Анонсы Explanations of the Two Copying Methods

Explanations of the Two Copying Methods

2024-06-14 01:56:15 UTC 1625 Прочли

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There are two copying methods in Advanced Mode: Copy Proportionally to Total Assets and Copy with a Fixed Multiplier. Below are explanations of the parameter settings and operational logic for these two copy trading methods:

## Basic Copying Logic:
The formula goes like this: number of Futures placed by the lead trader * copy ratio = number of Futures copied by the copier. The copying ratios could be dynamic or still, which means the copy ratio can either follow based on the proportion of total assets or copy with a fixed multiplier.

## Copy Proportionally to Total Assets 
Under this mode, the total assets are defined as the sum of available funds and the value of held positions. For example, if the lead trader has 50 USDT in available funds and holds a BTC/USDT position worth 50 USDT, then he has the total assets amounting to 100 USDT. If the lead trader places a 10 USDT order, that is, 10% of the total assets, then the copier, with total assets of 200 USDT, would copy this trade with 20 USDT (200 * 10%). This is the calculation under ideal market conditions.
In reality, the calculation of the copying "Proportionally to Total Assets" is related to the following five variables:

The immediate assets of the lead trader

The immediate assets of the copier

The margin calculation process

The current market price of the asset

The price difference between the lead trader and copier at order placement

**Tip**: It is generally recommended that users with large assets use another method of copying: copying with a fixed multiplier. This method is not affected by other variables, which is more stable and suitable for volatile markets.

## Copy with a Fixed Multiplier
In this mode, users can set a fixed copying ratio.
For example, if the lead trader completes 1000 contract trades, and the copy trader selects a fixed copying ratio with a coefficient of 0.2, then the number of contracts placed by the copy trading system for the copy trader would be 1000 * 0.2 = 200.
According to the set fixed multiplier value and the ratio of funds between the copier and lead traders, there are three scenarios:

1.If the set fixed multiplier is less than the ratio of funds between the copier and lead traders, it's the conservative mode. In this case, the copier's position ratio is lower than the lead trader's, with a higher remaining margin ratio.

2.If the fixed multiplier equals the ratio of funds between the copier and lead traders, it's the synchronous mode. Here, the copier's position ratio equals the lead trader's, with the same remaining margin ratio. However, if the lead trader adjusts the leading funds, the order ratio for both the copier and the lead trader will change.

3.If the set fixed multiplier is higher than the ratio of funds between the copier and lead traders, it's conservative mode. In this case, the copier's position ratio is higher than the lead trader's, with a lower remaining margin ratio.

Let's explain these three scenarios through an actual example.

Let's assume the lead trader's funds are $10,000 and the copier's funds are $2,000. To explain each mode, we will set three different fixed multiplier values.

**Scenario 1: Conservative Mode (Fixed multiplier less than the ratio of funds between copier and lead traders)**

The ratio of funds between copier and lead traders: 10,000 / 2,000 = 5

Fixed multiplier set: 2 (less than 5)

**In this case**:

The lead trader opens a position worth $1,000

The copier user follows with a fixed multiplier of 2, position value is $1,000 / 5 * 2 = $400

**Thus, the copier user's position ratio is lower than the lead trader's:**

lead trader's position: $1,000 (10% of total funds)

copier user's position: $400 (20% of total funds)
Due to the copier user's lower fixed multiplier, their remaining margin ratio is higher, indicating lower risk.

**Scenario 2: Synchronous Mode (Fixed multiplier equals the ratio of funds between copier and lead traders)**

The ratio of funds between copier and lead traders: 10,000 / 2,000 = 5

Fixed multiplier set: 5 (equal to 5)

**In this case:**

The lead trader opens a position worth $1,000

The copier follows with a fixed multiplier of 5, position value is $1,000

**Thus, the copier user's position ratio is equal to the lead trader's:**

lead trader's position: $1,000 (10% of total funds)

copier user's position: $1,000 (50% of total funds)

With this multiplier, if the lead trader adjusts their position size, for example, to $2,000, the copier user will also increase their position accordingly to $2,000, maintaining synchronicity.

**Scenario 3: Aggressive Mode (Fixed multiplier higher than the ratio of funds between copier and lead traders)**

The ratio of funds between copier and lead traders: 10,000 / 2,000 = 5

Fixed multiplier set: 10 (greater than 5)

**In this case:**

The lead trader opens a position worth $1,000

The copier user follows with a fixed multiplier of 10, position value is $1,000 / 5 * 10 = $2,000

**Thus, the copier user's position ratio is higher than the lead trader's:**

lead trader's position: $1,000 (10% of total funds)

copier user's position: $2,000 (100% of total funds)

Due to the higher fixed multiplier used by the copier user, their remaining margin ratio is lower, indicating higher risk.

**These three modes offer different risk and return management strategies**:

1.Conservative Mode: Suitable for copier users with a preference for low risk.

2.Synchronous Mode: Suitable for copier users who want to sync their returns and risks with the lead trader.

3.Aggressive Mode: Suitable for copier users who prefer high-risk but require careful risk management.

