user413: I'm currently writing something to script arbitrage between two exchanges to test the concept.
I know I can determine the difference in prices by using
(ExhangeA_sell - ExchangeB_buy) <- this will give me the price difference. i.e. gross profit (before fee's)
My question, how do I take the fee's into account when calculating net profit?
Currently my thinking is that I add the commission % to the buy price on ExchangeA and subtract the commission % from the sell price on ExchangeB.
Any ideas on this?
Thanks.

user5: It's pretty simple. Like you said, you only have to add the fees to the selling price and subtract them from the buying price. Considering that the fee is a number between 0 and 1 that represents the percentage, here is an example:
ExchangeB_bidPrice * (1 - ExchangeB_fee) - ExchangeA_askPrice * (1 + ExchangeA_fee)

This will give you the profit per coin for buying at ExchangeA and selling at ExchangeB.

user441: nmat: i think you got the signs wrong in there somewhere. the fees will /decrease/ your effective selling price, and /increase/ your effective purchase price. so it should in fact be:
ExchangeA_sell * (1 - ExchangeA_fee) - ExchangeB_buy * (1 + ExchangeB_fee)

and also, you should take into account any deposit/withdrawal fees (E.g., when you withdraw via LR from mtgox, that's a 2% hit, when you use dwolla, that's 0.25USD fee, etc) that you'd incur when moving money between the exchanges.

413: <p>I'm currently writing something to script arbitrage between two exchanges to test the concept.</p>

<p>I know I can determine the difference in prices by using</p>

<p>(ExhangeA_sell - ExchangeB_buy) &lt;- this will give me the price difference. i.e. gross profit (before fee's)</p>

<p>My question, how do I take the fee's into account when calculating net profit?</p>

<p>Currently my thinking is that I add the commission % to the buy price on ExchangeA and subtract the commission % from the sell price on ExchangeB.</p>

<p>Any ideas on this?</p>

<p>Thanks.</p>
 5: <p>It's pretty simple. Like you said, you only have to add the fees to the selling price and subtract them from the buying price. Considering that the fee is a number between 0 and 1 that represents the percentage, here is an example:</p>

<pre><code>ExchangeB_bidPrice * (1 - ExchangeB_fee) - ExchangeA_askPrice * (1 + ExchangeA_fee)
</code></pre>

<p>This will give you the <strong>profit per coin</strong> for buying at ExchangeA and selling at ExchangeB.</p>
 441: <p>nmat: i think you got the signs wrong in there somewhere. the fees will /decrease/ your effective selling price, and /increase/ your effective purchase price. so it should in fact be:</p>

<pre><code>ExchangeA_sell * (1 - ExchangeA_fee) - ExchangeB_buy * (1 + ExchangeB_fee)
</code></pre>

<p>and also, you should take into account any deposit/withdrawal fees (E.g., when you withdraw via LR from mtgox, that's a 2% hit, when you use dwolla, that's 0.25USD fee, etc) that you'd incur when moving money between the exchanges.</p>
