Quantitative strategy trading refers to the use of advanced mathematical models to replace human subjective judgments, through the analysis of big data, to find high-probability and effective trading strategies in the market, so that it does not have to rely on human subjective judgments to achieve rationality, objective and automated transaction process. In the volatile market, it can help users increase their yields by buying at the bottom and selling at the top. This article will deeply reveal the mysteries of quantitative strategies and teach you step by step to grasp it. Quantitative strategies will no longer be complex and recondite!
1.How does a beginner start his/her journey on Quantative Strategy?
First of all, you need to choose the investment crypto. This is the basis for starting the quantitative strategy. For single-crypto and multi-crypto investment, the strategies you can choose are also very different. Then it is necessary to judge the investment direction. For the bullish and bearish market, the investment strategies applied are also different. The specific operation is as follows:
Quantitative Strategy Operation Steps:
First, choose the currency you invest in.
If you choose a single market, please see Step 2
If you choose multi markets, please see Step 4
Second, determine the trading direction.
If you think the currency price will rise, please see Step 3.1
If you think the currency price will drop, please see Step 3.2
If you can’t predict the price trend, please see Step 3.3
2.Single-maket Investment
If you choose a single trading pair, such as BTC/USDT. Then, both spot trading and futures trading are applicable. All you need to do is to make a preliminary judgment on the trading direction. Spot trading can only be long, while margin trading can be long/short, and futures trading can be long/short/neutral.
3.Determine investment direction
3.1. Crypto prices will rise
If you think the price of the currency will rise, there are two situations for you to consider:
Situation 1: If you don’t want to use leverage, you can choose spot trading, such as spot grid.
After selecting a spot grid, you need to complete the following steps:
- Selected price range
- Set the number of grids
- Set “take profit” and “stop loss”
For more information about the operation guide and parameter settings of Spot Grid, please refer to: ：
Situation 2: If you are willing to use leverage, and hope to improve capital efficiency and expand profits through leverage, and accept greater risks at the same time, you can choose to go long Margin/Futures grid.
1.Select Margin Grid (long): It is an upgraded version of the spot grid, which uses leverage to amplify the spot income and take the spot as the trading object. Margin Grid is the same as spot grid in trading fees, and usually has better liquidity, but will charge a certain amount of extra lending fees.
2.Select Futures Grid (long): It uses perpetual Futures as trading objects, with lower fees and higher returns under the same parameters. It is recommended to use Futures Grid to trade mainstream currencies such as BTC, ETH. The higher the leverage ratio, the higher the user’s trading rights and interests, the higher the income, and the risk will be proportionally magnified. It is recommended that beginners choose a leverage of less than 5X for BTC and ETH Futures, and a leverage of less than 3X for other currencies to reduce their risk of liquidation.
To choose Margin/Futures Grid, you need to complete the following steps:
- Selected price range
- choose trading direction(long)
- Select the leverage multiplier
- Set the number of grids
- Set “take profit and “stop loss”
Note: The basic process of the Margin/Futures Grid is similar to that of the spot grid, but there are two more steps than the spot grid in Margin/Futures Grid: selecting the trading direction and setting the leverage multiplier.
Learn more about the operation guide and parameter settings of Marign Grid and Futures grid, please refer to:
Tips: FAQ of Grid Trading
Why does my grid strategy suffer from losses as soon as it comes up? Is my strategy wrong?
- Grid trading requires patience. You need to wait for the currency price to rise for a period of time before maximizing your profits. In fact, the classic profitable grid strategy is often to lose first and earn then
2.Users do not understand the nature of grid trading. In fact, the benefits of the grid strategy (which can be extended to any kind of copy trading strategies) consist of two parts. The first part is the transaction income, also known as the grid income, that is, the benefits brought to the user by each transaction The second part is the floating profit and loss, that is, the income brought to the user due to the currency price changes when there is no transaction. For example, according to strategy S, the user buys a unit of a certain currency (called B currency) at the price of 1 US dollar, so that the user holds a unit of B currency. Next, suppose the price of B currency becomes 0.8 US dollars, then the value of a unit of B currency held by the user drops from 1 US dollar to 0.8 US dollars, then the user’s floating profit and loss is (0.8-1) US dollars * 1 = -0.2 US dollars.
At this time, even if no transaction occurs,due to the decline in the price of the currency held, the user’s account value is also reduced, with the floating profit and loss negative.
The above example solves the problem of why some users lose money when they do not finish a complete set of buying and selling transactions. Because the user bought a certain amount of currency through the grid strategy, but before it was time to sell, the price of the coin fell, and there was a negative floating profit and loss on the user’s account. When the price rises, the floating profit and loss will become positive.
3.2 Crypto prices will fall
If you think the price of the currency will fall, you can choose to use Margin Grid and Futures Grid(short).
Short grid will help you clear part of the currency in your hands, that is, sell for you when the real-time price is high, and buy for you when the price falls, that is, sell high and buy low to earn the price difference. Similarly, when using a short grid, beginners should not set the leverage too high. It is recommended that beginners choose a leverage of less than 5X for BTC and ETH Futures, and a leverage of less than 3X for other currencies to reduce their liquidation risk.
Same as the operation steps for long Margin/Futures Grid, you also need to complete the following steps in short Margin/Futures Grid:
- Selected price range
- Choose the short direction
- Select the leverage multiplier
- Set the number of grids
- Set “stop profit” and “stop loss”
Unknown investment direction
When it is difficult for you to study and judge the future market, you can choose the Futures neutral grid, which allows investors to go long and short after the future price occurs, reducing the risk of loss caused by market misjudgment, and then achieving stable returns.
Click to learn about Futures Neutral Grid:
Guide to Gate Future Neutral Grid
Gate Future Grid: Long Grid vs Short Grid vs Neutral Grid
4.Multi-market Investment
There are also two investment strategies to choose from when choosing multi-currency investment. The first case is relatively simple, where you only need to deal with each currency you invest in according to the previous single-currency investment method.
The second situation is more complicated, but the operation is more convenient and the risk is smaller, which is generally only suitable for rising markets. That is, when you think that there is a stable relationship between the prices of multiple currencies you invest in, such as BTC/ETH or coins with a similar concept, and you are bullish on these currencies, then you can choose Smart Rebalance strategy to invest, which will help you gain a rising income, while automatically holding coins.
Smart Rebalance uses part of profits of the fast-rising assets to buy slow-rising assets to achieve a rebalance in the asset portfolio. Specifically, it uses half of the profits generated by a rising asset in the asset portfolio to buy the position of another asset, using profit to make profits, and finally obtaining additional income.
For the operation guide of Smart Rebalance, please refer to:
Guide to Smart Rebalance
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