In the cryptocurrency market, data has always been an important basis for trading decisions. How to see through the clouds in the complicated data and discover valuable information to optimize trading strategies has always been a hot topic in the market. To this end, OKX specially planned the "Insight Data" column, and cooperated with mainstream data platforms such as AICoin and Coinglass as well as related institutions to start from common user needs and hope to unearth more systematic data methodologies for market reference and learning.
In this issue of "Insight Data", the OKX strategy team and the inventor of quantitative trading (FMZ) discussed the concept of quantitative trading in depth, and conducted a detailed discussion on how ordinary people can get started with quantitative trading. Hope this helps.
OKX Strategy Team : The OKX Strategy Team is a group of experienced professionals dedicated to driving innovation in the global digital asset strategy space. The team brings together experts in many fields such as market analysis, risk management and financial engineering, and provides solid support for OKX's strategic development with its deep professional knowledge and rich business experience.
FMZ Quantitative Team : Inventor Quantitative is a company focused on providing professional solutions for cryptocurrency quantitative trading users. Inventor Quant not only provides users with a full range of quantitative trading functions such as strategy writing and backtesting, quantitative trading engines, algorithmic trading services and data analysis tools, but also has an active developer community where users can communicate and share experiences.
Table of contents
ToggleWhat is quantitative trading?
OKX Strategy Team : Quantitative trading is essentially a way of using mathematical models and statistical methods to automatically execute trading strategies through programs. Unlike manual trading, which relies on personal decision-making, quantitative trading relies on historical data, algorithms and technical indicators to analyze the market, find trading opportunities, and automatically trade. OKX's strategy robot provides powerful and flexible automated trading tools, supports multiple strategies (such as grid, Martin strategy, etc.), and can also perform strategy backtesting and simulated trading to help users find the most suitable tools in different market environments.
FMZ Quantitative Team : Quantitative trading is also called programmed trading, and there is nothing mysterious about it in nature. When users operate on the exchange website or software, whether they are getting market prices, checking accounts, placing orders, etc., they are connected to the exchange's server through the corresponding API, so that the server can return the data the user needs. API can be loosely understood as accessing a specific network link to obtain return information, such as opening https://www.okx.com/api/v5/public/funding-rate?instId=BTC-USDT-SWAP in a browser, will get:
{"code":"0","data":[{"fundingRate":"0.0001510608984383","fundingTime":"1717401600000","instId":"BTC-USDT-SWAP","instType":"SWAP" ,"maxFun
Among them, "fundingRate": "0.0001510608984383" is the current funding rate of the BTC-USDT perpetual contract. Modify the instId=BTC-USDT-SWAP in the link to other currencies to get the corresponding funding rate information. Similarly, we only need to access the corresponding API link and fill in the appropriate parameters to basically complete the operations we complete on the website or APP. If all this process is controlled by a program and accomplishes our preset purpose (trading or other), this is also quantitative trading.
In short, all information acquisition and order and transaction decisions were originally completed by our brains. Now we can hand over all or part of this process to a program for execution.
What type of user is it suitable for?
OKX Strategy Team : Taking OKX as an example, our quantitative trading tools are suitable for users with different backgrounds/preferences. Whether they are novices or advanced users, they can quickly get started using the strategies.
– For novice users (traders with little or no quantitative trading experience), we currently provide:
- Easy-to-use interface and preset strategies, you can choose the platform’s preset strategies, such as grid strategies, fixed investment strategies, etc. These strategies usually do not require complex settings and deep market knowledge. Users only need to select and configure a few parameters. Get started, no programming or deep technical knowledge required.
- Simulate trading and backtesting to understand the potential performance of strategies under different parameter settings and reduce risks in real trading. These features help users gain experience before actually investing money.
– For advanced users (traders with certain quantitative trading experience or technical capabilities), Ouiyi’s strategy robot also has highly customized strategies, such as grid and Martin strategies that provide rich advanced parameters, or can execute Trading View PineScript's signal strategy is suitable for users with programming and data analysis skills.
