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Interpretation of Smart Rebalance Strategy In Strategy Bot
11 November 14:56
1.What Is Smart Rebalance?
As a classic strategy, smart rebalance is invented to solve the problem where users hold multiple assets, but have no energy to study the buying and selling timing of each coin. The core of the strategy is to increase the total amount of assets held by selling high and buying low (that is, buying assets whose proportion has decreased and selling assets whose proportion has increased) while maintaining the asset allocation basically unchanged.
Simply put, smart rebalance is a strategy that rebalances the position portfolio to restore its initially set proportions. When the proportion of a single asset in the position portfolio breaches the set rebalancing threshold and the set periodical rebalancing point comes, the assets whose proportion has increased by a percentage higher than the rebalancing threshold will be sold to buy assets whose proportion has decreased, to restore the position portfolio to its initial setting.
2.The Advantages of Smart Rebalace
For investors who hold multiple assets but do not have the energy to observe the trend of each asset at any time, smart rebalance can help them save time and energy.
In addition, smart rebalance improves the return of the entire portfolio by taking advantage of rapid price fluctuations. When the profit of an asset in the portfolio reaches the threshold, the smart rebalance strategy will allocate this part of the profit to other assets, and the rising asset is adjusted to the initial value. As a result, the net asset value of the portfolio will increase during this period, and the total amount of assets will increase.
Especially in the market of sharp rises and falls, smart rebalance can keenly capture the position changes of different assets, so that the holding assets can fluctuate within a certain range, effectively avoiding large fluctuations in return due to market fluctuations. When the market of a certain digital asset rises strongly, smart rebalance will allocate the income to other digital assets in the portfolio, which makes the portfolio rise relatively stably. When the market falls, there will be less decline in the portfolio than in a certain digital asset, and finally a relatively stable return can be achieved.
3.Case Study
When using smart rebalance, you need to set the initial asset allocation ratio first, and secondly, you need to set the rebalancing mode, which can be set on basis of the time frequency or fluctuation threshold.
In order to help you better understand the principle and use of smart rebalance strategy, we will show you some examples:
Suppose you have a position portfolio consisting of two digital assets: BTC and ETH, whose shares are 50%, 50%, 30% respectively. If the total value of your portfolio is 100USDT, then both BTC and ETH are worth 500USDT.
If you set the rebalancing mode based on time frequency, with the rebalancing frequency set at 24 hours. When it reaches the time frequency of 24 hours, the smart rebalance robot will determine whether the current asset ratio is consistent with your initial ratio. If the price of BTC rises to 52% within 24 hours, while ETH's price decreases to 48%. The smart rebalance will execute the order of "buying low and selling high" to sell BTCand buy ETH so that the portfolio restores the initial proportion of each asset.
If you set the rebalancing mode based on threshold, with the rebalancing threshold set as 3%, it means that when the allocation ratio of the portfolio assets changes by 3%, the position will be automatically adjusted. If your BTC asset rises from 50% to 53% at any given time, the smart rebalance strategy will also automatically execute the order of "selling high and buying low".
Rebalance based on time frequency
Rebalancing process: set the initial asset ratio> the position changes in the set time frequency> the position rebalanced when it reaches the time frequency set the position changes in the set time frequency> the position rebalanced when it reaches the time frequency set
Rebalance based on threshold
Rebalancing process: set the initial asset ratio> the position changes reach the threshold set(suppose the threshold is set as 3%)> the position rebalanced to restore its initially set proportions . the position changes reach the threshold set(suppose the threshold is set as 3%)> the position rebalanced to restore its initially set proportions
4. What Investment Scenarios Are Smart Rebalance Suitable for?
Smart rebalance is suitable for the unstable market of sharp rises and falls. Users can make the proportion of digital assets held fluctuate within a certain range through smart rebalance, effectively avoiding large fluctuations in return due to the changing market.
5. What are the Smart Rebalance Strategies That Have Performed Well Recently?
Taking the Quant strategies running on Oct.7th, 2022 as an example, here are three smart rebalance strategies with excellent performance but different characteristics.
Note: The data in this article is only for display, which does not represent any follow-up and investment advice.
The yield curve of the three strategies above which performs well recently:
If you want to choose a smart rebalance strategy with excellent performance recently, please enter strategy bot: https://www.gate.io/strategybot, select "smart rebalance" in strategy type, and then filter the cryptos you want to invest in and copy it.About how to pick out strategies that have performed well recently, you can refer to this article: Strategy Bot: How to Quickly Identify Highly-Profitable Strategies?
Generally speaking, as a classic strategy used in the traditional investment industry for decades, smart rebalance still has its irreplaceable advantages in today's virtual currency investment market. After learning so much about smart rebalance, you are welcome to create a strategy or copy an excellent smart rebalance strategy for practical operation!
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