This is a re-post of the original article by @****. Resources being scattered all over the places I decided to publish them in an easy to find place. So here we go:
You take out a loan of both bitUSD and bitCNY, both with the same BTS collateral.
First decide how much BTS you want to use as collateral to back this short term trade.
Example: 700 BTS
You want 2 loans, so divide 700 by 2.
Take out a loan of bitUSD using 350 BTS as collateral with 2.5x collateral ratio.
Just guess how much to borrow. It’s about $7 today, but put $10 to get a rough estimate.
You would see that 350 BTS isn’t enough collateral so you just type a lower number until it works.
You want to be on this market CNY:USD Openledger
If you calculate the “lowest ask” (LA) minus “highest bid” (HB) you will get the difference in price.Someone is trying to buy 1 CNY for 14.184 and then sell it for 14.34.
You see how that is profitable?Same as buying a bar of gold from one guy in the pub and then selling it to someone else for a profit shortly afterwards.Next you need to find the midpoint between the HB and LA. LA price is the price a trader is wanting to sell 1 CNY.
HB price is the price a trader wants to buy 1 CNY.
By buying 1 CNY for a lower price and selling 1 CNY for a higher price a trader makes USD profit.
In order to calculate the price at which you want to buy 1 CNY, and how much you want to sell 1 CNY just do this.
You must calculate the midpoint between the LA and the HB.
-Calculate LA minus HB
-Divide this number by 2
-Add this small number to the HB price and you have the midpoint
Using the midpoint, you can calculate your desired profit percentage.
If you want to make a 1% profit by buying bitCNY, multiply the midpoint by 0.99 and you get your buy price.
If you want to make a 1% profit selling bitCNY, multiply the midpoint by 1.01 and you get your sell price.
By taking out two loans, one bitCNY and one bitUSD, you have USD and CNY at a lower price.
And also offer to sell the same amount of CNY (using your loan).
You sell the bitCNY for more dollars then your USD-debt, so if someone takes your offer you’ll be able to repay your loan and take profit.
You took out a ~$7 loan using 350 BTS as collateral.
Now there’s a $7 loan.
Lowest ask minus bid = 0.00156
Divide by 2 which is 0.00078
0.00078 + HB = Midpoint
Example: 0.14184 + 0.00078 = Midpoint
I want to buy 1% below this price, and sell 1% above this price.
Buy price = 0.99 * 0.14262 = 0.14119
So you offer to buy some CNY using your entire USD Debt at a price of 0.14119.
This is your order just placed to buy CNY at a “low” price.
Read the 49.57 CNY. This is the amount of CNY you are offering to by.
Now to make USD profit, you should offer to sell this same amount of CNY, but for more money.
So the next step is the take out the bitCNY loan, in order to sell 49.57 CNY for profit.
Then offer to sell this 49.57 bitCNY at 1.01 * midpoint price.
0.14262 * 1.01 = .14404
Now sell all the 49.57 borrowed CNY for the price of 0.144
Notice how the USD amount is higher than $7? That’s the profit.
That 0.1412 USD over 7 dollars is the profit. That’s it.
Only things you need to worry about is BTS falling in price and calling your debt inconveniently.
The price between USD:CNY will also fluctuate, but not as much.
If you’re not going to keep an eye on it for a few days then calculate your buy and sell prices to get a 2% profit and it should be alright.
The higher the profit % that you buy/sell for, the less risky it is. But the frequency that you can trade will go down.
If the midpoint price moves above your sell price or below your by price you might experience a ~1% loss.
With practice this process get easier.
Here’s where you need to go to borrow USD and CNY.
If your accessing the DEX directly through the bitshares.org website then you will need to borrow bitUSD and bitCNY.
Original article can be found here: How to make the market between bitCNY and bitUSD
Legal Disclaimer: I am not a financial advisor nor is any content in this article presented as financial advice. The information provided in this blog post and any other posts that I make and any accompanying material is for informational purposes only. It should not be considered financial or investment advice of any kind. One should consult with a financial or investment professional to determine what may be best for your individual needs. Plain English: This is only my opinion, make of it what you wish. What does this mean? It means it’s not advice nor recommendation to either buy or sell anything! It’s only meant for use as informative or entertainment purposes.
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