I’ve noticed that BTCUSD quotes are sometimes lagging from bitfinex and coinbase especially during sharp moves. Have anybody tried to use this advantage to trade BTCUSD on forex brokers. I found Tickmill which have 8 USD spread and Hotforex spread which I 20-25 USD. Others brokers like XM charge much higher spreads like 45 USD.
Do you know any brokers which have low spreads on this pair - 10 -15 USD or so?
And my second question is what are pitfalls in this trading strategy?
Arbitrage on exchanges is possible in theory.
However, you have to factor in the withdrawal/deposit fees and time it takes for it to happen.
This is the main pitfall.
As for forex brokers with low spreads - JFD Brokers has ~8$ spread on that CFD pair.
Screenshot from MT5:
Disclosure: I’ve recently been employed as a part of the aforementioned broker’s online marketing team.
All depends which broker you use. With Jafx they get their prices direct from Bitfinex so shouldn’t be a lag.
Thanks, you helped me a lot. Have you personally tried to trade BTCUSD. How was the execution?
Yes. In the beginning when the spread was ~50$. Haven’t tried it since.
It’s important to note that there are 4 more crypto CFD pairs available there now. If I am not mistaken they launched them on the 1st of August, along with the ESMA changes.
My focus is on EUR/USD currently.
It really depends if you are trading crypto CFD’s or Crypto. If its cryptos then what @bradley79 says applies but if you are trading cryptos as CFD then you will have to treat them just as you treat arbitrage on EUR/USD across various brokers i.e. spread arbitrage.
How do we implement spread arbitrage on fx pairs?
its one of the oldest strategy that still works. Essentially its one of the core “hit and run” strategy that is implemented by small time pro traders who look to make quick buck from new brokers or inefficient broker system configuraitons. You can read more about it online. Sorry, but I dont offer investment advise on public forums so can not commnet any more on it
Ok I see, the chance of getting banned using this trading style is higher right, because it’s quite illegal and brokers prohibit to make money risk free.
it not necessarily “illegal”. Its just that you are tring to be smarter than broker’s internal systems or that you are taking advantage of latency (latency arbitrage as its called). Brokers dont like it because in latency arbitrage, your profit is LP’s loss. You will get banned by the broker very quickly (in some cases it can take just a few hours before the ban you and in other cases it can go on for a few weeks before they figure it out). Cryptos are more or less an infant when compared to fiat fx and there are definitely a lot of ways to arb around it. You just have to find out what works for you. As a general rule of thumb, anything that is dominated by retail traders will be filled with inefficiencies that can be exploited. Cryptos (unlike fx) have way more retail participation in terms of percentage volume.
Yeah I found the inefficiency and I want to exploit it. The problem is spread, it’s unstable and sometimes can eat my profit