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Using Automatic Trading Software – Best Arbitrage Trading Tools

Using Automatic Trading Software – Best Arbitrage Trading Tools Photo 1

Cryptocurrencies, with their volatility leading to high exchange rate variability, are a great asset for traders looking to profit from buying tokens at a low price and then reselling them when the price is high. However, as the cryptocurrency market is a highly volatile environment where prices change literally every minute, it can be challenging to track price movements manually. Therefore, many small and big players operate using automatic trading software which simplifies a lot of tasks. By reading this article, you'll learn what arbitrage trading (AT) is, how it works, how you can improve your performance using remote alert programs, and what to consider when choosing the right software solution.

What is Arbitrage Trading?

The currency market, including the cryptocurrency segment, is subject to such phenomena as price fluctuations caused by mispricing an asset. As a result, the value of the same asset can vary dramatically in different markets and brokers. AT aims at smoothing out these price differences by adjusting them. However, these temporary price disparities provide ample opportunities to everyone wishing to profit from price differences in one asset or another. Simply put, you can buy an asset at the bottom line price and immediately sell it at the place where the price is the highest. This is exactly what traders do, they look for undervalued assets and sell them where their price is higher, thereby making an instant profit.

Intra-Exchange Arbitrage Trading

So, what is arbitrage trading within a single cryptocurrency exchange? All trades are conducted on a single platform involving different pairs, using an 'intermediate token'. For example, you can exchange a certain amount of Litecoins for Bitcoins (BTC), then exchange BTC for USDT, and subsequently exchange USDT back for Litecoins. Since all digital money transactions are done on the same platform, you will only lose money on exchange fees. The challenge with this option is finding opportunities even though digital tokens are highly volatile. This is why many practitioners buy and sell within a single exchange using remote alert programs.

Inter-Exchange Arbitrage Trading

This option is easier to understand because it is all about buying a particular cryptocurrency on an exchange at a minimum price and then reselling it at a higher price on another exchange. With a little market analysis, even a beginner will find some pretty good inter-exchange trading opportunities. However, by using automatic trading software, you will greatly simplify most routine tasks. Keep in mind that the withdrawal fee can be substantial, which is the main disadvantage of this method.

What is Arbitrage Trading Software and How to Use It?

So, AT offers good opportunities to make profits on digital token sales transactions. By closing trades, they capture a small profit made on the price difference. However, as opportunities exist within an extremely short period of time (often even just a few seconds), it is very difficult or even impossible to carry out efficient calculations on your own. Therefore, many software solutions have been developed to find opportunities, calculate potential profits and execute trades much more efficiently.

What is Automatic Trading Tools and How to Use the Software

Downloadable to a brokerage platform, this solution allows for instant detection and calculation of arbitrage opportunities, followed by the initiation of a trade assignment on behalf of the person. As the cryptocurrency market is literally brimming with short-term opportunities, such a program is the only option for those looking to profit from them. As far as how to use the software is concerned, the main difficulty lies in making the right settings. Thereafter, the service will work automatically, detecting opportunities and executing orders with minimal intervention by person.

Using Trade Alert Programs

There is a category of more experienced players who want to make decisions about opening trades themselves. There are solutions that work about the same way as the automated program but provide the ability to make proper decisions by yourself. So, to understand how to use this software, let's consider the algorithms of its work. The program scans the markets, brokers, and instruments looking for the best opportunities and, if it finds a good one, sends a signal to the user. Having received such a signal, you can consider all the aspects of the proposed option and make your own decision based on knowledge and experience.

Using Remote Alert Programs

As trading solution regularly scans the market processing huge amounts of data, it places high demands on the hardware component of computing systems. Remote services run on a remote server with higher computing power than a standard PC. In terms of how the software works and how it is used, remote alert services operate in the same way as their PC alert counterparts.

How to Pick the Right Arbitrage Trading Software Solution?

So, now that you know what AT is and how it works, it's time to choose a good solution that will send you signals or even automate almost all tasks. Thus, trading on your own can be a very time-consuming and inefficient job, so you can't do without a good program or online service. So, here are some criteria to consider when choosing a reliable solution:

  • The security of your deposit. This is especially important if you have figured out how to use software that automates all tasks. So, you provide the program with all your account passwords and cryptocurrency wallet keys, which is associated with a high risk of losing money. Therefore, give preference to an open-source program developed by reputable companies.
  • Compatibility with major exchanges. Choose products that integrate well with a large number of reputable exchanges to have more buy/sell opportunities.
  • The cost of buying or subscribing as well as all kinds of transaction fees. Analyze the market to eventually utilize trade alert programs or automatic software that will not hit your wallet.
  • Understanding how to use the software. Although many programs are feature-rich and contain many settings, try to choose an option that is clear for you.
  • Operational speed. As many market opportunities only exist for a few seconds, the performance of the program is of utmost importance. Try a product in free trial mode (if available) to see if it really works.
  • Community. You will judge the popularity of the solution and its effectiveness by the number of active users as well as by the feedback.

With so many options on the market, choosing a good AT software product is a daunting task. However, before you start looking for an option, you need to decide exactly what you want to do. While an alert solution can be a great help for experienced users, automated trading programs are the best option for beginners who do not yet have enough knowledge and experience. No matter which type of trader you are, we recommend choosing the right solution with the above criteria in mind.

F.A.Q.

What is arbitrage trading?

It is an activity aimed at profiting from the difference in the value of the same asset in different parts of the market.

Is arbitrage trading still viable?

Although this direction has recently become riskier, many retail traders still choose this option. Moreover, with the advent of more advanced software solutions, it is now possible to find arbitrage opportunities even faster and make more informed decisions.

Are trading programs legal?

They are not only legal but also encouraged for use, as they contribute to the efficiency of the market as a whole.

How do I make money trading?

Follow a few simple steps: choose a reputable exchange paying attention to security measures and transaction fees, use good services to identify arbitrage opportunities, buy assets at a bottom line (low) price and sell them at a high one thus making a profit.

What is the profit in percentages that can be made?

The average profitability of such activities is 1-10%, which means that it is worthwhile if you have a fairly large bankroll.

Can I make a living from it?

With solid knowledge and experience, and using good software, you can make a living as an arbitrage trader.

How to use software to automate all tasks?

Try out fully automated tools that not only scan the market but also execute orders for you automatically.


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