Setting up an Arbitrage Bot

There are two types of Arbitrage Bots. Triangle Arbitrage and Inter Exchange Arbitrage.

Creating a Triangle Arbitrage Bot

The triangle arbitrage bot is one of the oldest bots we have. This bot allows you to trade on three trading pairs on one exchange and look for arbitrage between these pairs.

In the past this bot was working really well with the thin orderbooks, but these days the orderbooks are filled pretty good so making profits with this bot type has become hard.

We still have support for this bot type, but we advice not to use it. Its a waiting game and trades are rare and have marginal profits.

If an exchange offers zero trading fees then it is still possible to get some good trades with this bot. Keep an eye out for exchanges offering limited time deals on trade fees.

Support

This bot can only be run on spot markets.

Inner workings

The triangle arbitrage bot works on 1 exchange. It allows you to setup the pairs you think can have arbitrage opportunities nd then when running it will search for profitable trades.

The search for profits is done with the fee and the orderbook taken in account, so this bot really targets the orderbook. At the same time this bot type requires 3 trades to be executed. Normally this is less. It means this bot has an additional risk of having trades stalled and it carries the risk of orderbook changes in the time in between, 3 trades can consume time so things might change in the orderbooks with stalled trades as result.

Backtesting

The backtest of this bot is not accurate, its only an impression.The backtest is can not take into account the past order books so the numbers are estimated.

Configuration

To setup a good arbitrage bot you must make sure the pairs/markets you select can be exchanged. There has to be a shared coin among 2 markets to make a bridge. For example, when Btc/Usd is selected the second pair must contain either Btc or Usd. Then the 3th pair/market will have the same demand also in reflection to Btc or Usd so it can be exchanged back.

To give an example of this... Btc/Usd → Ltc/Usd → Ltc/Btc

The bot on its own it able to detect the connections between all the setup pairs/markets.

Maximize performance

Setting up a coins like Btc, Ltc and Usd works fine, but be sure to add in some alternatives too. For example, if you can add in Eth or Lsk then your scope gets bigger, the bot can check more triangles to make profits and this is how you maximize performance.

Creating a inter exchange Arbitrage Bot

The internal arbitrage bot is based on the principle where you have 2 exchanges. It assumes to watch the highest volume trend and respond to the less volume trend.

For example, if this bot is watching OKCoin and BTC-e and OKCoin its prices are going up then this bot will sell at OKCoin and buy at BTC-e at the same time. The difference in between is the gain you make. The buy and sell even out and the remaining are the gain.

Configuration

Be aware you need to watch exactly the same markets. So if you select for example OKCoin and BTC-e then you must make sure they are both observing the Btc/Usd market. Otherwise the bot will not be able to make sense of the situation.

Maximize performance

The highest performance can be reached if you set this bot up to watch a leading market and let it respond to a slower market. Keep track on the trading volumes and you will be able to select the exchanges on your own.

Risk

This bot must assume it can place a buy and sell order and both of the order has to be filled before we can claim profits. In some rare events the orderbook might just have peaked and the order which has been send will not be filled. This is a situation which we can not avoid, we will try to issue a cancel from the software, but still 1 trade might have been progress casing a small loss.

In general the risks are rated low for this trading method