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Gate.io Quantitative Column: Spot grid trading with an annualized return of 1203%, from beginner to proficient
Gate.io Quantitative Column: Spot grid trading with an annualized return of 1203%, from beginner to proficient
07月14日 18:58
As a heavy player in the currency circle, let's first do a small survey to see what mistakes we often make when we make transactions:
1. It is easy to chase the price as soon as it rises
A visual analogy, on this fishing net woven by time and price, traders are like fishermen who set up fishing nets at different prices, wait to fish, buy down, and sell up. As long as the price fluctuates within a certain range, you can make money, and you can get a definite profit once you buy and sell.
Grid trading includes other derived strategies such as spot grids and contract grids.
1. Choose a suitable spot grid trading target
A. Preferred mainstream value currency
For mainstream value coins with good consensus and high liquidity, you can refer to the transactions of CMC's top 100 digital assets on Gate.io.
B. Auxiliary volatility indicators
Reference indicator: ATR (14)-represents the average true fluctuation range of the last 14 cycles, as shown in the figure below.
For example, BTC/USDT: The current 1-hour ATR (14) is 330.29, the current BTC/USDT is 32844.68, the volatility is 330.29/32844.68 = 0.010047 (1.004%), and the transaction fee is 0.15% (the GT is deducted) rate). The completion of one-time arbitrage is 0.5002%. After deducting the commission, the target profit rate of the trading pair hourly grid is estimated as: 0.5002%-0.15%=0.35%
2. Reasonably set the price range
Look at the upper and lower ranges of the Bollinger Bands in the 4-hour period, and use this as a reference to set the price range.
B. Draw a trend line, as shown in the figure below:
The high point is connected to the high point, and the low point is connected to the low point. The blank area in the middle of each line segment is the price range we are looking for.
Of course, for investors with rich trading experience, the range can be directly given based on experience. For example, if the current BTC price is around 33000 USDT, it can float up and down by 5000 US dollars, which is also feasible as a price range.
3. Distinguish arithmetic and geometric grids and determine the number of grids
Arithmetic grid (inter-compartment): The difference of handicapping your orders is the same. If the price fluctuation range is small, the arithmetic grid can get more profits from the grid than long term holding where it would revert back in price. Over time however, the single grid rate of return is floating or variable.
Proportional grid (large interval): If the ratios of handicap orders are equal and the price is a one directional upward market, then the proportional grid can get more fluctuating profits and losses, while the single grid rate of return is fixed.
Number of grids: The three factors of price range, arithmetic/ratio, and number of grids ultimately affect the rate of return per grid. The number of grids can be adjusted according to the rate of return.
The parameter setting of the spot grid determines the speed that an investor could potentially make money. Using these gadgets skillfully can double the investor’s income under the same market conditions.
A. AI intelligent recommendation: The software will automatically give the optimal parameter of the arithmetic grid based on the return of the backtest in the past 7 days. It is more suitable for running short-term grids and suitable for grid novices.
B. Strategy trigger price: This is equivalent to a pending order that is not yet filled. The grid will only start to run when the latest market price is less than or equal to the trigger price; the trigger price configuration must be less than the latest price and be between the lowest and highest prices in the grid interval.
C. Take profit and stop loss: In this scenario, the take profit price is higher than the upper limit price. When the currency price rises above the take profit price, take profit orders are triggered and so the grid order will automatically end; and vice versa.
D. Tuncoin mode: After opening this mode, the grid strategy income will be converted into the equivalent tokens in real time, which is very suitable for Tuncoin at the end of the bear market.
5. View the operation details of the strategy
1. Operation overview: total revenue = grid revenue + floating profit and loss
2. Funds overview: you can view the current grid transaction's capital investment situation
3. Parameter configuration: all the parameters of the trading pair, including
Grid trading skills and best scenarios
In a one-directional bull market, grid trading can be less effective because the price stays in the upper limit of the price range, which leads to early profit taking and inability to maximize revenue. But if you choose the BTC and ETH trading markets, this problem will not arise often, especially the ETH/BTC trading pair, which is known as "the bull market lies in cross pair profit, because it is a never-ending arbitrage machine".
2. Tuning currency model, a fixed investment weapon at the end of the bear market
There is a famous saying in the investment circle, "If there is no initial investment layout in the bear market, the bull market has nothing to do with you." The Tuncoin model is very conducive to the collection of low-cost bets in the bear market.
