So before we select our exchanges and currencies, I want to explain some of the jargon I'll be using as it can get pretty confusing. In order to download coin information, we're going to be using an API call, which stands for application programming interface, which means a particular website or company is providing us access to specific features or functions within their application, instead of giving us access to the whole application itself. In this example, an exchange is providing us their price information without giving us access to the exchange as a whole. To bring this to life, let's take the by Nance API URL and look up the price of bitcoin against the US dollar. The buy Nance exchange has provided us the bid and ask price with all these curly braces and quotes which is actually a format called JSON or JavaScript Object Notation, which is another way of structuring gotta think of JSON as an alternative to XML.
What we want out of this JSON is the bid and ask price. With bid, as the name suggests, and what you would normally do at an auction, you're submitting a bid to buy bitcoin at $3,783. With an ask if you already hold Bitcoin or something else you want to sell, you would normally submit an asking price for it. And looking at the ask price here, people have submitted orders to sell Bitcoin at $3,783. So the price difference between bid and ask is $1. If you can't remember which one is buy or sell, I always remember it as bid and buy both start with B.
Therefore ask is sell the bid price will always be lower than the sell price. Therefore if I wanted to buy bitcoin, I can Immediately at the asking price, which will be more expensive. Or I can submit a bid, play the waiting game and hope someone sells it to me for the price that I want. Depending on the bid price you've put, you might only have to wait one minute or one day or even longer to get your order fulfilled. Sometimes your bid will never get fulfilled because you may have put an unrealistic bid of $1 instead of something closer to the current prices. To put it into perspective, let's go through the scenario of buying Bitcoin at the ask and bid price and then selling Bitcoin at the asking bid price.
So using the example at the bottom, if we were to buy bitcoin, we can buy it at the bid price of 3000 and the ask price of 3500. Now buying Bitcoin at the asking price is more expensive than the bid because that's the price the seller has set it at. However, I'll be able to purchase Just immediately buying Bitcoin at the bid price is cheaper than the asking price. But there may be a delay to purchasing it, as it requires someone who already owns Bitcoin to sell it to you at that lower price. Now let's go through the scenario of selling Bitcoin. If I were to sell Bitcoin at the asking price, I get a better ROI, but I may have a delay in myself as it requires someone to buy it at that more expensive price.
Selling Bitcoin at the bid price has worse ROI, but I'll be able to sell it immediately. So because arbitrage requires quick reactions and for orders to be fulfilled immediately, we need to identify the exchange with the cheapest ask so it can be bought immediately and then identify another exchange with the most expensive bid so it can be sold immediately. Putting All that into context Now, let's go make our workflow