Basic Arbitrage Strategy

Your First Profitable Trade

Starting with arbitrage doesn't require complex strategies or huge capital. Begin with simple spot arbitrage between two exchanges. This foundational strategy teaches core concepts while generating consistent profits.

Choose liquid pairs with high volume. BTC/USDT, ETH/USDT, and SOL/USDT typically offer the best opportunities for beginners. These pairs have deep liquidity, meaning your trades won't significantly impact prices. Start with $100-500 positions until you're comfortable with the process.

Monitor spreads during volatile periods. Major news events, market opens, and funding rate adjustments create temporary dislocations. Set alerts for spreads exceeding 0.5% after fees. When alerts trigger, verify the opportunity manually before executing.

Execute both legs quickly but carefully. Place your buy order on the cheaper exchange first, then immediately sell on the expensive exchange. Use limit orders slightly into the order book rather than market orders. This reduces slippage while ensuring fills.

Track every trade meticulously. Record entry prices, exit prices, fees paid, and actual profits. Compare actual results to projected profits. This data helps refine your strategy and identify which opportunities are most profitable.

Common Beginner Mistakes

New arbitrageurs often underestimate total costs. Remember to include maker/taker fees on both exchanges, withdrawal fees, network gas, and potential slippage. A 1% spread might look profitable until you realize total costs are 1.2%.

Failing to account for withdrawal times causes many failed arbitrages. If moving funds between exchanges takes 30 minutes, spreads will likely close before you can execute. Maintain inventory on multiple exchanges or focus on same-chain opportunities.

Over-leveraging destroys accounts. Just because you can borrow doesn't mean you should. Start with your own capital, prove your strategy works, then gradually add leverage. One bad trade with high leverage can wipe out weeks of profits.

Ignoring risk management leads to inevitable losses. Set maximum position sizes, stop losses, and daily loss limits. If you hit your limits, stop trading and analyze what went wrong. Emotional trading after losses only compounds problems.