1. It is easy to chase the price as soon as it rises
2. If you don’t dare to enter when heavy volume falls, then you will miss bargain price opportunities
3. If you are unable to hold the rising currency, you may have a lack of imagination for the long-term trend, and miss out on big profits
4. No single trading strategy or trading tools are enough to deal with all the complex currency market conditions
As an ordinary investor, if you want to overcome the volatile currency market and obtain long-term stable and generous investment income, you need to master three core essentials:
1. Correct investment philosophy
2. Reasonable position size
3. Efficient investment tools
I have covered the first two in one stroke. To put it briefly, almost all books on investment will mention it, nothing more than: "spare money investment, adherence to value investment and time management, fixed investment and step-by-step increase in positions" and so on. Now we will focus on high-efficiency investment tools, and see whether grid trading and CTA signal tracking strategies in Gate.io's quantitative copy products can help you obtain long-term high returns.
It just so happened that Gate.io smart quantization was fully upgraded to now include copy trading on July 7. Let's take a look at how this works:
In Gate.io quantitative copying, users can choose to copy other user strategies based on their investment experience and ability, so that the investment expert can help you to make money. Investors can also potentially choose to "become a signaler" using grid, CTA, and other tools to create a strategy, while making money for yourself. You can also get an additional 5% of the profits of other users who copy your signals.
Now let’s analyze the spot grid from concepts and principles, parameter settings, trading techniques, best use scenarios, advantages and disadvantages, to help you understand the spot grid trading more comprehensively, and truly understand yourself, the market, and the tools to achieve Long-term stable profitability.
The concept and principle of spot grid trading
1.A brief de_script_ion of quantitative trading
Grid trading is just one of the most common trading strategies among many quantitative trading strategies. Quantitative trading refers to the use of advanced mathematical models to replace human subjective judgments, and the use of computer technology to select a variety of "high probability" events that can bring excess returns from huge historical data to formulate strategies. It greatly reduces the impact of investor sentiment fluctuations, and avoids making irrational investment decisions when the market is extremely fanatical or pessimistic. Quantitative trading has the characteristics of discipline, system, probability of winning, and arbitrage.
2. The origin of grid trading
The idea of grid trading comes from Shannon, the father of information theory.
One day in the 1940S, Shannon demonstrated to investors on the blackboard that 50% of the funds were bought at any price, that is to say: Position value: remaining available funds = 50%: 50%. When the stock price rises to a certain extent, some stocks will be sold, and the current position value: remaining available funds = 50%: 50%. Conversely, if the stock price drops by a certain amount, the remaining funds will be used to buy part of the stock. The current position value: remaining available funds = 50%: 50% can always be maintained.
Using this method to deal with the random movement of stock prices, long-term trading is profitable. In his more than ten years of trading career, he has achieved 29% annual compound interest growth.
3. What is grid trading
Within a certain price range, divide the funds into N equal parts, buy one for every fall, and sell one for every rise. Deterministic profitable transactions of buying low and selling high are being carried out all the time.
Grid trading includes other derived strategies such as spot grids and contract grids.
4. Features of spot grid
Grid trading has the characteristics of increasing positions at low prices and lightening fast exits at high positions, which is naturally suitable for volatile markets. The currency market is a market with short bull runs and long bear slides. Data shows that 70% of the time the market is in a volatile period, which provides us with a natural trading environment for grid trading.
Gate.io spot grid parameter settings
A. Preferred mainstream value currency
For mainstream value coins with good consensus and high liquidity, you can refer to the transactions of CMC's top 100 digital assets on Gate.io.
B. Auxiliary volatility indicators
Reference indicator: ATR (14)-represents the average true fluctuation range of the last 14 cycles, as shown in the figure below.
For example, BTC/USDT: The current 1-hour ATR (14) is 330.29, the current BTC/USDT is 32844.68, the volatility is 330.29/32844.68 = 0.010047 (1.004%), and the transaction fee is 0.15% (the GT is deducted) rate). The completion of one-time arbitrage is 0.5002%. After deducting the commission, the target profit rate of the trading pair hourly grid is estimated as: 0.5002%-0.15%=0.35%
2. Reasonably set the price range
ABC has three different price ranges. Compared with A, there are some idle funds in B and C. We know that the grid has a disadvantage that the utilization rate of funds is low. If the price range is set unreasonably, the range is too large. The utilization rate is even lower.
