Babbitt Column | Is Quantitative Trading in the Blockchain Really Reliable?

Editor's Note: The original title was "Quantitative Transaction on Blockchain"

I. Causes

A couple of days ago, my friend pulled me into a digital currency quantitative trading group. After getting up, I found out that although the current currency market is not good, the group doing quantitative trading is not idle at all. The discussion in the group is hot.

Basically, it was more than 100 without reading WeChat for a few minutes. Someone said, "This time it plummeted, and I made 100 eos." Someone said, "My strategy has yielded more than 20% this month." Of course Some people are losing money. Some people say, "I just fell in this wave. Is there any parameter that is not set and why there is no automatic liquidation?" Some people are inquiring: "If I adjust the parameters and period slightly, will the rate of return change? better?"

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The chat is also mixed with a lot of code, terminology and the like. Anyway, the group is talking hot, and basically no one speaks with the WeChat group in other currency circles, close to the dead group, forming a very sharp contrast.

When the digital currency market is not good, the discussion in the quantitative trading group is so hot that there is no bear market at all. So is quantitative trading reliable? How does this investment method compare with fixed investment and coin storage?

What is quantitative trading?

In the current market, the term quantitative trading is basically overused. Any software platform dares to call it a quantitative trading platform. There are some so-called "smart bricks", "smart hedging", "binary options" and other projects. It is actually a fraudulent project, but it is under the banner of quantitative trading. These projects have nothing to do with quantitative trading, and this category must be ruled out first.

Quantitative transactions are defined on Baidu Encyclopedia:

Quantitative trading refers to the use of advanced mathematical models to replace human subjective judgments, and the use of computer technology to select a variety of "high probability" events that can bring excess returns from huge historical data to formulate strategies, greatly reducing investor sentiment. The impact of volatility, to avoid making irrational investment decisions in extreme market enthusiasm or pessimism.

At present, the formal quantitative trading in the market is basically divided into two cases: the first is that there are already clear trading strategies and buying and selling signals, but they are automatically executed by computers. For example, I want to make a fixed investment. For example, I want to make a certain investment every week, but I do n’t want to go to the exchange every Monday to recharge, buy coins, check prices, hold orders, etc., so I go through the program. Write code to execute, the quantitative transaction mentioned here, the code just plays the role of automatic execution, which is a relatively basic quantitative transaction.

The second type is a little more high-end. People do not participate in determining when to buy. People are only responsible for selecting the strategy. The machine executes the strategy algorithm to determine when to buy and when to sell. It automatically orders to buy and sell. Quantitative trading has been done, and it is mainly this that is currently done on the market.

Of course, the boundary between the two is not so obvious. Sometimes you know when to buy and sell, but there is a strategy hidden behind it, but the strategy is not quantified in your mind; sometimes you have a strategy. But this strategy is simple, and the effect achieved is basically equivalent to automatic execution.

The previous two days ahr999 released an ahr999 fixed investment index , which was included by Babbitt.

The significance of this strategy is that the fixed investment strategy is a lazy investment strategy with a fixed period investment. It does not require timing and opportunity, but if supplemented by a simple timing strategy, it may better help investors control costs and increase returns. The coin hoarding indicator is such a simple and clear timing tool.

The conclusion of this algorithm is: when the indicator is less than 0.45, it is more suitable to increase the investment amount, and the time interval is about 21%; when the indicator is between 0.45 and 1.2, the fixed investment strategy is suitable, and the time interval is about 39% . This index can be regarded as a coin hoarding indicator of a fixed investment strategy. It is a very simple strategy of fixed investment, and at the same time, specific buying and selling signals are generated by the strategy.

I personally researched this index and found that the fit of this strategy is quite high. Interested friends can also test it by themselves.

Of course, this indicator is not the focus of our discussion here. My focus is on quantifying this type of strategy. We can completely execute the buying and selling transactions for us by machines. We do not need to manually mark and place orders. We only need to advance. Enough USDT is enough.

However, if we buy it manually, we will be affected by emotions, such as when we fall sharply, we dare not buy it, or feel that it will fall more. In contrast, the machine has no emotion, it only executes our instructions mechanically, and all we have to do is to constantly optimize the strategy, continuously test the parameters, and then try to minimize interference with the machine unless necessary, Let it run automatically. In some aspects, such as short-term trading, quantitative trading is more reliable than artificial participation, because it can eliminate emotional factors, it will not be greedy and hopeless, and its parameters can be continuously tested, adjusted and optimized.

Quantitative trading in the traditional financial world

In the traditional financial market, there are a large number of quantitative transactions. Some people even say that more than 50% of the transaction volume in the financial market is contributed by quantitative trading robots.

Therefore, in the traditional financial market, the major securities companies are very friendly to robots, have made a very complete API interface, and give very low commissions and other preferential conditions for quantitative transactions (1.5 / 10,000 commission, plus (The basic threshold fee of 5 yuan is waived), because quantitative transactions will create a lot of fees and profits for the company.

