TOKYO, JAPAN / ACCESSWIRE / May 23, 2020 / Volatility has been one of the characteristics of digital asset prices. In early May 2020, for example, price levels have reached the highest price since "Black Thursday" even amidst the current economic situation. It is challenging for some investors and traders to keep on pushing especially with the current volatility that can pose threats to growing one's portfolio. Nonetheless, some trading strategies can still help ensure profits during these trying times.
For most digital asset traders, holding appears to be the safest method. This is when a trader holds on to the asset for a long time. Holding requires patience, and unfortunately, it can take years to actually get a profit. Take Bitcoin as an example. People who have held onto the coin for years ended up as the biggest winners. However, the challenge with this technique is knowing whether it is the right time to sell.
Trading, on the other hand, can be extremely risky and is accompanied by a massive amount of stress. It is a very dangerous game especially if there's not much knowledge about it. Traders must stand the mental pressure and can say "stop" at the right time while waiting for a price bounce. Many traders who are trying to compensate for their losses can end up losing more than their accumulated capital.
Is there any strategy that does not involve a long and uncertain wait or risk of severe losses? Yes. There exists a strategy that is both low-risk and short-term.
Increasing digital assets through arbitrage trading
"Arbitrage is the concurrent buying and selling of an asset on different markets to profit from the price difference. This is the best strategy for trading, especially when there are so many price movements and asymmetries in the market," says Andre Gerald, Chief Executive Officer of Prance Gold Holdings, a trading platform specializing in algorithmic trading.
Significant price differences arise for the same digital asset on multiple exchanges because there are hundreds of different exchanges on the market to date. These price differences can range from 3% to 5% on average, although it can go as high as 20% in some cases. These price discrepancies allow traders to generate a huge profit with little to no risk and no advanced market knowledge. "The main purpose of arbitrage is to maximize investors' profits, based on their assets, with zero risks," according to the Journal of International Studies.
However, this process is time-consuming and requires traders to have the right equipment to fully take advantage of all the arbitrage opportunities in different markets, especially with digital assets.
Leveraging on digital asset arbitrage
The most basic and straightforward way to start arbitrage in digital assets is to do everything manually. You can monitor exchanges for price differences and then place trades and transfer funds accordingly.
However, "What these programs do is to initiate a trade instantly once an arbitrage opportunity is spotted. This offers traders reduced risks and increased profitability of their digital assets", explains Jeffrey Guo, Fintech Veteran and Seed Investor of Prance Gold Holdings.
In addition, there are two distinct methods of arbitraging in digital assets: regular and triple-directional arbitrage. The former refers to buying and selling the same coin on different exchanges with significant price differences. The latter involves three coins in the same exchange.
"Triple-directional (also referred to triangular arbitrage) is the act of exploiting an arbitrage opportunity resulting from a pricing discrepancy among three different assets or currencies in the exchanges. This strategy involves three trades, exchanging the initial digital currency for a second, the second currency for a third, and the third currency for the initial," says Prance Gold Holdings' Gerald.
Arbitraging manually can be tedious and requires a lot of time. To fully take advantage of this strategy, there are arbitrage bots that are designed to make it as easy as possible to leverage these price differences. This means there will be no need to hold on to a coin for years. You can grow digital assets short term with little to no risk.
Among all digital asset trading strategies, arbitrage can be proven as a sustainable way to grow one's portfolio. Although it requires a lot of information to process and to make the strategy work for you. Fortunately, there are certain platforms you can take advantage of that offer software or trading bot to help you find arbitrage opportunities.
Arbitrage takes advantage of multiple small gains from price differences in markets. Therefore, it will generate profits even amidst volatility and even through economic uncertainties. For traders, this will be an opportunity to take advantage of the asymmetric nature of markets.
About Prance Gold Holdings
Prance Gold Holdings is a technology firm focused on the growth of digital assets for retail and corporate firms through transparent, short to mid-term cryptocurrency arbitrage on world-renowned major exchanges around the world. The company offers everyone ultra-short-term investment opportunities as short as seven hours, simply by parking their idle balances in its high performance and secure platform for risk-free arbitrage trading to grow their individual wealth.
For inquiries, please get in touch with Linda Fairbrother at [email protected].
Image credit: Pxfuel
SOURCE: Prance Gold Holdings