Core Concepts
Understanding cross exchange arbitrage requires familiarity with market microstructure, order flow dynamics, and execution latency. The following sections detail each component.
Performance Metrics
Key metrics include Sharpe ratio, maximum drawdown, win rate, profit factor, and average trade duration. Compare against baseline strategies and adjust parameters based on out-of-sample results.
| Metric | Value | Benchmark |
|---|---|---|
| Sharpe Ratio | 1.85 | 1.20 |
| Max Drawdown | -12.4% | -18.0% |
| Win Rate | 58.2% | 52.0% |
| Profit Factor | 1.72 | 1.45 |
Common Issues
Common issues with cross exchange arbitrage include look-ahead bias in backtesting, overfitting to historical regimes, inadequate handling of exchange downtime, and insufficient logging for debugging.
Risk Considerations
Risk management for cross exchange arbitrage addresses position limits, stop loss placement, correlation exposure, and worst-case drawdown scenarios. Regular monitoring prevents drift from intended behavior.
Production Notes
In production, cross exchange arbitrage requires monitoring for API rate limits, database connection pooling, log rotation, alert thresholds, and automated restart procedures. Document runbooks for incident response.