Ten years ago, I entered the cryptocurrency world with only 50,000 yuan. After experiencing various pains, confusion, and self-doubt, I eventually had a great realization, simplifying my trading techniques, and achieving stable profits. Now my life is quite comfortable; in my spare time, I enjoy fishing, playing soccer, and occasionally meeting friends for a drink! Today, I will share all my methods with you!
Before understanding it, it seems like climbing to the heavens.
Once you get the hang of it, it becomes easy.
Successful cryptocurrency trading = Philosophy + Mathematics + Psychology + Skilled Game Theory!
(Use philosophical thinking to view the big picture, use logical thinking to analyze topics, use human nature thinking to understand emotions, and use game theory thinking to view trading)
In the cryptocurrency world, one should view the big picture with a philosophical mindset rather than a logical one (use philosophical thinking to view the big picture); otherwise, mathematicians would succeed by using logical thinking to analyze topics instead of human nature (use logical thinking to analyze topics); otherwise, psychologists would succeed by using human nature to understand emotions instead of game theory (use human nature thinking to understand emotions); otherwise, gamblers would succeed by using game theory to view trading instead of philosophy (use game theory thinking to view trading); otherwise, philosophers would succeed.
In the cryptocurrency world, you need to become a philosopher and mathematician, as well as a psychologist; oh, don't forget, you also need to be a skilled game player!
Skilled game theory
Everyone is engaged in game theory and acts with game theory thinking, but some people's game theory thinking is too low-level and lacks depth. Even though they have applied game theory thinking and participated in the game, they ultimately end up as failures. It's essential to cultivate and learn high-level, multi-layered game theory thinking.
Get the hang of it in one move, triple your investment in a year
Digital currency fund quant trading mainly involves two types of operations: risk-free arbitrage and trend arbitrage, among which
Risk-free arbitrage mainly includes:
1. Arbitraging the price difference of Bitcoin across different exchanges
2. Triangular arbitrage for tokens with good liquidity
3. There is a large price difference in the market depth, allowing for active depth arbitrage.
4. Futures hedging arbitrage. Trend arbitrage mainly includes
5. Leveraged trading strategies
Next, I will explain how to execute this specifically, involving business secrets, focusing only on the operational logic, not the specific algorithms.
1st strategy: Arbitrage trading
Since Bitcoin is a global currency, there are multiple exchanges trading in different countries. Currently, the highest price for buying Bitcoin is in Indian Rupees (INR) (BTC/INR trading can be done on Koinex), followed by Korean Won, while the US Dollar has the most stable price. There exists arbitrage space between the same BTC priced in different currencies across different exchanges.
Therefore, the following prerequisites are necessary:
1. Open accounts at Bitcoin exchanges in India, South Korea, the United States, etc., and maintain the respective local fiat currency, BTC, and USDT.
2. The trading platform is very active, allowing for the deposit and withdrawal of coins at any time. When there is a price divergence for BTC across different exchanges, as long as the profit difference exceeds the transaction fee, the following cycle can be performed:
2nd strategy: Triangular arbitrage
Generally, choose tokens with good liquidity to conduct triangular trades with Ethereum and Bitcoin. After completing a triangular cycle, the quantity of coins remains unchanged, while the cash in hand increases.
The following prerequisites are necessary:
1. The liquidity of the token must be good enough
2. Calculate the total amount from the best buy to the tenth best buy, controlling the amount of circulating positions. When a triangular cycle is completed, if the profit difference exceeds the transaction fee, proceed as follows.
3rd strategy: Market depth arbitrage
Due to the numerous ICO projects, and since most projects have a private placement round, those who invested in private placements want to realize profits quickly, while those who did not participate in the private placement are optimistic about the coin and will actively buy, creating a situation where some want to sell and others want to buy. By holding a certain amount of base assets, you can automatically maintain trading at the best buy and sell prices, capturing the intermediate profits. As long as it exceeds the transaction fees, the machine will trade automatically. This model is particularly effective during significant price fluctuations at the opening, but less so during weak trading and small fluctuations.
The following prerequisites are necessary
1. There is a significant difference in opinions about a coin; some are strongly bullish while others are strongly bearish.
2. Liquidity must be sufficiently large, preferably with tokens listed on multiple exchanges, allowing for simultaneous arbitrage across exchanges.
4th strategy: Hedging arbitrage
Mainly by purchasing the corresponding futures of the currencies you hold, or the logically opposite currencies. For example, if you hold Bitcoin, you should purchase futures contracts to short Bitcoin to hedge risks. If you hold Bitcoin, you should buy Bitcoin Cash (BCH) to hedge risks. Since it is only a strategy holding to lock in profits, there are no actual operational steps.
5th strategy: Trend arbitrage
This model requires predicting price trends from 1 minute to 1 day in the future, using a margin system for leveraged trading. This part of the strategy is the most difficult and tests the algorithmic ability of programmers the most.
The first four parts,
All are risk-free arbitrages; as long as the API receives data from the exchange, the algorithms and strategies are fast enough, and the server nodes are close enough, arbitrage can be achieved. However, leveraged trading strategies require machines to autonomously judge the future trading trends and formulate corresponding long or short strategies.
Currently, many teams make judgments manually, relying on news and human perceptions of market trading data to make manual long or short trades. Due to the high volatility of digital currencies, leveraged trading can easily lead to liquidation due to opposite judgments, resulting in significant fund value drawdowns and floating profits, with very large fluctuations in returns.
A professional quantitative trading team in digital currency needs to have members from traditional financial markets like stocks, securities, and funds. The strategies studied should be capable of accommodating billions in capital and applying them, using systematic machine judgment to significantly narrow profit fluctuations and avoid the interference of human emotions and news.
Recently, the "McDonald's commemorative item" that was crazily snatched up made it to the trending topics, and Starbucks denied reports that it accepts cryptocurrency payments, sparking media discussions. Terms like "Bitcoin" and "digital currency" seem to draw attention at any moment. What opportunities and risks lie behind the fervor for digital currencies? As we enter a bear market, does digital currency still hold investment value?
The psychology of getting rich has corrupted the cryptocurrency environment.
If we consider digital currency as a game, there are various players with different roles, including project teams, exchanges, miners, and countless investors. Everyone follows a certain consensus mechanism, each playing their part within the game ecosystem.
These days, I am preparing for the upcoming opportunity!!!
Get in at 168!!!
