Quantitative technology house team launched a series of quantitative investment courses in CSDN College
Students who are interested in systematically learning quantitative investment are welcome, click the link below to register:
Quantitative Investment Crash Camp (Introductory Course)
Python stock quantitative investment
Python Futures Quantitative Investment
Python digital currency quantitative investment
C++ Language CTP Futures Trading System Development
Digital currency JavaScript language quantitative trading system development
How to do cash management for large funds
When doing circle B transactions, usually a part of the stable currency denominated in usd is reserved, which is used as a safety pad for margin, or as a backup to wait for possible trading opportunities. For example, when we do USDT-based contract transactions, we often do not fully fill the position, and reserve a part of the margin to deal with market fluctuations; for example, when we do fixed investment transactions, since the funds are not fully filled at one time, we will also reserve them in the spot account for a period of time in the future The amount of stable currency that needs to be invested.
If we only put the reserved stable currency funds in spot or contract accounts, then the rate of return on these temporarily idle funds is 0. In the long run, this part of idle funds has not been well used. For this problem, there are two solutions. The first is to use Binance’s own current financial management. The USDT and BUSD stablecoin pairs that are most frequently used are equipped with current financial management on Binance, which can basically achieve instantaneous deposits and withdrawals. However, there is one biggest problem with self-contained financial management: scale. Let's look at the relationship between scale and rate of return.
It can be seen that whether it is USDT or BUSD, if the idle funds in the account are within 2000, it is more cost-effective to use current financial management. The annualized rate of return can reach 10%, but if it exceeds 2,000 or less than 20,000, the annualized rate of return will drop to less than 2%, and if it exceeds 20,000, the annualized rate of return will continue to drop to 0.3% of USDT and 0.4 of BUSD %, which is almost negligible. That is to say, if the size of our account is larger than 2000USDT or BUSD, then the rate of return of option 1 will be severely reduced.
Option two, use the stablecoin grid market-making strategy to manage the cash of large funds.
First of all, BUSDUSDT spot pair transactions are zero-fee, which means that every transaction profit is a pure profit with zero cost.
Second, the BUSDUSDT spot transaction volume is very large, and the BUSDUSDT spot transaction volume ranks third in Binance’s total turnover all year round, second only to BTCUSDT and ETHUSDT. Compared with the scale limit of Binance’s wealth management, it is more suitable for large funds for cash management .
Third, the expected annualized rate of return of the stablecoin grid market-making strategy is 10% to 20% (the expected return is adjusted according to the volatility of the stablecoin pair), far exceeding the rate of return of wealth management above 2000U or even 20000U. Attached is the real transaction record of our spare funds in the market making part of the BUSDUSDT pair. The strategy is similar to financial management and stable cash harvest.
Fourth, since the stable currency pairs are all anchored to the US dollar, their central price is 1, and the deviation will inevitably return, and there is almost no problem of entrapment. Even if you need to use the stablecoins for other strategies during the operation of the strategy, you can stop immediately. Binance provides BUSD spot pairs of various mainstream currencies, as well as BUSD-based contracts, available for trading. Investors can immediately invest the USDT and BUSD held in their hands into the required transactions.
Stablecoin Grid Market Making Strategy Principles
The probability of a stablecoin pair returning to the mean is close to 100%: the greater the deviation, the better the trading opportunity and the higher the expected return
We start from the underlying logic of stablecoin pair design. At present, almost all mainstream stablecoins are against the US dollar. If the price of one of the reserve stablecoins (such as USDT) exceeds $1, while the price of the other stablecoin BUSD is lower than $1, then arbitrageurs will enter the market and sell USDT for BUSD, In order to bring the BUSD price back to $1. When the price difference between two stable currency pairs is getting bigger and bigger, the expected income from exchanging high-priced currencies into low-priced currencies will also be higher and higher, and this income is close to risk-free income, and there will be a steady stream of Arbitrageurs enter the market until the spread is evened out.
Taking BUSD/USDT as an example, in the long run, the average transaction value of the stablecoin pair is very close to 1, and has been stable at this position.
Although stable currency pairs have a high probability of returning to 1 in the long-term from the perspective of economic principles, from the perspective of short-term trading behavior, stable currency pairs are unstable, and the opportunities brought by daily volatility are very rich. In the intuitive impression of many people, stable currency pairs should not fluctuate much for a long time, but this is not the case in reality. The daily volatility of stable currency is not small, which is enough for us to do transactions. For example, we have a certain period of BUSD/USDT pair market, we can see that the lowest is 0.9883, and the highest is 1.0013, with an amplitude of more than 1.3% in the middle. Suffice it to say that stablecoin pairs are not stable.
We know that the volatility of the underlying asset is the source of profit for a trading strategy. Assume that we can earn 1/3 of the daily volatility of the BUSD/USDT currency pair every day through the grid + market-making strategy. In the past two years, we can accumulate a total return of more than 40%, and the average An annualized rate of return of more than 20%.
Fully automatic trading performance
Core functions
1 Since it is a cash management strategy, of course it is necessary to achieve 7*24 hours of fully automatic transactions, and support opening and stopping at any time.
2 Personalized adjustments based on user funds and risk preferences
2.1 Personalize the amount of funds and risk preference of users by adjusting core parameters
2.2 Adjust the grid pending order amount and the number of pending order grids to adapt to the amount of cash management funds required by users
2.3 Set parameters such as grid width and number of grids to adapt to user risk preferences
3 Fault Tolerance Mechanism of Automatic Trading Program
3.1 The network cable is often unplugged in digital currency exchanges. Our program can achieve seamless connection before and after the network cable is unplugged.
3.2 The program can stop and resume trading at any time. For example, if the user's funds need to be used for other transactions, the program can be stopped at any time. Similarly, if the user has excess idle funds, the user can modify the strategy parameters and resume the transaction at any time. When the program starts, all previous pending orders will be restored and the transaction will continue.
Firm performance
