On WunderTrading, you can buy assets on one exchange and sell them on another exchange using the Spreads and Arbitrage trading terminal. We can divide this tool into 2 strategies: Spread trading and Arbitrage.
Spread trading in crypto is a strategy where a trader buys one cryptocurrency and sells another at the same time to profit from the difference in their prices — this difference is called the spread. The goal is to profit from the difference in price movements between two related cryptos.
Arbitrage trading in crypto is a strategy where you buy a cryptocurrency at a lower price on one exchange and sell it at a higher price on another, making a profit from the price difference — called the arbitrage. The goal is to profit from price differences of the same coin on different exchanges
Spreads and Arbitrage Overview
Spreads and Arbitrage terminal has 3 important sections: Spreads and Arbitrage Trading Terminal, Charts for Spreads and Arbitrage trading and Statistical Arbitrage Signals. Let's dive deeper into each of those.
Spreads and Arbitrage Trading Terminal
Trade overview
The Spreads and Arbitrage Trading Terminal enables users to execute arbitrage and spread strategies across two exchanges.
1. To start, you will need to select Base(where assets will be bought) and Quote(where assets will be sold) exchanges.
2. Then choose if you want to apply the leverage to selected pairs.
3. Insert Amount per trade and move the slider to allocate balance between two pairs.
4. Choose Order type(Market, Stop market, Two-leg entry).
Advanced settings
1. You can setup up to 6 Take Profit targets for your strategy
2. Choose if you want to add Stop Loss in percentage or specify fixed price, then input Stop Loss value.
3. Next parameter is Move Stop Loss to breakeven. Once the Activation target is reached, the stop loss will be automatically moved to the Execution target, minimizing the risk of losses.
• Activation: The percentage at which this function is triggered.
• Execution: The percentage from the entry price where the stop loss will be adjusted.
4. The Trailing Stop has two parameters: Activation Price (Trailing Stop Activation) and Trailing stop (Trailing Stop Execute). The first determines the level after which your trailing stop becomes active. The second parameter is the actual trailing stop. When the activation price will be reached this will be the starting point for your trailing stop. If the price will continue increasing your trailing stop will be trailing in the same direction.
5. A Reduce only order is a type of order that only reduces an existing position, preventing the opening of a new position in the opposite direction. It ensures that a trader's actions will not increase their overall exposure, effectively limiting the potential for over-leveraging or unintended positions.
Charts for Spreads and Arbitrage trading
The Spreads and Arbitrage chart is created by dividing Left chart(Base currency) by Right chart(Quote currency). In this case we divide ETHUSDT by BTCUSDT prices. The chart also includes hedge ratio. By changing the hedge ratio the spread chart will be adjusted automatically
Statistical Arbitrage Signals
Statistical Arbitrage Signals is a tool designed to generate trading signals that help identify optimal entry points and detect price correlations between two different asset pairs. It is integrated into the Spreads and Arbitrage Trading Terminal and supports position entry based on three key parameters: Beta (hedge ratio), Half-life, and Z-score.
Z-score | In statistical arbitrage, a Z-score measures how far a value is from its average, in terms of standard deviations. It helps traders spot when the spread between two assets is unusually high or low — which may signal a trading opportunity. |
Beta (Hedge ratio) | In statistical arbitrage, beta (also called the hedge ratio) tells you how much of one asset to trade against another to create a balanced (hedged) position. |
Half-Life | In statistical arbitrage, the half-life measures how long it takes for a spread (or price deviation) to move halfway back to its mean — this is key to mean reversion strategies. Half life is represented in number of bars on a 15 minutes timeframe. |
The Percentile at the top of the Stat Arb signals lets you pick only the alerts that fit what you're looking for in trading. A percentile is a measure used in statistics to indicate the value below which a given percentage of observations in a group falls.
Example:
Suppose you took a test and your score was in the 80th percentile. That means:
-You scored higher than 80% of the people who took the test.
-Only 20% scored higher than you.
You can adjust the Percentile to 1%, 5% or 10%.
You can also set up alerts for the Statistical Arbitrage signals. There are three types of alerts you can turn on in the Settings:
Audio Notification - This will play a sound when a new signal comes in.
Browser Notification - This will show a pop-up window in your browser when a new signal is received.
Telegram Notification - This will send you a message on Telegram when a new signal is received.
