Costing arbitrage between exchanges 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) &lt;- 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.
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.