In the fast-moving world of cryptocurrency, finding an advantage can be tough. That’s where arbitrage trading bots come in. These handy tools help you as a trader profit from price differences on various exchanges. Many bots are free, but some charge fees, so choose wisely.
While arbitrage bots have been used in stock trading for years, their use in crypto is debated. Remember, using a bot doesn’t mean you can relax. You still need to monitor your trades and make quick decisions. In this guide, we’ll look closely at how they work and how to set up your own bot. so, let’s dive in!
What are Arbitrage Trading Bots?
Arbitrage trading bots help traders make money by taking advantage of price differences. Many bots are free, while some charge high fees. Traders often choose bots based on the specific cryptocurrency they want to invest in. Various companies create these bots, and traders buy them along with the software code.
Bots have been useful for stock trading for a long time. However, their use in cryptocurrency is debated. Some people believe they should be allowed, while others disagree. Using a bot doesn’t mean traders can relax. They still need to put in time and effort.
For arbitrage trading, traders must create accounts on different cryptocurrency exchanges. They also need to fund these accounts so the bots can trade. There can be unexpected situations where traders must make decisions. Bots are not for those who want to invest without any work.
Types of Crypto Arbitrage Bot
There are many types of crypto arbitrage bots, each with different tools and strategies. Choosing the right bot is important for your investment goals. Here are some popular types:
1- Cross Exchange Arbitrage Bot
This bot does exactly what its name suggests. It buys crypto on one exchange and sells it on another. Traders profit from the price differences between these exchanges.
2- Convergence Arbitrage Bot
These bots look for price differences between various cryptocurrencies. They buy low and sell high. When prices start to match, the bot sells the short position and buys back the long. It uses data to predict future price movements.
3- Triangular Arbitrage Bot
This bot operates differently. It trades cryptocurrencies across three exchanges. The bot monitors prices on all three to find profitable opportunities.
4- Decentralized Arbitrage Bot
These bots work on decentralized exchanges (DEX) using smart contracts. They spot price differences between centralized exchanges and DEX. Traders can then make profitable cross-exchange trades.
5- Spatial Arbitrage Bot
This bot keeps an eye on cryptocurrency prices across different exchanges. It decides when to trade based on price changes. If there are delays or fees, the bot may choose not to trade.
6- Statistical Arbitrage Bot
These bots use statistical models to trade quickly. They buy and sell cryptocurrencies to get the best prices. Often automated, they can execute many trades in a short time.
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Select and configure the Arbitrage bot in your trading bot
Now that you are familiar with how Arbitrage bots work, let’s dive into some practical work and set your bot up.
Before you start, remember that your bot can only place orders if you have funds for both coins on the exchanges. If you lack funds on any exchange, your order may get canceled.
Step 1: Access Your Hoppers
To start, go to “View all your hoppers.” This section shows your trading bots. Next, create a new bot and select the “Arbitrage bot” option. This will begin setting up your automated trading strategy. Choose the “Arbitrage bot” to focus on profitable trading opportunities across different exchanges.
Step 2: Configure Basic Settings
Now, let’s configure your Arbitrage bot. In the Baseconfig section, you can name your bot. You can also set the maximum open time for buy and sell orders that aren’t filled.
Step 3: Select Exchanges
Next, go to the exchanges section. Here, choose the exchanges where your bot will trade. Make sure to enable and fill in the API keys for at least two exchanges. You can also use paper trading mode to test your bot’s performance without real money.
Step 4: Set Coin Amounts
In this section, set the maximum amounts for each coin your bot will use. For example, if you set your BTC amount to 0.1, the bot will trade only that amount. The Percentage sell amount is the portion of your BTC used in each trade.
If your BTC amount is 0.1 and your Percentage sell amount is 15%, each trade will use 0.015 BTC.
Step 5: Choose Markets
After selecting your exchanges, choose all the markets where your bot will trade.
Step 6: Adjust Arbitrage Settings
Finally, set your exchange arbitrage settings. You can choose the minimum profit your bot aims for in each trade. Also, set the maximum open time for orders and the maximum number of simultaneous trades. Use the buy and sell rate to set the lowest ask, highest bid, and last values.
Now your Arbitrage bot is ready to use!
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Market arbitrage settings
Your bot can run alongside the exchange arbitrage bot. It will search for market arbitrage opportunities on the exchanges you selected. Whether you choose two or nine exchanges, your bot will work hard to find any price differences. This helps increase the value of your portfolio.
There’s one final step in setting your arbitrage bot up: Revert and Backlog.
In this step, you get to choose to revert or retry failed orders. If you enable this option, any failed orders will go into a backlog for retrying later. If you disable this option, failed orders will be completely discarded.
And that’s it! It may seem challenging to grasp all these concepts at first, but it becomes intuitive quickly. After following six simple steps, your arbitrage bots will be set to take advantage of any market inefficiencies in the cryptocurrency market.
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Best Arbitrage Bots available
Finding the right arbitrage bot can boost your crypto trading profits. Many options are out there, each with its own features. Some bots are perfect for beginners, while others suit experienced traders. These tools help you take advantage of price differences across exchanges. They can save you time and effort while trading. Here are some of the best crypto arbitrage bots:
- Metaset: This bot provides monthly profits ranging from 10% to 15% and annual profits of 120% to 150%
- Pionex: This service offers free Bitcoin and crypto arbitrage bots. They charge a small fee of 0.05% on profits. You can trade spot futures easily on their platform.
- Bitsgap: This is a popular choice in the crypto world. It operates in the cloud and has a user-friendly interface. This makes trading simple and effective.
- CoinRule: CoinRule works with over ten exchanges. It’s easy to set up and use, even for beginners. You don’t need coding skills to create strategies. Plus, it’s completely free and trades 24/7!