Cross-Exchange Spot Hedging with Different Quote Currencies
Summary
This educational strategy monitors two spot exchanges for a price gap large enough to justify buying on one venue and selling on the other. The trigger can be set as an absolute price difference or a percentage of an average price derived from both books. Trade size is bounded by available top-of-book liquidity, each account's coin or cash balance, and minimum and maximum order amounts. The implementation places the two legs concurrently, then cancels outstanding orders.
A periodic balancing routine compares combined coin holdings with their initial level and trades on the venue whose order book offers the more favorable price to restore that baseline. Exchange-specific rate conversion and precision settings are available. The document provides implementation and parameter details but no backtest results or fee analysis. In practice, displayed spreads may not cover fees, slippage, transfer or conversion costs, and asynchronous fills can leave unhedged exposure; the balancing routine itself can also trade at a loss.
Key ideas
- The strategy seeks price differences between two exchanges and sends opposing spot orders when a threshold is exceeded.
- Trade sizing accounts for visible liquidity, available balances, and configured size limits.
- A periodic inventory check attempts to restore combined coin holdings to their initial level.
- Profitability is not established because the document provides no test results or cost analysis.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.