How to start crypto arbitrage: exchanges, capital, and your first trade

Part 3 of a three-part series on crypto arbitrage.

Excerpt: A practical guide to setting up your first crypto arbitrage trade: choosing exchanges, splitting capital, checking order books, and managing execution risk.

Tags: arbitrage, exchanges, liquidity, execution, risk

Knowing why price gaps appear is one thing. Trading them is another.

A basic spot-arbitrage setup requires accounts on several exchanges, capital in the right place, and a way to compare prices. None of this needs to be complicated. Your first trade should be small, slow, and easy to check by hand.

Step 1: choose your exchanges

Start with three to five established exchanges. Binance, Bybit, OKX, KuCoin, and Gate.io are common choices because they cover a broad range of spot markets.

More exchanges mean more potential price gaps. They also mean more accounts to fund, monitor, and rebalance. Three venues are enough to learn the process.

Before depositing funds:

• Check whether the exchange operates in your country

• Complete any KYC required for your account and region

• Confirm that the same asset and network are supported on both sides

• Review spot trading and withdrawal fees

• Test deposits and withdrawals with a small amount

Create API keys only when you need them. Monitoring tools should use read-only keys without trading or withdrawal permissions. Never give a portfolio dashboard permission to move funds.

Step 2: split the capital before trading

An arbitrage gap may last seconds. If all your money is on one exchange, waiting for a transfer usually means missing it.

Keep quote currency on the exchange where you expect to buy. Keep the asset itself on the exchange where you may need to sell. This lets both orders fill at roughly the same time.

With $1,000 across four or five exchanges, that works out to about $200–$250 per venue. It is enough to test the workflow, though minimum order sizes and fees will limit which trades make sense.

There is no universal minimum. A trader can test the mechanics with $100–$500, but small trades leave little room after fees. Around $1,000 gives a manual setup more flexibility. It does not make the strategy profitable by itself.

Equal balances are only a starting point. Over time, successful trades shift cash to one exchange and coins to another. The accounts then need to be rebalanced.

Step 3: configure a spread scanner

A scanner compares prices across exchanges and flags gaps that meet your filters. Start with a short watchlist of liquid pairs rather than every token the exchanges list.

A minimum gross spread of 0.3% can work as an initial filter. It is not an entry signal. The displayed spread still has to cover trading fees, slippage, withdrawal costs, and any price movement between the two fills.

The price at the top of the order book can also be misleading. It may apply to only a tiny amount. Always check how much liquidity is available at the prices you plan to trade.

Step 4: check the trade before opening it

For a first trade, look for a clear gross spread, perhaps 0.5% or more. Then check the numbers yourself.

• Is there enough depth on both order books?

• What will both exchanges charge?

• Are the required balances already available?

• Can both orders be placed without waiting for a transfer?

• Does the expected profit remain positive after all known costs?

If the trade still works, buy on the cheaper exchange and sell the same amount on the more expensive one. Place the orders as close together as possible.

Don't assume both legs will fill just because both orders were submitted. One side may fill while the other remains open, leaving you exposed to the market.

Keep the first trade small

The first trade is for testing the process, not proving the strategy.

Use an amount you can follow without rushing. Watch the fills on both venues. Record the fees, the actual average prices, and the final net result. If one order only fills in part, deal with the open exposure before looking for another trade.

Avoid withdrawing immediately unless the transfer itself is part of the test. Rebalancing adds another fee and another point of failure. It is often cheaper to leave the capital in place and wait for a trade in the opposite direction.

Once funds are spread across several venues, visibility becomes part of risk management. ArbLens shows available and locked balances across supported exchanges and wallets, along with paired positions, PnL, funding, and transfer history. It does not scan for spreads or execute trades. Its job is to show where the capital sits after the setup becomes too large to track reliably in separate exchange tabs.