FMZ Quantitative Team : We often come into contact with roughly the following four types of users:
– Professional traders. As a professional trader, trading is the foundation of his life, and he must master all advanced tools to assist him. Therefore, quantitative trading is almost necessary for them to master. Professional traders often have mature and profitable strategies. By programming the strategies, they can be applied to more exchanges and trading varieties, doubling the trading efficiency.
– Programming enthusiast. For individual traders with a programming background, quantitative trading tools provide an excellent opportunity to combine programming skills with the digital currency market. They can customize trading strategies, develop trading tools according to their needs, and optimize strategy effects through backtesting. Saves a lot of learning time in the early stage.
– Traders who need effective strategies. Some traders may not yet have a stable trading strategy, and quantitative trading tools can also help them. These tools usually include strategy libraries and strategy markets. Traders can test other open source strategies and find strategies that suit them through data analysis and backtest optimization.
– An average trader with the ability to learn. Even ordinary traders without a programming background can benefit from the automation capabilities provided by quantitative trading tools. By using ready-made quantitative trading platforms such as FMZ Quantitative, they can easily set up trading strategies and use the backtesting function to evaluate the effectiveness of the strategies, thereby improving trading efficiency and reducing human errors in actual operations.
What are the advantages and disadvantages compared to manual trading?
OKX Strategy Team : The advantage of quantitative trading is that it is more systematic and objective. Transactions are executed through preset algorithms and rules, avoiding the interference of emotions on decision-making. The trading efficiency is also very high, able to process large amounts of data and conduct high-frequency trading, and capture market opportunities 24/7. Users can also test and optimize strategies through historical data to enhance the reliability and testability of the strategy.
But quantitative trading is not perfect. First of all, it has a certain degree of complexity. Some advanced strategies require professional statistical and financial knowledge, and the threshold is relatively high. Secondly, quantitative trading may rely too much on historical data to optimize strategy parameters, and actual market performance may not be as expected. Since market prices move according to the random walk hypothesis, past performance may not be indicative of future profit potential, which is known as strategy overfitting. Finally, the performance of quantitative trading strategies under different market conditions may fluctuate, requiring constant adjustment and optimization to adapt to market changes.
FMZ Quantitative Team : In fact, manual trading and quantitative trading are not antagonistic. An excellent quantitative trader is often also a qualified manual trader. These two trading methods can complement each other and can be used together to achieve greater advantages. Good quantitative traders need to have a deep understanding of the market. The market is complex and changeable. Although quantitative trading relies on data and algorithms, the basis of these data and algorithms is still a deep understanding of the market. Only by understanding the operating mechanism of the market, influencing factors, and the relationship between various assets can quantitative traders design effective trading strategies. Therefore, volume traders must possess solid market knowledge, which is often also accumulated through manual trading.
According to our experience, there are roughly three advantages:
1. Automate policy execution and avoid manual intervention.
Sometimes the strategy itself is profitable, but constant human intervention leads to losses. Programmed trading can automatically execute preset trading strategies without manual intervention. This means that traders can set the conditions for buying and selling, and the program will automatically execute the trade when the conditions are met, thus avoiding emotional fluctuations and human error. The program is executed 24 hours a day without interruption, eliminating the need to stare at the disk for a long time.
2. Can satisfy transactions that rely on low latency, high frequency, and complex calculations.
Manual trading is limited by human reaction and calculation speed, which is far from comparable to program execution. These needs can only be met by quantitative trading.
3. Quantitative trading can use historical data to backtest and optimize trading strategies.
Evaluate the effectiveness of a strategy by simulating its performance in past markets. This method can help traders optimize their strategies before real trading and increase the probability of profit. However, many manual traders trade based on their feelings and use real trading to trial and error at a high cost of time and money. In fact, most quantitative strategies are dug out of data analysis.
