In XXI century, the oldest market strategy “Buy Low, Sell High” sounds so obvious it became a classic joke every newborn knows.
In XXI century, the oldest market strategy “Buy Low, Sell High” sounds so obvious it became a classic joke every newborn knows. However, most trading strategies, no matter how sophisticated and advanced they might seem, employ the principle in their core.
Avalon, despite being the pinnacle of trading technology, is no exception to this rule. Software commits automated arbitrage trades to deliver profits, but due to exceeding computing power and instant connection to world markets, is by far more efficient than manual trading. Avalon was designed using predictive modelling techniques: Bayesian analysis, time series data mining and Markovian queueing system. Taking advantage of big data through predictive modeling measures allows us to better identify potential risks and opportunities for a company.
Arbitrage is a trading technique that profits by taking advantage of price differences between assets in two or more markets. It provides a way to exploit market inefficiencies and a mechanism to ensure that substantial price deviations do not exist for long periods of time. Arbitrage works well across a range of different assets, including cryptocurrencies, and it’s relatively low risk when compared to other strategies.
- Spatial/Cross-Exchange Arbitrage
Simply said, spatial arbitrage trading is buying an asset cheaper in one market and selling it higher in the other market. Common situation — for a brief moment BTC prices may differ between exchanges by up to 4%, thus creating a “profit window” to earn on this deviation. To successfully gain on this opportunity, a trader is required to have an initial investment capital split among various crypto exchanges and recognize the gap before it’s closed.
- Triangular Arbitrage
As opposed to previous method, opportunities for triangular arbitrage usually appear in one market, as a result of price discrepancy among three currencies. This strategy involves three consecutive trades. For example, let’s look at a USD-ETH-BTC-USD trade:
ETH/USD(184.9), BTC/ETH(49.41), BTC/USD(9203.45).
- Trader converts 18,490 USD to 100 ETH;
- Converts 100 ETH into 2.02 BTC;
- Converts 2.02 BTC to 18,585 USD.
- Calculated profit — 105 USD, not covering transaction costs.
Low risk is often compensated by extra small price differences between exchange rates — only fractions of a cent, and in order for this form of arbitrage to be profitable, a trader must trade a large amount of capital.
Constantly being aware of market changes is the key to success, but it’s impossible to manually notice a split-second diversion. And while arbitrage trading may seem a risk-free way to earn a living, any profitable opportunity in markets is often eliminated in a matter of seconds, making it extremely difficult to profit for starting investors with simple technology. Avalon was created to resolve this issue using modern implementation of century-old concepts. It’s effectiveness is proven and we welcome everyone to give it a try via Nimbus.