairs, All almost all major Exchanges listed with good liquidity. So we can do tradings in any exchanges very easily.

Even available in Dex also.

_{Cake Markets}

About PancakeSwap:-

Pancakeswap is an Automated Market Maker(AMM) In Decentralized finance. It works on Binance Smart Chain.

Here we do swaps, Participate in Famings, pools and many more things. From this, we can earn additional income from our holdings.

This project launch in September 2020, her all BEP 2O coins we can swap.

Pancakeswap all users to earn additional income on providing Sigle Token pools, Farming with a combination of 2 coins. On staking there we earn good APY here. In some staking we get more than 100%+ APY we get here.

But still, we don't know who is the founder of this Pancakeswap AMM protocol on the Binance Smart Chain. Some telling due to passion on Pancakes they develop this project.

For small investors, Pankeswap is a good choice. Because here Transaction fee is very less, and faster compared to other AMMs like Uniswap, 1Inch compared to them.

What Makes PancakeSwap Unique?

Pancakeswap is an Automated Market Maker so here we don't get any order book
Liquidity pools are used instead of order books.

So any user can provide liquidity here, from this they earn cake as a reward. For providing liquidity we get LP tokens, and staking them also generate additional income.

Pancakeswap User Interface is very simple and easy to use. Its feature attracting a lot of trades to use this platform.

At preset we having NFT trend, Next month Pancakeswap plane to start its Market place for NFTs needs. After it becomes the life we can but/sell NFTs very easily.

One more important feature along with cake rewards they offering free NFTs for liquidity providers. That is additional income for providers.

And also it having cake burning event, from this they trying to controlling cake supply.

After knowing all those things about Cake I choose this coin for my investment needs.

Pancakeswap Technical Analysis:-

Its present price is around $19.29. It's an all-time high of around $44.18, Present trading nearly 56.23% low price compared to its ATH. Its all-time low price is around $0.198. At preset it trading 9601% above from its low price with a $4,328,997,646.05 Fully Diluted Market Cap.

_{Cake Technical Analysis Chart}

As per my Technical Analysis if I Invest my money in cake, If it hit my all Targets I earn 121.73% returns. If go opposite way, then reach the next support level here I lost 40.93%. Ifdumpsdump hard again I do Dollar Coat Average on using additional money.

Fantom(FTM) Fundamental and Technical Analysis:-

When my writing Time FTM trading around $1.25 with a market cap of around $3,192,028,566.88

_Fantom

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Its Total supply is 2,545,006,273 FTM coins. The current circulation supply is around 2.55B FTM. It is 80% of the Total supply.

_{Fantom Basic Details}

The Fantom is listed in coinmarketcap with 44th rank and having around 0.16 Dominance in crypto market.

_{FTM Dominance}

We can trade FTM in different pairs, All almost all major Exchanges listed with good liquidity. So we can do tradings in any exchanges very easily.
Even available in Dex also.

_{FTM Markets}

About Fantom:-

Fantom comes with a different concept. This looking very new to me.

Fantom is a directed acyclic graph (DAG) smart contract platform providing decentralized finance (Defi) services to developers using its bespoke consensus algorithm. This concept is very new in the crypto market.

Their team looking very strong and developing their project as per Roadmap. It having its NFT marketplace. But here we can buy/sell using different networks also very easily.

This project main aim is to solve issues in Smart-contract platforms Specifically focused on Transaction speed.

Its project developer says here transaction occurs under Two Seconds. This Transaction speed I like a lot in this project.

This project was first created in 2018 on OPERA, then after its main net launch in 2019, December.

The Fantom Foundation was founded by South Korean computer scientist Dr Ahn Byung Ik. Currently, the platform’s CEO is Michael Kong.

Fantom tram is filled with specialist engineers, scientists, researchers, designers and entrepreneurs. This platform having worldwide Employees also with distributed platforms.

What Makes Fantom Unique?

It using a new scratch-built consensus mechanism for providing Defi related Smart contracts.

They providing high security and scalability services for smart contracts needs.