Of course, quantitative trading is not perfect and has some disadvantages:
1. High technical requirements:
Compared with manual trading, quantitative trading requires additional programming and data analysis capabilities, and the threshold is higher. Getting started with quantification will undoubtedly cost a lot of time and learning, and there is no guarantee of return on investment.
2. Higher cost:
The construction and maintenance costs of quantitative trading systems are high, especially for high-frequency trading, which requires a large amount of hardware and data resources. These fixed costs will be incurred regardless of the strategy's profits or losses.
3. Market risk:
Although quantitative trading can reduce human error, market risks still exist, and failure of strategies may lead to serious losses. Quantitative strategies are written in advance and back-tested based on historical data, which has certain limitations and cannot keep up with changes outside the market. Manual traders, on the other hand, can quickly make comprehensive judgments on various information in the market and are more sensitive to market changes.
How do novice users get started?
OKX Strategy Team : In general, quantitative trading is challenging for novices, but it is not impossible to get started. Here are some suggestions to help novice users better master quantitative trading:
1. Learn basic knowledge: First, understand the basic strategy principles and the impact of different parameter settings on strategy performance. This is the first step to success.
2. Choose a suitable strategy robot: Choose a suitable strategy robot based on your judgment of the market conditions. For example, in volatile markets, a grid strategy may be a good choice.
3. Start with simple strategies: Start with the most basic trading strategies, gradually learn and implement them, and then gradually introduce more complex strategies.
4. Focus on risk management: Learn to establish and implement effective risk management and stop-loss strategies.
FMZ Quantitative Team : When it comes to programmatic trading, many people think that the threshold is high and the technology is complicated. In fact, learning programmatic trading has become very easy now. The exchange integrates common strategies, and quantitative teams such as FMZ Quantitative will provide one-stop services. Coupled with large language models like ChatGPT to assist programming, novice users have a very realistic and feasible path to get started and even become proficient in programmatic trading. The only obstacle is mobility. If you are a user who is new to trading and has many trading ideas, learning programmatic trading will make you even more powerful. Here are the steps we believe are suitable for getting started with digital currency traders without any prior programming experience:
1. Familiar with basic quantitative strategies:
Understanding how to use the strategic trading module of OKX Exchange will help you have a preliminary understanding of strategic trading. For most traders, these features are sufficient. If you have more ideas to implement, you can continue to learn more.
2. Learn programming languages:
It is recommended to learn Javascript (JS) and Python, and you only need to master the basic usage. When writing strategies, learn and practice at the same time, and you will improve quickly. The JS programming language is relatively simple, and there are many open source strategies from simple to complex for reference on the FMZ platform. Python is the most commonly used language for data processing, and it is very convenient to perform statistical analysis in combination with Jupyter Notebook. You can also learn some data analysis during this period. There are many related Python books and tutorials. We recommend "Using Python for Data Analysis"). Depending on the basis of study, it takes about 1-2 weeks to study 4 hours a day.
3. Read basic quantitative trading books:
There are many related books, you can search by yourself. You can read it quickly and understand the types of strategies, risk control, strategy evaluation, etc. Quantitative trading involves finance, mathematics and programming, and is very rich in content. Strategies that can actually be applied to the market will not be found directly in the book. Reading relevant books, research reports and papers is a long-term process.
4. Study the exchange API documents and related examples, and make some real deployment strategies:
It is recommended to get started through the FMZ quantitative platform. The rich documents and examples greatly reduce the threshold for real trading. This step requires mastering the basic policy architecture and solving common problems, such as error handling, access frequency control, policy fault tolerance, risk control, etc. Write some simple modules, such as price push, iceberg commission, etc., to exercise your ability to write real offer strategies. Backtest some basic strategies, such as grid, balanced strategies, etc. Join relevant groups and learn to ask the right questions and search for relevant posts.
