Get to know more about how our portfolio works! Part 3 - Active Trading
Trading is certainly the most interesting factor of our portfolio for you. No wonder its allocation stands at a respectable 40%. The goal of active trading is to outperform BTC over a certain time period. In this piece, we will take a closer look at the entire mechanics
Different kinds of strategies
The mentioned 40% gets divided into 2 segments - biometric (35%) and algorithmic (5%) trading.
- Biometric Trading: Even though a variety of automated tools are at the disposal to analyze the right pair to be entered, the trader must always open the trade and set it up on his own. The algorithm won't do it on his behalf.
- Algorithmic trading: The algorithm has all the tools and strictly allocated capital available. It evaluates the position on its own, opens, sets up the Stop-Loss orders itself, and also closes it automatically when deemed as the right move.
In addition, we also divide strategies into short-term and medium-term. The first mentioned positions are open just for minutes to hours, medium-term trades for days to weeks. Rarely more than that. The strategies form a whole – they complement each other to minimize risk and maximize performance.
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Bionic trading: What are its goals and tools?
Partially automated (bionic) trading still depends primarily on the skills of the analyst who opens the position. At the same time, our goal is to automatize as many thought processes as possible, because it is the only way to make the right decisions quickly.
Since 2018, we have managed to do an impressive amount of work. On command, the program scans all the exchanges available to us and filters out interesting opportunities. The trader cannot sit in front of the screen 24/7, so the program notifies him via an automated signaling feature, for example, by email or SMS.
The program can extract even more complex technical analyses from the data flow. It can define highly probable resistances and as well recognizes well-known technical patterns such as "Rising Wedge" or "Dead Cat Bounce".
You may have noticed that the tools mentioned above are not standard stock exchange equipment. And you are correct! However, most exchanges offer a so-called API (Application Programming Interface), which is an interface for two applications to communicate with each other. All options of the exchange can be used through the API, even if you trade through a third-party app.
Below you can see part of what the analyst works with. Once he has all the important information gathered, he decides to open a position.
Algorithmic trading: Do I switch it on and.. that’s it? Not at all!
Our algorithms are very sophisticated. They result in about 1,700 trades a year. Because of this, the futures contract market has become their home field, where you can speculate on
growth and fall through long and short positions. In addition, they can also work with a lever. Our maximum allowed leverage - stock exchange loan for the purpose of trade - is 5x.
We have 6 backbone strategies that bet on the robust principles of trend-following (trading in the direction of the trend) and mean-reversion (trading against the trend). In addition to these strategies, we have several other strategies up our sleeves that are based on completely new principles specific to crypto markets only (e.g. payout - Funding Fees).
The most important tools for our operations are standard programming languages from the C family (C/C++/C#) and lately very popular Python and its statistical libraries. The main daily duty is the efficient development and testing of algorithms. In this regard, the Zorro and QuantConnect platforms have proven to be the most effective for us.
A common mistake is thinking that the algorithm is straight-up perfect. That is not true, sometimes things don't work out. However, the total number of trades is high, so even the possible losses are undone in a long run.
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