Beginner mistakes in crypto arbitrage and how to avoid them
Most arbitrage losses come not from the market but from typical mistakes: a miscalculated route, the wrong network on a transfer, too much leverage. Each is easy to avoid if you know about it in advance. Below are the most common beginner errors, grouped by stage of the trade.
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Mistakes when finding a route
1. Counting profit on the top of the book
The spread in the table is the gap between the best prices. At your size the average price is worse, and fees and the transfer take another slice. Count the result at your size after every deduction - see why the spread is not your profit.
2. Getting excited about a huge spread
A 10-20% spread almost always means closed withdrawals, an illiquid coin, a broken quote or different tokens sharing a ticker. Real opportunities are usually more modest.
3. Not checking whether the route holds
A spread that flickers for a second is a quote-delay artefact. A stable route holds for minutes. Look at how it behaves over time, not at a single snapshot.
4. Ignoring book depth
On a thin book even a small size eats through several levels. How to count it is in the order book depth article.
Mistakes when transferring
5. Not checking withdrawals and deposits
Before buying, make sure withdrawals of the coin are open on the first exchange and deposits on the second. Otherwise the coin gets stuck and the spread disappears.
6. Sending a coin over the wrong network
The network must match on the sending and the receiving exchange. Addresses on different networks can look identical, but the money will not be credited. How to choose is in the transfers article.
7. Forgetting the tag or memo
For XRP, TON, ATOM, XLM and several other coins, without a tag the exchange cannot tell whose account to credit. Getting such money back can take a long time and is not always possible.
8. Ignoring the fee and withdrawal minimum
A fixed withdrawal fee on a small amount can exceed the entire spread. And a minimum withdrawal can leave a "tail" of coins on the first exchange.
Mistakes on futures
9. Using high leverage
The route is price-neutral, but each leg can be liquidated on its own. At 10x the liquidation is roughly a 10% move away - an ordinary day for an altcoin.
10. Not watching funding
Funding can run against the position and eat the whole spread in a week. Check the rates on both exchanges before holding - see the funding rate explainer.
11. Closing legs one at a time
While one leg is closed and the other still open, the position is unhedged. Close both as close together as possible.
Mistakes in organisation
12. Keeping everything on one exchange and not preparing in advance
Verification, two-factor protection, an address whitelist and capital on several exchanges are prepared before a trade, not during it. Otherwise the route is gone while you pass a check. How to prepare is in the article on choosing exchanges.
| Mistake | What it costs | How to avoid it |
|---|---|---|
| Counting on the top of the book | A loss instead of profit | Count at your size after all deductions |
| Wrong network or forgotten tag | Lost money or a long recovery | Check the network and tag before every transfer |
| Closed withdrawals or deposits | The coin is stuck, the spread is gone | Check wallet status on both exchanges |
| High leverage | A liquidated leg | 1-3x leverage, spare margin, alerts |
| Ignoring funding | Income eaten by the rate | Check rates and history |
| Unprepared accounts | Missed routes, freezes | Verification and capital in advance |
How to start safely
Start small
The first trades are for testing the process, not for profit. A mistake on $50 costs less than on $5,000.
Make a test transfer
Before the first large transfer between two exchanges, send a small amount and confirm it arrived.
Keep a trade log
Record the spread at entry, the actual result and the fees. After a week you will see which routes work.
One strategy first
Get to grips with spot or funding on its own before combining them.
Have an exit plan
Decide in advance at what spread, rate or loss the position closes.
The scanner helps avoid many of these mistakes: it shows the net spread at your size, flags closed withdrawals and deposits, and checks book depth and route stability. Checking the network, the tag and the margin is still up to you.
Glossary
- Route - a specific coin and pair of exchanges with a price difference.
- Tag / memo - an extra recipient identifier for some coins.
- Liquidation - a position closed by force for lack of margin.
- Test transfer - a small transfer to check the path between exchanges.
- Trade log - a record of every trade for reviewing results.
Beginner arbitrage FAQ
How should a beginner start crypto arbitrage?
Register and verify on 2-3 exchanges, start with small capital, make a test transfer and pick one strategy. The first trades are for checking the process, not for earning.
Which mistake is the most expensive?
Sending over the wrong network or without a tag - the money can be lost entirely. On futures, a leg liquidated because of high leverage.
Why can I not repeat the spread from the table?
Most likely slippage at your size, fees or time were not counted: while you enter, the spread narrows. Count the route at your size and choose stable ones.
Do I need programming skills?
No. Manual arbitrage is done through the exchanges' interfaces, and the scanner helps find and check routes.
How much money do I need to start?
For learning, a small amount you can afford to lose. For meaningful income, more - especially on futures, because of margin on two exchanges.
How do I avoid scammers?
Never send money to people promising "arbitrage with guaranteed income", and never give anyone access to your accounts. Real arbitrage is something you do yourself, on your own accounts.
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