5. Verify the strategy through backtesting and simulated trading, continuously improve it, and finally start actual trading:
Skilled traders already have their own strategic ideas, and can verify and improve the strategy through backtesting and simulated trading, and finally start actual trading. The joy of completing a complete strategy and watching the order be placed automatically is indescribable. If you don’t have your own strategy yet, you can first complete some backtest arbitrage of open source strategies, grid strategies for multiple trading pairs, etc. to exercise your real-time programming capabilities.
6. Keep reading, thinking, communicating, analyzing, backtesting and real trading, and practice repeatedly:
As the difficulty gradually increases, the learning gradually deepens, and the ability will continue to improve.
What should you pay attention to when using quantitative trading?
OKX Strategy Team :
In fact, we believe that users need to pay attention to the following three points when using quantitative trading:
1. Quantitative trading must be profitable:
Many people believe that quantitative trading relies on complex algorithms and data analysis, so it must be able to make stable profits. However, quantitative trading does not guarantee a certain profit. Although quantitative strategies optimize trading decisions through data and algorithms, factors such as market uncertainty, errors in model assumptions, and strategy overfitting may lead to losses. Quantitative trading still faces the risk of market risk and strategy failure. The key is to choose appropriate trading strategies in different market conditions and reasonably set the parameters of the corresponding strategies.
2. Quantitative trading is only suitable for large institutions and high-net-worth users:
Individual investors can also use quantitative trading platforms and open source tools on the market to participate in quantitative trading. For example, tools such as Grid Strategy, Martin Strategy, and Signal Strategy provided by OKX are all free to use. While high-frequency trading does require high financial and technical requirements, the above types of strategies do not necessarily require huge amounts of capital.
3. Backtest results represent future performance:
Backtesting is only a means of evaluating a strategy but does not guarantee future performance. Changes in the market environment, deviations from model assumptions, and strategy overfitting (over-optimization for historical data) may cause actual trading results to be less than expected. Backtesting results need to be combined with real market conditions and robust risk management to assess their reliability.
FMZ Quantitative Team : In fact, most people do not have a deep understanding of quantitative trading and are prone to misunderstandings. We have summarized these common misunderstandings and shared them with readers:
1. Can quantitative trading be profitable?
Many traders turn to quantitative trading after losing money in manual trading, hoping to make quick profits and regard it as a straw. However, profitability depends more on the logic of the trading strategy than on the instrument itself. Even if an ideal automatic trading strategy is developed, various unexpected problems may be encountered in actual trading, resulting in unsatisfactory strategy results. Therefore, programmatic trading is not a guarantee of profitability, but requires continuous optimization and adjustment of strategies.
2. Are there no mistakes in quantitative trading?
Although quantitative trading reduces human error, it also introduces other errors. For example, the leakage of API-key may lead to malicious manipulation of account funds. In addition, bugs or unhandled exceptions in the strategy may lead to incorrect transactions or even catastrophic consequences. In order to avoid these problems, traders need to take strict security measures and conduct sufficient testing and verification before deploying trading programs to ensure the robustness and reliability of the programs.
Conclusion
The above is the third issue of the "Insight Data" column launched by OKX. It focuses on core issues such as how to get started with quantitative trading and precautions. It is hoped to help interested traders understand quantitative trading more systematically and make wise trading decisions. . In future series of articles, we will continue to explore more practical data usage/analysis methods to provide a reference for traders with different trading preferences.
Risk warning and disclaimer
This article is for reference only. This article only represents the author's views and does not represent OKX's position. This article is not intended to provide (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; (iii) financial, accounting, legal or tax advice. Holding digital assets, including stablecoins and NFTs, involves a high level of risk and may fluctuate significantly. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professional regarding your specific situation. Please be responsible for understanding and complying with applicable local laws and regulations.
The content of this article is officially provided and does not represent the position or investment advice of this site. Readers must make their own prudent assessments.
