OKX collaborates with the high-quality data platform AICoin to launch a series of classic strategy research, aiming to help users better understand and learn different strategies through data testing and analysis of strategy characteristics, and to avoid blind use as much as possible.
This article is the conclusion of the strategy testing, aiming to help users understand 8 major classic trading strategies by summarizing the core content of the previous 5 periods. These strategy summaries demonstrate the performance and application scenarios of different strategies in specific market environments. Traders should choose suitable strategies based on their risk tolerance and market judgment, and continuously optimize strategies to cope with market changes.
1. Dollar-Cost Averaging Strategy
The dollar-cost averaging strategy is a method of trading at fixed intervals with a fixed amount to spread the risk of a one-time large transaction and maximize returns through the compounding effect of time. This strategy is particularly suitable for long-term holders, aiming to reduce the psychological pressure and trading risks brought by market fluctuations.
Data Sample
By comparing the dollar-cost averaging returns of Bitcoin in different halving cycles, the results show that the win rate of the dollar-cost averaging strategy exceeds 50% in each cycle, especially during the second to third halving period, with a return rate of 170.03%. However, this return rate is still inferior to the overall market increase of Bitcoin. For the dollar-cost averaging data sample of the past four years, the return rate in 2022 was -48.75%, showing the risk that the dollar-cost averaging strategy may bring in a bear market.
Advantages and Disadvantages
• Advantages: The dollar-cost averaging strategy reduces the impact of market fluctuations by spreading out trading time, suitable for traders with low psychological pressure. It is simple to operate and has lower risk, especially suitable for long-term traders.
• Disadvantages: The dollar-cost averaging strategy cannot maximize returns in sharp market increases and requires long-term adherence. In the face of a long market downturn, the returns may be lower.
Strategy Summary
The dollar-cost averaging strategy provides a relatively stable trading method in highly volatile markets, but it may not capture the maximum increase in a clear market trend. Traders using this strategy should adjust it based on market conditions and personal trading goals.
2. Grid Strategy (Spot and Futures)
The grid strategy is a method of dividing multiple grids within a preset price range and executing buy and sell operations during price fluctuations. This strategy is mainly suitable for oscillating markets, aiming to achieve stable returns through frequent small trades.
Data Sample
In the testing of neutral contract grids and spot grids, the data shows that the neutral contract grid has the highest return rate in an upward oscillating market, reaching 33.91%, while the return rate of the spot grid under the same market conditions is 19.05%. However, in a downward oscillating market environment, the spot grid incurred losses, showing its limitations in a declining market.
Advantages and Disadvantages
• Advantages: The grid strategy performs well in oscillating markets, especially the neutral contract grid, achieving higher returns through leverage and frequent trading. It is flexible and adaptable.
• Disadvantages: The grid strategy performs poorly in a one-sided market, especially the spot grid, which is prone to losses in a declining market. In addition, although the contract grid strategy has high returns, it comes with higher risks.
Strategy Summary
The grid strategy provides an effective way to earn returns in oscillating markets, especially the neutral contract grid, which performs well in different market environments. However, traders should use leverage cautiously and pay attention to the potential impact of one-sided market trends on the strategy.
3. Martingale Strategy (Spot and Futures)
The Martingale strategy is a high-risk strategy that involves doubling the trading volume after a loss to lower the average cost and expects to make up for all losses through eventual profits. This strategy is suitable for traders with strong capital and performs well in oscillating or rising markets.
Data Sample
In different market environments, the testing data of spot Martingale and contract Martingale shows that both can achieve considerable profits in an upward market, especially the contract Martingale, which performs exceptionally well in a sideways oscillating market. However, in a downward market, both face significant loss risks, especially the contract Martingale, which has more significant risks due to leverage usage.
Advantages and Disadvantages
• Advantages: The Martingale strategy lowers the average cost through continuous position increases, with high profit potential in oscillating and rising markets, especially the contract Martingale, which amplifies returns through leverage.
• Disadvantages: The main risk of this strategy is the potential for significant losses in a sustained downward market, especially in leveraged trading with the risk of liquidation. Additionally, the Martingale strategy requires strong psychological resilience and capital support.
Strategy Summary
The Martingale strategy can bring significant returns in appropriate market environments, but its high-risk nature means that only traders with sufficient risk tolerance and capital strength can use it effectively. In a one-sided downward market, traders should use this strategy cautiously or consider adjusting it to lower the risk.
4. Funding Rate Arbitrage Strategy
The funding rate arbitrage strategy aims to profit from the difference in funding rates between futures contracts and spot by utilizing the funding rate disparity. This strategy is suitable for markets with small fluctuations and significant funding rates, aiming to achieve stable returns by locking in the funding rate difference.
