Could spot-futures arbitrage bots be the best low-risk strategy in crypto? - Pionex trading bot

hello guys welcome to the trading parrot future spot arbitrage bot that's the topic for today we're gonna be covering these types of bots on pionics really in depth covering everything from what are all the risks we're going to cover back testing almost two years of data of back testing for four important pairs so you can have a fair understanding on what you can expect from running these types of bots on bionics we will go in detail on how to mitigate the risk how to make the maximum rewards from these bots so stick around up till the very end because i'm pretty sure you're gonna find a lot of answers in this video but before we get into that make sure you look at the link in the description if you're planning to sign up for pinex you can get 25 bub free and as soon as you start trading with grid pools you're going to unblock those 25 in your account immediately let's start first with what is exactly an arbitrage board an arbitrage bot is a bot that profits from differences in the value of an asset in two different buckets that's mainly it a traditional arbitrage boat will put funds in two separate buckets and given the difference in prices the fluctuations that they are constantly between these two exchanges then you can profit from that but in this case the futures spot arbitrage bot does something very different from a traditional arbitrage bot aspect but this type of boat in pionics the futures spot arbitrage bot does something completely different it basically places a long position on the spot market let's say it buys 1 000 of btc and then on the futures account it opens an equivalent position but shorten the same asset so you get these two open deals at the same time and you end up in a neutral position you don't mind if btc goes up or goes around because literally you stay there zero there's no profit from the differences so in that sense is different from a traditional arbitrage board so you're gonna ask then how you make the money with this type of boats well in futures there are funding rates that are applied constantly to people that are doing lungs on futures or people are doing shorts most of the time the people in the market are doing loans therefore the only way that binance has to maintain the price of the perpetual similar to the spot price of bitcoin is by charging these funding rates to the longs or to the shorts and then giving those fees to the opposite for example if btc at the moment most of the people are doing longs in order to maintain the price the same with the spot they are going to charge the funding rates to all the loans and they are going to give those fees back to the people that are doing shorts when you are on your futures account you can always check the funding fees when you go to information and funding rate history or real-time funding rate and because most of the time those fees are positive for the people doing shorts you end up capitalizing on getting those fees so you don't make money from bitcoin going up or down you make money from holding that short position on binance futures so the next question you're probably wondering is okay hold on a second i'm holding a short position on bitcoin yes you are holding a futures position a short futures position on binance but at the same time you have a long therefore you're in a neutral position that mitigates the risk a lot but not 100 percent of course there are risks which takes us to the next topic what are all the risks of running these walls can you lose money when running an arbitrage boat of this type in theory yes but those risks are extremely low if you're running the future spot arbitrage bot on a very stable coin like bitcoin or ethereum compared to other smaller caps those coins are very stable and what i mean is that you don't see those tokens pumping to the upside a hundred or more percent whereas on a lower cap you can even see a thousand percent up and that's very and that's a terrible idea to run on an arbitrage boat because you are under the hood you're running a short position with leverage you don't want to get liquidated now the risk is very small very small but there is a risk of liquidation obviously we're going to look in this video where to find what's your liquidation price when you're running this boat so you can have a fair idea of how risky it could be that you get hit by by that price but just so you know that short position is actually placed in isolated mode which means that it doesn't liquidate the whole account just the single position in case it happened but what needs to happen for you to get liquidated well the price will have to go very high very quick and what i mean by very high for example on btc if now we are at 45k or we are at 50k we will have to go literally to 75k on bitcoin or 80k in very short period of time which is basically like a 50 straight away in the price of bitcoin so as you can see that is possible but it's very low likely stick around until the very end of the video because once we are looking into how to create a boat you're going to be seeing exactly in the parameters what is the liquidation price we are also going to explain how to increase the liquidation price so therefore you reduce the risk of hitting it remember it's a short position so the higher the liquidation price the less likely that you get liquidated personally i'm gonna run it just with the default and i'm gonna run very stable tokens like btc and ethidium now what are the rewards of running this thing this is the reason the main reason