**Explanation of Copy Failure**
Just because a copier user places an order doesn't guarantee they can execute it; in other words, they might not be able to buy contracts even if they place orders. There are two main reasons for this:

1.Since the system places limit orders for copier users, when market prices deviate significantly from the limit order prices, execution may fail.

2.When a copier user has a low remaining margin ratio, it can impact their subsequent position opening, leading to copier failure, where the copier user's remaining account balance is insufficient to support the order quantity.

**Example:**
Suppose a copier user uses a fixed ratio for following, with a following coefficient of 0.01 and assets of 1000 USDT; the lead trader has assets of 50,000 USDT and, when the BTC/USDT perpetual contract is priced at 70,000 USDT, the lead trader buys a contract position worth 1 BTC using 10x leverage. Then, the copier user follows with a 10x leverage and buys 10 BTC. What is the number of contract positions the copier user bought, and what is the margin used?

**Using the formulas:**

Initial Margin = Position Value / Leverage

Position Value = Contract Price * Holding Quantity

lead trader's Executed Contract Quantity * copier Ratio = Number of contracts placed for the copier user

**Results:**

**lead trader:**

Assets: 100,000 USDT

Leverage: 10x

BTC/USDT Perpetual Contract Price: 70,000 USDT

Purchase: 1 BTC

Position Value: 70,000 USDT

Initial Margin: 70,000 / 10 = 7,000 USDT

Executed Contract Quantity: 1 / 0.0001 = 10,000 contracts

**copier user:**

Assets: 700 USDT

copier Coefficient: 0.01

Number of Contracts Following: 10,000 * 0.01 = 100 contracts

Position Value: 70,000 * 100 * 0.0001 = 700 USDT

Initial Margin: 700 / 10 = 70 USDT

**After Adding to the Position**

**lead trader:**

Planned Purchase: 10 BTC

Executed Contract Quantity: 10 / 0.0001 = 100,000 contracts

Position Value: 70,000 * 10 = 700,000 USDT

Required Margin: 700,000 / 10 = 70,000 USDT

**Calculate the lead trader's Remaining Funds:**

Total Assets: 100,000 USDT

Initial Margin after First Trade: 7,000 USDT

Remaining Funds after First Trade: 100,000 - 7,000 = 93,000 USDT

The lead trader can pay the required margin for adding to the position, so the addition is successful.

lead trader's Total Position after Adding: 1 BTC + 10 BTC = 11 BTC

lead trader's Total Position Value: 70,000 * 11 = 770,000 USDT

lead trader's Total Margin: 77,000 USDT

**copier user**:

Following Executed Contract Quantity: 100,000 * 0.01 = 1,000 contracts

copier User's Total Position after Adding: 100 contracts + 1,000 contracts = 1,100 contracts

copier User's Position Value: 70,000 * 1,100 * 0.0001 = 7,700 USDT

copier User's Position Value after Adding: 70,000 * 1,000 * 0.0001 = 7,000 USDT

copier User's Initial Margin after Adding: 7,000 / 10 = 700 USDT

copier User's Total Margin: 70 USDT (Initial) + 700 USDT (After Adding) = 770 USDT

## Any problems?
Since the copier user's total assets are 700 USDT, and the total margin required is 770 USDT. This means the copier user's assets cannot pay the required margin. Therefore, the copier user's attempt to add to the position will fail.

## How to Avoid this Situation?
**1.Ensure Sufficient Copying Funds**

**Reason**: Insufficient copying funds can easily result in the number of Futures being copied being less than 1

**Measures**: Calculate Required Funds: Calculate the minimum funds you need based on the lead trader's funds and your set multiplier. For example, if the lead trader's funds are 10,000 and your set multiplier is 0.01, then your minimum copying funds should be greater than 100.

Set Appropriate Multiplier: Choose an appropriate copying multiplier based on your actual funds. For instance, if your funds are limited, you can increase copying multiplier slightly to ensure that the number of Futures to be copied is not less than 1.

**2.Use the Same Leverage as the Lead Trader**

**Reason**: Different leverage levels can result in different risk and return ratios, potentially preventing the copier from matching positions when the lead trader trades.

**Measure**: Copier users should use the same leverage level as the lead trader to maintain consistent risk and return ratios.

**3.Follow the Lead Trader's Margin Mode**

**Reason:** Different margin modes impact fund management and risk control differently. If the copier selects a different mode from the lead trader, it may lead to inconsistent risk.

**Measure:** Copiers should choose the same margin mode as the lead trader to ensure consistent risk management.

**4.Reserve Sufficient Margin**
**Reason**: Copier users may be unable to complete trades due to insufficient margin when the lead trader adds to their positions.

**Measure**: Copier users should reserve enough margin to follow the lead trader's trades promptly when the lead trader adds to their positions.

By implementing these measures, copier users can more effectively avoid copier failures and ensure a higher success rate in following trades.

**5.For Users with Large Funds, Prefer Fixed Ratio Copy Trading**

**Reason:** Copy trading based on the total asset ratio is affected by multiple variables. In volatile market conditions, these variables can influence each other, leading to copy failures.

**Measure**: Choose copying with a fixed multiplier to ensure stability.

By following these measures, copiers can more effectively avoid failures and ensure the success rate of their copy trading operations.

Explanations of the Two Copying Methods

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