The exchanges in the currency circle, like the securities companies in the stock market, all kinds of quantitative trading robots provide very convenient conditions. In turn, the quantitative trading robots provide sufficient depth for the entire market. Quantifiers win the world. "

This has basically become the future trend. No matter whether it is currency trading, futures, margin trading, or options trading, the future exchanges will open API interfaces to provide services for quantitative trading. Whether you like it or not, quantitative trading has become This is an invisible but very powerful force in the market.

In the traditional financial world, most securities firms will have their own self-employed business, and a large part of self-operated business is quantitative trading. Common trading strategies in stocks include alpha strategies, CTA strategies and arbitrage strategies. Alpha strategy taps portfolios to tap investment opportunities that surpass the overall performance of the market; CTA strategy follows the trend to chase up and down; arbitrage strategies use market price differences to empty gloves. Every quantitative investment strategy is a black box. They are the core competitiveness of a quantitative investment in a quantitative company. Other outsiders cannot know the secret.

Quantitative investment in stocks has not developed in the past two years, but has existed for many years. It is said that on October 19, 1987, the "Black Monday" of the US stock market, the global stock market fell sharply, and no one could find it. The reason was later discovered that the reason was that a certain trader placed the wrong order and then caused a chain reaction in the entire market. A large number of quantitative trading robots (also called "computer program trading" at that time) got the wrong signal and then kept selling. Exiting and closing positions caused the price to plunge all the way to form a stampede event.

If after so many years of development, the traditional quantitative trading in the stock market has been relatively mature, and the profit space is not large, then I personally think that there is a lot of room for quantitative trading in the digital currency field. The digital currency field is an emerging industry. The overall scale of the industry is still very small, and the market value is only equivalent to the market value of a large company in the traditional stock market. Moreover, the digital currency industry does not have any regulatory system, audit system, or information disclosure system. It is not mature yet, and the overall volatility will be very high, and the profit potential of quantitative trading may be greater.

4. Is quantitative trading reliable?

Some people ask, is quantitative trading reliable? It should be said that an industry can exist for so many years, and the market value of the assets involved is so significant, it certainly has its reason.

To study whether quantitative trading is reliable, this comes to the essence of quantitative trading.

Some people think that quantitative trading is essentially a programmatic version of short-term trading.

He believes that only short-term trading is reliable, and quantitative trading is reliable; if short-term trading is not reliable, then quantitative trading is certainly not reliable.

This view is not necessarily correct. The mistake made here is to confuse quantitative trading into high-frequency trading and short-term trading . There are indeed many frequent transactions with high transaction frequency, most of which are short-term transactions. However, there are also very low quantitative transaction frequencies and long holding times, such as the ahr999 fixed investment strategy we mentioned above. When designing quantitative trading, it is difficult to say whether it is short-term or long-term.

Long-term and short-term are not the key points of whether quantitative trading is reliable. The trading strategy behind it is! If your trading strategy is reliable, then your quantitative trading is reliable; if your quantitative trading is not reliable, your quantitative trading is not reliable; strategy is the key, and quantification is only a specific machine execution process.

Even the quantitative trading of short-term strategies is different in the digital currency market. The essence of the short-term is actually trend-following-that is, when the market is falling, we expect it to continue to fall; when the market is rising, we expect it to continue to rise.

This has a premise, which is that the volatility of the entire trading market is very high, and the amplitude of the volatility is particularly large. The higher the short-term volatility, the more obvious the short-term trend will be, and the possibility of quantifying the trading income of that short-term strategy will be Bigger.

The current digital currency exactly fits this characteristic, and its volatility is very high. For example, taking the BTC 30-minute line as an example, there are often fluctuations of US $ 500 to US $ 1,000. Yesterday, this situation occurred several times, and sometimes there were cases of up and down pins, long and short double burst.

So in the case of such short-term fluctuations, there is a certain profit margin for short-term quantitative trading. It is easy to miss opportunities or be affected by emotions, and quantitative trading can automatically capture these opportunities. This is why I think The reason why digital currency quantitative trading may be reliable.

Personally, although I rarely do short-term trading, I am open to quantitative trading.

The digital currency market is an emerging market. There are still many imperfections. It should be said that there are many information gaps and arbitrage spaces in many places. I personally think that the closer the market is to the invalid market, the greater the space for profit from quantitative transactions . Programs to get the benefits behind this information gap are a viable approach.

Of course, the threshold for quantitative trading is not low, and most people should not participate. This article is purely a discussion of digital currency quantitative trading. I am personally open to quantitative trading, and interested friends can try it. If there is no such technical foundation, it will be an honest hoarding and fixed investment, and the income will not be low.

In addition, government agencies and major exchanges also need to pay attention to the power of quantitative trading. Quantitative trading can help rise and fall . It may be dangerous if it is not controlled . For example, on the evening of September 25, 2019, the digital currency market suddenly plunged. Bitcoin's 24-hour drop fell more than 15%. A large number of small and medium-sized market value currencies fell more than 50%. Numerous leverage and futures traders broke out. There is a quantitative trading robot behind this. Shadow.

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