This platform work based on proof - of- work algorithm. That's why here every transaction executes in under Two Seconds.

As per their website, this project main aim is grant compatibility between all transaction bodies around the world.

In the 2018 FTM sale, Fantom raised around $40 Million only for Further development needs.

After knowing all those things about Fantom I choose this coin for my investment needs.

Fantom Technical Analysis:-

Its present price is around $1.24. It's an all-time high of around $1.93 Present trading nearly 34.99% low price compared to its ATH. Its all-time low price is around $0.0019. At preset it trading 64704.13% above from its low price with a $$3,982,186,923.21 Fully Diluted Market Cap.

_{Fantom Technical Analysis Chart}

As per my Technical Analysis if I Invest my money in FTM, If it hit my all Targets I earn 38.79% returns. If go opposite way, then reach the next support level here I lost 20.56%. If it dumps hard again I do Dollar Coat Average on using additional money

My Investment in using 1-4 Diversification Strategy.

Already I choose 4 coins for my investment needs. For selecting my investment needed coins I do my fundamental and Technical Analysis.

This is my verified Binance Account.

_{My Verified Binance Account}

In my wallet, I have $90, But now I don't invest all money in my selected coins. Because the Market is in a Downtrend, so if my invested coins dump hard, on using the remaining amount I do Dollar Cost Average. For further needs, I hold some money and investing $60 in total. For each coin, I decided to spend $15 on each coin. So total $60 investment.

_{My Balance in My Wallet}

For investment needs I go to my wallet, Then select DOT/USDT pair. Then go Market buy. Then I place my bid in the market for $15 worth.

_{DOT/USDT Market Buy}

Now I select the VET/USDT pair. Then go Market buy. Then I place my bid in the market for $15 worth.

_{VET/USDT Market Buy}

Now I select CAKE/USDT pair. Then go Market buy. Then I place my bid in the market for $15 worth.

_{CAKE/USDT Market Buy}

Now finally I select FTM/USDT pair. Then go Market buy. Then I place my bid in the market for $15 worth.

_{FTM/USDT Market Buy}

Like that on doing Diversification of my complete money, I invest in my 4 selected coins.

_{My Complete Trade History}

_{Holdings in My Wallet}

Like that, I do my Investment on using 1-4 Diversification Strategy successfully.

Note: I invest the above coins 2 days before, But the chart prepare 2 days after, that's why we get buy price differences in my presentation

Explain Arbitrage Trading in Cryptocurrency and its benefits

Arbitrage means leveraging profits to our advantage. In the Crypto market, we having a lot of trading platforms like Centralized Exchanges and Decentralized Exchanges. Here we can trade different coins with different platforms. Due to Liquidity, Users and some other reasons, we see some price differences in some coins.

Just finding those, here we can do arbitrage tradings. From this, we earn quick profits very easily.

Means simply buying a coin at a low price, then selling the same coin in another Exchange for a higher price. In this process, we need to handle the withdrawal fee, and also on doing a small amount we don't get that's many profits. Need some reasonable money for doing arbitrage trades.

In general crypto trading, there is a high risk involved due to volatility. We always need to focus on price action, and market conditions, then only we get profitable trades.

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Crypto arbitrage is also one type of trading technique. But here we need to take our decisions faster, and move founds related to it. Here we get profits based on our speed, efficiency, network speed and many more things helps us to book quick profits.

If we do slowly then there is a chance of sudden price drop also, so possible to get lost also. Because all traders try to fo utilise this arbitrage opportunity, so we can sudden pumps and dumps in that coin in a fraction of seconds. So need caution on doing arbitrage trades.

For Example, if you see Dot trading around $25 in Binance, at the same in Kucoin it trading $26, here we get the opportunity for doing arbitrage Trade here.

Simply Buying Dot in Binance, withdraw to Kucoin, then selling Dot at $26. We get good profit within a short time. This type of tradings is known as Arbitrage Tradings.

Like those trades is possible as long as crypto markets are not perfect.

Benefits of Crypto Arbitrage:-

• Fast Profits
  
  Here for doing Transaction it took less than 10 to 20 minutes. So can book profits in this short period. So we see fast profits on doing Arbitrage Trades.
  