you are probably watching this video you probably have in mind should i be staking or should i be running a future sport arbitrage mode that's a good question in this video i'm not gonna cover how much you can make by staking but i'm definitely gonna give you a very good idea what you should expect and this is what takes us to the next topic which is back testing how am i back testing how am i back testing these arbitrage bots well i found that in binance you can go to information and then to funding rate history this takes you to this page here that's only showing you 14 days of the funding rates which is not very useful because in the last 14 days things have been pretty good but if you hit save a csv it's gonna save a large file that contains 1.7 years of data at the frequency of every eight hours oh i think i didn't mention every eight hours you get paid the funding rates so three times a day you get paid here what we are looking at here is the ethereum pair what i did is with that file i want to import i imported it in a new sheet after that i selected these two columns and i created a chart and the default chart is good enough and as you can see ethereum is perfect perfect in my opinion for running an arbitrage boat the funding fees they remain positive most of the time and the only times they have gone down was on the covet period around march or april in 2020 and then recently during the dump in may in 2021 apart from that you get every now and then a slightly under zero rate that it's fine because it compensates with this high fees that you get later on the more longs that are in the market on futures the higher the rate and the more you get paid every eight hours so the million dollar question if you run this arbitrage boat for exactly the period of data that we have 1.7 years how much money would you make well if you do it with simple interest basically what pionics is offering you by default let's say you set up the vote on day zero you never look back until today then you will have made 59 in 1.7 years without doing anything at a very low risk that is really a strong contender to staking in my opinion and it's not a replacement but it could be a great compliment to spread you know and diversify you could have some in staking and some in arbitrage both definitely a good contender for those of you that are wondering how can we do compounding and increase those returns yes you can do that on bionics but on bionics you cannot do it automatically i haven't seen any competitor that allows you to do it automatically the compounding but if you do it even once a month you will be somewhere between these two profits so you will be sitting in between 59 to 81 returns for 1.7 years so let's say you make 70 that's amazing amazing but how can you compound well very simple once you have some spot futures literature votes running on your account you can head down to more and then here you have a bunch of features one of them is release the profit if you release the profit into your account then you can fit that back into the boat by doing ad investment so this feature here allows you to give the boat more money to trade so let's say after one month you made a one percent then that one percent you release it into your account and then you give it back to the bot and that's all you need to do to be doing compounding you can go a little bit higher maybe do it every once a week but i will say is something that takes you probably one or two minutes to do by the way here you can also do some other things you can withdraw the investment partially or fully or you can stop the boat with clothes or here there's something very interesting for the advanced users i do not recommend beginners to start messing around with this but definitely it's something for advanced users especially when you're trading lower cap tokens on an arbitrage boat if you get tempted to run one of those sexy tokens that are giving you even 30 or 60 a year that's great but you should definitely consider in that case to increase the margin when you hit at margin it takes you to here which is a great screen it's showing you exactly where you will get liquidated in this case you get liquidated when you get to 75 k and if you start adding more you add one dollar extra and then you get eliminated as 76 if you add 10 84 100 174 so you can see that having on the side 100 next to the boat running is almost doubling my liquidation price now all of this is using the 2x leverage which is the default if you go for 3x then of course you're going to have a shorter liquidation time frame which is higher risk of force the higher the the higher the leverage the more exposed you are that's always the rule and the same is you if you reduce the leverage to just 1x then your liquidation price is going to be way above and you're going to need less margin to protect yourself now don't get scared i'm personally not planning to add any extra margin i'm gonna let the bot do its job by itself but i'm gonna stick to stable coins i'm gonna stay away from the ones that are offering the top rates because those can have fluctuations that are much more painful you can add the margin but you can also remove it so if you are fearing that a token is about to pump and it's going to go very high and you might risk getting very close to that liquidation price you can head down straight to your account and add margin immediately and when things turn back to normal or to bearish then you can withdraw that margin but remember unstable coins is less necessary and on 2x or 1x is also less necessary this becomes extremely