Here are two ways to find the price range:
A. Find the upper and lower intervals of the Bollinger Band (boll) directly, as shown in the figure:
Look at the upper and lower ranges of the Bollinger Bands in the 4-hour period, and use this as a reference to set the price range.
B. Draw a trend line, as shown in the figure below:
The high point is connected to the high point, and the low point is connected to the low point. The blank area in the middle of each line segment is the price range we are looking for.
Of course, for investors with rich trading experience, the range can be directly given based on experience. For example, if the current BTC price is around 33000 USDT, it can float up and down by 5000 US dollars, which is also feasible as a price range.
3. Distinguish arithmetic and geometric grids and determine the number of grids
Arithmetic grid (inter-compartment): The difference of handicapping your orders is the same. If the price fluctuation range is small, the arithmetic grid can get more profits from the grid than long term holding where it would revert back in price. Over time however, the single grid rate of return is floating or variable.
Proportional grid (large interval): If the ratios of handicap orders are equal and the price is a one directional upward market, then the proportional grid can get more fluctuating profits and losses, while the single grid rate of return is fixed.
Number of grids: The three factors of price range, arithmetic/ratio, and number of grids ultimately affect the rate of return per grid. The number of grids can be adjusted according to the rate of return.
4. Make good use of AI recommendations, triggers, terminations, and other conditional tools
The parameter setting of the spot grid determines the speed that an investor could potentially make money. Using these gadgets skillfully can double the investor’s income under the same market conditions.
A. AI intelligent recommendation: The software will automatically give the optimal parameter of the arithmetic grid based on the return of the backtest in the past 7 days. It is more suitable for running short-term grids and suitable for grid novices.
B. Strategy trigger price: This is equivalent to a pending order that is not yet filled. The grid will only start to run when the latest market price is less than or equal to the trigger price; the trigger price configuration must be less than the latest price and be between the lowest and highest prices in the grid interval.
C. Take profit and stop loss: In this scenario, the take profit price is higher than the upper limit price. When the currency price rises above the take profit price, take profit orders are triggered and so the grid order will automatically end; and vice versa.
D. Tuncoin mode: After opening this mode, the grid strategy income will be converted into the equivalent tokens in real time, which is very suitable for Tuncoin at the end of the bear market.
5. View the operation details of the strategy
1. Operation overview: total revenue = grid revenue + floating profit and loss
2. Funds overview: you can view the current grid transaction's capital investment situation
3. Parameter configuration: all the parameters of the trading pair, including
The situation of pending orders are clear at a glance
Grid trading skills and best scenarios
1. Make good use of the BTC and ETH trading markets in the volatile upward market
In a one-directional bull market, grid trading can be less effective because the price stays in the upper limit of the price range, which leads to early profit taking and inability to maximize revenue. But if you choose the BTC and ETH trading markets, this problem will not arise often, especially the ETH/BTC trading pair, which is known as "the bull market lies in cross pair profit, because it is a never-ending arbitrage machine".
2. Tuning currency model, a fixed investment weapon at the end of the bear market
There is a famous saying in the investment circle, "If there is no initial investment layout in the bear market, the bull market has nothing to do with you." The Tuncoin model is very conducive to the collection of low-cost bets in the bear market.
3. The advantages and disadvantages of spot grids
Gate.io spot grid advantages:
A. No need to watch the market, 24-hour automatic arbitrage machine, naturally suitable for volatile market
B. It is friendly to novices, and the cost of learning is extremely low. AI recommendation grids can be used, and the strategies of other signalers can also be copied
C. There are more than 1,000 trading pairs to choose from, and there are many opportunities
D. The handling fee is low, which can be deducted by point card or GT, as low as 0.06%
However, the spot grid is not omnipotent. For example, the one directional downward market is easy to be caught on the wrong side adding to the position, and while the utilization rate of funds is relatively low, it is still easy for price to run out of the range against the investor.
As we said earlier, there is no perfect tool. Any tool has its value and weaknesses. Only by continuously learning, understanding the tool itself, familiarizing yourself with the market, and understanding one's own risk appetite, can an investor find the most suitable way to make money in whatever the current situation becomes.
Please use the Gate.io Quantitative Column-Sharing to share your “hardcore actual combat” experience. Thank you for your attention!
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