  -Wide Range Of Opportunities
  
  As per coinmarketcap, we having more than 400+ Exchanges in the crypto market. So we get plenty of opportunities on doing arbitrage trades in different coins every day.
  
• The Crypto Market is Still Development
  
  Still, the crypto market is not welcome by the public. We having a lot of issues with accepting crypto. Each country having their restrictions also. Due to this irregularity, disjointing, and lack of information transfer between exchanges. We get a lot of prices difference in coin price. So we can utilise those opportunities.
  
• Crypto Currencies are Still Volatile
  
  All we know is how much volatility we having in the crypto market. Due to supply, demand and liquidity based we see assets price differences in different Exchanges. So here we get a good opportunity to doing arbitrage trades.
  

Disadvantages of Crypto Arbitrage

Here how many benefits we get that's much risk also involved in doing arbitrage trades. We also need knowledge on it for getting profitable arbitrage trades.

-KYC Restrictions

This big issue for doing arbitrage trades. Some exchanges do not allow us to Withdraw/Deposit along with Buy/Sell without finishing our KYC.

But for arbitrage needs we need to use Different Exchanges, so need to finish KYC in different exchanges for this arbitrage trades needs. But here high risk involved, on giving our original information to Exchanges is not a good choice. There is a chance to misuse those. That's why we do KYC in Trusted Exchanges only.

-Fees

Crypto Exchanges do not allow us to do trade, Withdraw without a fee. Some took a Deposit fee also. So before doing arbitrage trade we need to calculate trading, withdraw and another fee also. If we good profit after eliminating those few, then only we go for arbitrage trades otherwise is not a good choice for us.

• Large Investment give Good Profit
  
  For doing arbitrage trade we need to invest a large amount, then possible to book good profits. On doing arbitrage with the low amount not possible to book profits.
  
  -Withdrawal Limits
  
  Some Exchanges set withdrawal limits also. More than that limit not possible to withdraw so not possible to book good profits here.
  
• Timing
  
  Sometimes it took a long time for Withdrawal and Transaction needs. In the meantime, there is a chance to move the market in opposite direction. So possible to a get huge loss also.
  
• Competition
  
  Not only you, there is a lot of other traders who also try to do arbitrage trades. From this, they reduce volatile and maintain volume in different Exchanges. This may also reduce our arbitrage opportunities for others.

Like that we having Advantages along with Disadvantages on doing arbitrage Tradings.

Discuss with illustration how to take advantage of Exchange Arbitrage.

Exchange Arbitrage means buy coins in one Exchange with a low price, withdraw those to another Exchange, then selling those at a higher price. This type of tradings is known as Exchange Arbitrage.

For example, in the below example here you see Dash coin price differences in Different Exchanges At a time.

_{Dash Price in BitBns Exchange}

In BitBns Exchange, Dash trading around $82 but has no volume to buy there.

_{Dash Price in Binance Exchange}

In Binance it Trading around $156.2 with good volume.

_{Dash Price In Wazirx}

In Wazirx it trading around $153.90 with good volume.

So here we can do Exchange Arbitrage between Binance and Wazirx but not possible to do it in Bitbns Because there is no volume so our orders do not get executed.

But on buying Dash in Wazirx, Sell in Binance we get a good profit if we did faster, otherwise, our profits reduce.

Here we do trading in the Same Coin but Buying at low in One Exchange, again selling those at higher Immediately in another Exchange. That's why we called those Tradings Exchange Arbitrage Tradings.

Creatively discuss Triangular Arbitrage in Cryptocurrency. How to identify Triangular Arbitrage opportunities and the risks involved.

A triangular arbitrage opportunity occurs when the exchange rate of a currency does not match the cross-exchange rate.

Like those opportunities, we get rarely. Identifying those is also not so easy.

Like those opportunities, we get when one market is in an uptrend and another market is in a Downtrend. In this situation only we get to do Triangular Arbitrage. This type of trade occurs in one Exchange itself.