important to know how to do it if you're going with small cap or if you're going with higher leverage 3x is the maximum by the way on on bionics another very cool thing is that when you're looking at your bot details here all the arbitrage bots that i'm running is that you can see all the fees that you've been paid every eight hours exactly here you can also see the opening fee when you start the bot you get charge death which as you can see after three or four fees paid to me it compensates so you break neutral if you at least run your boat for one day you can also see the estimate average profit that you are supposedly gonna take in five more hours in this case and you can see how it's settling sometimes they show here when it's settling it's very interesting how it works this bot has been running from the 25th of august so base roughly for one week very little profit here that you're seeing on a hundred dollars invested i'm not expecting more than that according to the back test this is going perfect as i say this is a long term strategy and you can expect to get a 60 or a 70 percent but you need to keep the money for at least one year here to see those returns now let's go to other back testings that i have easium i have to say one of the best that i i really like because the balance between the risk and the reward is really great but let's go to btc let's say you run the btc btc compared to ethereum has less daily profit the funding fee on ethereum is 0.03 and it stays positive most of the time whereas btc has some bigger fluctuations in kovid and also during may is stayed below zero for quite a long time compared to ethereum but still it's offering for 1.7 years 55 on compound interest on cardano you get 56 and 76 percent on compound but the period is slightly smaller and theta is the worst performing of these four tokens only 0.01 so that's roughly one-third of what you get with ethereum is half of what you get with btc and you can clearly see how long it remain negative the funding rate on binance futures which explains the poor performance of this token but still you're still making a nine percent here it's still way better than you can get in any bank out there i pick on purpose theta because it was really poor performing so i wanted you to see kind of the ranch and definitely these are not the top performers because i'm intently not picking any extremely high performer i don't want to encourage people to run the most risky ones and then have to do manual intervention i guess if you want to run both is because you are liking the fact that things can be done by itself if you push it too hard and you pick a very low cup of course it looks sexy on paper to get 60 a year but then every now and then things are gonna be pumping too high gonna be risking getting liquidated on the short or the funding fees might stay negative for very long as well so i think ethereum cardano and btc are a good compromise and you can run all of them in parallel as well you don't have to be guessing which one is the best you can spread the risk and diversify in my case i'm gonna do that together with staking to all of that form part of my very conservative portfolio if you head down to market and then ranks and then arbitrage you're gonna find this very interesting page here it shows the performance kind of the back test as well of all the supported tokens for arbitrage you can see at the top the top cap coins and then leverage tokens of top cap coins at the moment i'm sorting by 180 days back testing what does it mean this seven day 30 day in 180 days some people were getting confused they were saying oh i'm going to be getting 33 that's amazing in 30 days i'm gonna be getting 34 and then in 180 days 34 wait a minute that doesn't make any sense no it's completely wrong that interpretation the right interpretation is on seven days the funding fees that you were getting every eight hours if they were applied for a period of a whole year you will have made 33 as long as those fees remain in that range of the last seven days on 30 days it's exactly the same if the funding fees of the last 30 days in average remain the same for a whole year then you will have made that so you can see that these funding fees have remained really consistent that is what you can interpret from here at least for the half past year now if you ask me i'm not very familiar with this token i wouldn't put this as part of my conservative portfolio to run with the token i don't even know enough i am running avalanche but the whole purpose of avalanche was that i thought it's becoming more and more a stable project so i trust avalanche but at the same time there's a lot of people trading so i was expecting that the funding rates are gonna be higher they've been higher as you can see they've been higher at least compared to btc i'm not writing the ethereum yet so i cannot compare the performance of the last seven days but the current funding fee of avalanche is very high zero zero five almost zero zero six which is very high you're going to notice that you can pick between 1x 2x and 3x of course if you're running 2x is the recommended one it's kind of a middle ground 1x you're going to get paid less you can also see the performance how it's impacted if you change this on 3x of course you're going to make the most returns but also is the most risky in terms of the likelihood of getting liquidated if the token pump too high so now how can we set up a boat it literally takes less time than the time i'm gonna take to explain this it's probably gonna take you one minute challenge accepted one minute