The setting of arbitrage parameters is very important (if you don't understand how to set the parameters, you can use the default parameters). Setting appropriate parameters will greatly increase arbitrage profits and the efficiency of opening and closing orders. Below, the editor will focus on introducing the key techniques for setting arbitrage parameters.

Non-professional arbitrage traders are recommended to use AICoin's automatic profit-making feature. There is no need to understand complex principles or manually set parameters. You only need to invest the amount and start the strategy program with one click to wait for profits, and you can withdraw the principal at any time.

I. How to set the parameters for opening and closing arbitrage

1. Opening price spread rate

The opening price spread rate is one of the most important conditions for placing orders in the arbitrage strategy. Orders will only be placed when the set spread rate is met. If you want the program to start placing orders quickly, you can adjust it according to the current spread rate to meet the order conditions.

For example, if the left leg is a perpetual contract and the right leg is spot.

For forward arbitrage (buying contracts short in spot), it is recommended to set the spread rate greater than 0% for opening. The higher the spread rate at the opening, the greater the position spread profit. It is better for the closing spread rate to be smaller (generally, the opening spread rate > closing spread rate).

For reverse arbitrage (selling contracts long in spot), it is recommended to set the opening spread rate less than 0%. The lower the spread rate at the opening, the better, and the higher the spread rate at closing, the better (generally, the opening spread rate < closing spread rate).

2. Investment amount

The total amount for opening arbitrage. The arbitrage strategy will open positions based on this investment amount until fully opened. Please pay attention to the unit of the investment amount. Generally, perpetual contract spot arbitrage is based on the investment principal in USDT.

3. Leverage

To reduce the risk of contract liquidation, it is recommended to set the leverage within 1-5 times. Leverage will affect the utilization of funds. For example, the fund utilization rate for 3 times leverage is 75%. (Note: Even with 1 times leverage, liquidation may occur in the event of a black swan market crash.)

4. Single amount

The amount for a single order in the arbitrage strategy. It is mainly used to divide the investment amount into multiple small orders for opening positions, reducing price slippage losses. It is recommended to estimate the maximum amount for a single order based on the capacity of the top 5 levels of the order book depth.

5. Price mode

The order price can support maker orders, premium orders, and market orders. Maker orders have the lowest fees but are prone to not being executed. Market orders are the fastest to execute but have the highest fees. Premium orders place limit orders close to the market price, avoiding excessive slippage.

6. Check frequency

The number of times the spread condition is met can be set to 1-5 times. The purpose is to ensure that the spread is stable and not just a momentary spike, reducing the risk of erroneous orders caused by spread noise (the actual spread rate may not be 100% consistent, as there is a certain time difference between price updates and order execution, so price errors cannot be completely avoided).

7. Closing spread rate

The closing spread rate is the condition that needs to be met when closing the arbitrage strategy. It will have a certain impact on the final arbitrage profit: closing spread profit = opening spread - closing spread.

In addition, some small currencies may have insufficient depth and require a longer wait time. In such cases, the closing spread rate can be manually adjusted to meet the order requirements.

8. Opening funding rate/closing funding rate

Used to control the conditions for automatic arbitrage strategy opening and closing, ensuring that opening or closing will only occur when the funding rate meets the conditions, ensuring profits and avoiding frequent opening and closing leading to fee losses. Generally, the default values can be used.

9. Distance to trigger position reduction when approaching liquidation price

The purpose of triggering position reduction is to automatically reduce the position to reduce the risk of liquidation. By default, when the latest price is 10% away from the liquidation price, position reduction will be triggered, and this can be adjusted as needed.

During price fluctuations, there is a risk of liquidation for contract positions. After liquidation, the arbitrage position becomes unbalanced, leading to losses. Therefore, it is necessary to set the distance to trigger position reduction to reduce the risk of liquidation.

AICoin's automatic arbitrage strategy has corresponding automatic risk control measures for liquidation, automatic position reduction, and position balance, so manual intervention is not required.

II. Frequently Asked Questions

1. How to reduce the frequency of opening and closing positions?

You can increase the threshold for triggering opening and closing by adjusting the opening and closing conditions.

2. Why can't automatic opening and closing be set to all limit orders or all maker orders?

Because it may lead to one-sided opening, with one side being executed while the other side waits, resulting in losses.

3. When is the most suitable time for arbitrage?

When the funding rate has been positive for the past 3 days, the higher the better; the higher the spread rate, the better, and the position value should be >$10 million.

4. When can positions be closed?

When the funding rate reverses and needs to be paid, or when there is a large negative spread rate, the arbitrage position can be closed.

Note: Do not frequently open/close arbitrage positions. Engaging in funding rate arbitrage will incur fees, and the final profit is the funding rate minus the fees. Therefore, frequent operations may result in the obtained funding rate not covering the fees.

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