Data Sample
Under different market conditions, the testing of the funding rate arbitrage strategy shows that in high funding rate situations, the strategy can achieve stable annualized returns. However, when the market fluctuates significantly or the funding rate experiences abnormal fluctuations, the strategy's returns may be affected.
Advantages and Disadvantages
• Advantages: The funding rate arbitrage strategy provides a relatively stable way to earn returns by locking in the funding rate difference, especially in markets with small fluctuations. It has relatively low risk and is suitable for long-term trading.
• Disadvantages: The strategy is highly dependent on market conditions, especially in markets with small funding rate fluctuations. However, in markets with significant funding rate fluctuations or abnormalities, it may be difficult to achieve the expected returns.
Strategy Summary
The funding rate arbitrage strategy provides a stable way to earn returns in low-volatility markets, suitable for risk-averse traders. However, traders need to closely monitor the market's funding rate changes and adjust the strategy when necessary to cope with the risks brought by market fluctuations.
5. Time-Weighted and Iceberg Order Strategy
The time-weighted strategy and iceberg order strategy are two common trading strategies suitable for splitting and executing large orders. The time-weighted strategy spreads large orders over a specified time to reduce market impact, while the iceberg order strategy hides the actual size of large orders to avoid drastic market price fluctuations.
Data Sample
The time-weighted strategy reduced market impact by splitting large orders during a bull market, achieving better returns. In a bear market, it avoided overpaying by setting limit prices, thus reducing the risk of losses. The iceberg strategy effectively hid the actual size of large buy orders in a bull market, avoiding market price hikes. In a bear market, it avoided panic selling by hiding the actual size of large sell orders.
Advantages and Disadvantages
• Advantages: The time-weighted strategy reduces market impact by spreading order execution over time, resulting in smooth and controllable prices. The iceberg order strategy protects trading privacy by hiding order size and is highly adaptable.
• Disadvantages: The time-weighted strategy may not achieve the best prices in highly volatile markets and may be identified and targeted. The iceberg order strategy has liquidity risks and is easily identified by advanced algorithms.
Strategy Summary
The time-weighted and iceberg order strategies provide effective solutions for executing large orders, especially suitable for markets with high volatility or poor liquidity. When using these strategies, traders should flexibly adjust strategy parameters based on market conditions and personal needs to achieve better trading results.
How to Access OKX Strategy Trading?
Users can access OKX strategy trading through the OKX APP or official website, enter the "Trading" section, and then click on "Strategy Trading" mode to experience it by accessing the strategy plaza or creating strategies. In addition to creating strategies independently, the strategy plaza currently provides "High-Quality Strategies" and "Strategies with Order Placers," allowing users to copy strategies or follow strategies.
OKX strategy trading has multiple core advantages, including easy operation, low fees, and security. In terms of operation, OKX provides intelligent parameters to help users set trading parameters more scientifically and offers graphic and video tutorials to help users quickly get started and become proficient. Regarding fees, OKX has comprehensively upgraded its fee rate system, significantly reducing user trading fees. In terms of security, OKX has a security team composed of top global experts, providing bank-level security protection.
How to Access AICoin's Strategies?
Users can find grid trading strategies, universal DCA strategies, and funding rate arbitrage strategies in the "Strategies" option on the left sidebar of AICoin's product. In the "Market" option on the left sidebar, users can find AI grid strategies and spot DCA strategies. In the "Custom Indicators/Backtesting/Live Trading" section of the "Market" interface, users can find dollar-cost averaging strategies and contract DCA strategies. In the "Trade" section on the right sidebar of the "Market" interface, users can find intelligent order splitting strategies.
AICoin's strategy plaza selects various high-quality strategies, including arbitrage robots with low risk and stable returns, AI grids with the ability to capture price differentials rapidly, and universal DCA with the advantages of cost averaging and batch bottom fishing for all market currencies, making them suitable for various types of investors.
Data Testing Series Summary
Strategy Test 01 | OKX and AICoin Research Institute: Dollar-Cost Averaging Strategy
Strategy Test 02 | OKX and AICoin Research Institute: Grid Strategy
Strategy Test 03 | OKX and AICoin Research Institute: Martingale Strategy
Strategy Test 04 | OKX and AICoin Research Institute: Funding Rate Arbitrage Strategy
Strategy Test 05 | OKX and AICoin Research Institute: Time-Weighted and Iceberg Order Strategy
Disclaimer
This article is for reference only and represents the author's views, not OKX's position. This article does not intend to provide (i) trading advice or recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; (iii) financial, accounting, legal, or tax advice. We do not guarantee the accuracy, completeness, or usefulness of such information. Holding digital assets (including stablecoins and NFTs) involves high risks and may experience significant fluctuations. You should carefully consider whether trading or holding digital assets is suitable for your financial situation. For your specific circumstances, please consult your legal/tax/trading professionals. You are responsible for understanding and complying with applicable local laws and regulations.
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