to set up this boat step number one you're gonna head down to trade and here you're gonna find the spot futures arbitrage boat as you can see is the risk of this is qualified as flexible it doesn't really care what's going on with the market once you select create you're gonna see this section here appearing we're gonna again see the results of back testing we're gonna be allowed here to enter how much we wanna invest then if we keep all things in default you just hit create and then you wait for the bot being created it takes a few seconds and after that it's all done where can you find your bot running you go to my orders my trading bots and you're gonna find it as a average stretchbot you can also filter here like that and you're going to see it in an expanded way again if you want to create another one you go to trade spots futures create and you're going to find it here now you're probably wondering what are these advanced settings we already explained the 2x 3x the 2x is the recommended but then there's this interesting guy here called the price gap control if you're going to start one of these bolts wait for the highest gap possible what is the gap the gap is the difference between the price in the spot market versus the perpetual futures market when the difference is positive it means that the price of the token is higher in futures the whole purpose of this boat is first to buy on spot along and on futures to place a short if the gut is positive you end up starting your boat in the best conditions because technically you are longing at cheaper price and shorting at a higher price that's perfect for starting the boat and the same applies for stopping the boat when is the best time to stop the boat when the current price gap is the lowest possible or even negative if it's negative it's perfect time to stop the bot personally i just leave it exactly as the default but i follow that advice if i see a negative here i will never start my vote i wait for a fairly high price gap to take the best advantage when i'm starting the boat now most of the time is positive so if you see negative just stay away from it don't start it come back the day after and wait until it's zero one or zero two something i'm going to leave a link in the description to this spreadsheet so you can have a look you can also see what formulas i was using to calculate different interest which is very interesting way of forecasting how things can go one final and very important question how often do you have to be keeping an eye on the average spot to make sure that is not going negative as you can see here the funding rate is negative so some people what they're doing is at least once a day you check your notifications in the bionx app and you keep an eye on how is the funding rate going now this is not as relevant for stable coins compared to low cap tokens so if you're running a low cap definitely download the app and make sure you are keeping an eye on the funding rate of course you get more reward but it's gonna come with extra work for you you're gonna have to keep an eye on where are the funding rates every day to decide whether you want to start or stop the vote accordingly but ultimately i really think that this is a great alternative to leave your money in a conservative bucket that you can think of a long term compounding once a month great idea and once you are able to backtest you can decide which tokens are providing a better risk reward if you're thinking to open an account on bionics.com make sure that you use my referral link you're gonna get automatically 25 bub as long as you deposit some funds and you start a grid bot that unlocks the 25 bub which goes straight into your account you can really open an account in minutes but if you open the account and you haven't done kyc i think that's totally fine these are the maximum and minimum withdrawals if you don't have kyc with kyc they increase significantly but without kyc you can withdraw every day these are the withdrawal fees they are very fair commission fees for trading are very low they are considerably smaller than other exchanges so i think those two last points makes it a very attractive alternative guys i hope you like this video i hope you found most of the answers to your questions i'm looking forward to your comments i want to know if you are considering to run this together with bots or you're going all conservative and now everybody wants to run harvey trashbots only to be honest i wouldn't be surprised let me know which other of the 12 different bots that you have on pioneer x you would like me to do an in-depth video like this one so far i cover grid trading i cover the spot futures in this video the infinity grid but i haven't had a look at rebalancing boat btc moon ethia moon eth moon leverage grid margin grid these are the higher risk ones there was a lot of the amount of people wanting to know about the average response so i hope you enjoy the video okay guys i'll see you in the next one bye [Music]

Channel: The Trading Parrot

Views: 11,372

Keywords: arbitrage bot review, pionex trading bot, trading bots crypto binance, dollar cost average, altcoin season 2021, passive income ideas 2021, best crypto trading bot 2021, cryptocurrency for beginners 2021, crypto bot 2021, free crypto trading bot 2021, free crypto trading bot binance, best crypto trading bot for beginners, automated trading system cryptocurrency, crypto trading bot, 3commas trading bot, pionex bot review, pionex, pionex review, passive income

Id: seuHsCYspNE

Length: 25min 59sec (1559 seconds)

Published: Thu Sep 02 2021