Like those opportunities, we generally get in foreign currencies. On doing foreign currency tradings also we earn quick profits here.

For Example same holding $1000 USDT in his hand. He observes price differences in Euros and ponds with respect to Dollars.

_{Difference Between Currencies}

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As per the above image, Using cross -rate formula, he find the €/£ rate is undervalued.

So he decided to apply Triangular arbitrage here. So here first he sells Dollars to Euros. Then Euros to Pounds, then again Pounds to Dollars.

Now we see exact calculations, at finally how much profits he gets from doing this type of trades.

Here same holding $1000.

1. Sell Dollars for Euros

1000×0.8678=€867.8

1. Sell Euros for Pounds

€867.8/1.3021=£666.461

1. Sell Pounds For Dollars

£666.461×1.5028=1001.557

So total profit is around $1.5, here we using $1000 if he uses $100000 in this trade he can earn $150000 very easily.

It's very huge profit in a short period. But for doing Triangle Arbitrage we need huge money for booking good profit.

Here Sam invested $1000 and earn around $1.5 as a profit. If he invests huge money then he earns huge profits. But here we do not include trading fees, if we include those in our profit, then our profits reduce based on trading fee.

How to identify Triangular Arbitrage opportunities.

• In Triangular Arbitrage, we need to trade between three currencies.

• Must Identify the cross rate and implied cross rate before going for the trade.

• If you find differences between currencies after applying cross rate and implied cross rate strategy then, we go for arbitrage trade, if it does not give any profit then it's a waste of time to do Triangular Arbitrage here.

• To identify an arbitrage opportunity, traders can use this basic cross-currency value equation:

A/B x B/C x C/A = 1, Here A is Base Currency, B and D are counter currencies which we use for doing Triangular Arbitrage.

• If the equation does not equal one, then we get the opportunity for doing Triangular Arbitrage between currencies.

So before going for the year must apply the above equation, if out pit more than 1 then we can go for trade, otherwise, it's invalid.

For Example, traders find these Differences in currencies like EUR/USD 1.1325, USD/GBP 0.7805, GBP/EUR 1.4528.

As per the formula first, we multiply all, need to identify total value is more than 1 or not.

1.1325 × 0.7805 × 1.4528 = 1.2841

So here we having the opportunity for doing Triangular Arbitrage between those currencies.

If we having €10000 in our hands.

• First Step first sell Euros to Dollars at a rate of 1.1325.

10000 × 1.1325 = 11325

So we get $11325 here.

In- Second Step we need to sell this dollar into GBP for 0.7805

SO 11325 × 0.7805 = 8,839.1625

So we get £8,839.1625(GBP)

• Now again we need to convert this GBP to our Base Currency Euros for 1.4528.

So 8839.1625 × 1.4528 =12,841.53528

So he gets back around €12841.53528.

From this trade, his pure profit was around €2841.53538. But from this we need to remove the trading fee, then remains we consider as profit.

On doing Triangular Arbitrage we earn quick profit in a short period.

Risks in Triangle Arbitrage

• Here we need to do three trades in a fraction of seconds, because if we took a long time then we miss profits. In meantime, those coin prices may get a chance.

• In each pair we having different tradings fees, so we also need an handle it.

• Need huge money to grab good profits in Triangle Arbitrage. Using small investments is not possible to do like those trades.

• Here we get less opportunity, not possible to identify those. Need powerful computers for identifying those.

• Need to do faster transactions with efficiency.

Like those risks we having on doing Triangle Arbitrage.

Conclusion:-

• Diversification is a profitable strategy for managing our portfolio.

• Through this strategy, we reduce risk in a volatile market but also reduce our profits also.

• On doing Arbitrage trades between Exchanges we can earn good profits in a short period. At the same time, high risk is involved.

• Need huge money and fast ness in doing transactions.

• For doing Exchange Arbitrages we get high opportunities due to price volatility.

• Triangle Arbitrage is also a good opportunity for huge money holders. With low money not possible to do Triangle Arbitrage.

• Triangle Arbitrage opportunities are minimum. Identifying those are very hard.

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