Written by Gabriel Yeh

Trading the markets has always been risky as market fluctuations cannot be predicted with certainty. A no-risk trading model does exist though, the qualitative “cross-market dual angle arbitrage” trading model.

This article will explain this trading model and how to use and profit from it.

What is a cross-market dual angle arbitrage?

The wide range of trading platforms available in the market also means that there is a wide range of quoted price for the same trading pairs.

Using these differently quoted prices, it is possible to sell on platforms with high prices and transfer the assets to another with a lower buying price. This way not only do assets not decrease, but a profit can be made from the price difference.

Using an example from real world business, a business imports $10,000 worth of LV bags from France to Hong Kong and sells them there for $11,000 before buying $10,000 worth back from France and keeping $1,000 of profit. France and Hong Kong can be likened to trading platforms in this example, while LV bags are the commodity. The goods, which remain the same, are transferred to another platform where sales are made at different prices. Not only was there profit made from the difference in price, but the original assets remain the same. This is logic behind arbitrage.

Example

A diagram can be used to describe the entire arbitrage process. Assume that there is a total of 13,000 USDT, and 2 BTCs.

In the given example a trader would sell his BTC on platform A and buy one back on platform B, thus having the same amount of BTC but pocketing 50 USDT extra from the arbitrage.

Another form of arbitrage is the ,popular and low-cost, triangular arbitrage module through which traders can arbitrage in the same platform. Its mechanism is shown below.

2. What is triangular arbitrage

Unlike dual angle arbitrage, triangular arbitrage takes place in the same platform, as long as this platform meets two conditions: there are at least three different trading instruments available in it, and the transaction cost is low.

It works as follows:

Firstly, exchange A into B.

Secondly, sell B for C.

Thirdly, convert instrument C back to A and net a profit.

This works by taking advantage of price differences between the trading pairs assuming the transactions total at a profit

Example

With prices as follow:

BTC/USDT:6500USD

ETH/BTC:200USD

ETH/USDT:210

A trader has 1 BTC, he exchanges the BTC into 32.5 ETH at the current price of ETH/BTC.

Secondly，he sells all the 32.5ETH for 6,825USDT.

Thirdly，he converts 6,500USDT back to 1BTC and keeps a 325USDT profit.

This was a brief introduction to dual angle and triangular arbitrage. Understanding the theory is necessary but should be accompanied by practice to fully master the concept. The discussion and diagrams above come from personal experience and explanation. Criticism is welcome. Please stay tuned for more articles.

Where to Find Us:

Website: www.bybit.com

Twitter: www.twitter.com/Bybit_Official

Reddit: www.reddit.com/r/Bybit/

Youtube: bit.ly/2Cmuibg

Steemit: steemit.com/@bybit-official

Facebook: bit.ly/2S1cyrf

Linkedin: bit.ly/2CxHGcz

Instagram: www.instagram.com/bybit_official/

Telegram: t.me/BybitTradingChat