Guide to Futures Martingale Strategy

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Announcements Guide to Futures Martingale Strategy

Guide to Futures Martingale Strategy

2023-12-04 09:58:15 UTC 9859 Read

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1.What's Futures Martingle?
2.Terms Explained
3.How to use Futures Martingale？
4.Pros of Futures Martingale
5.Risks of Futures Martingale

## 1.What's Futures Martingle?
Martingale is a strategy applied to average the cost in capital management. Its fundamental concept involves increasing the next investment amount after experiencing losses, to recuperate losses and attain profits in a single transaction when the market rebounds. The core concept of Spot Martingale is to buy in batches to average down the cost, and subsequently sell out all positions at once to make a profit when there is a market upturn. Futures Martingale builds on spot Martingale by supporting two-way long/short trading and using leverage to amplify trading funds, providing traders with more trading opportunities and choices.

## 2.Terms Explained
### 1.Price Scale
The preset price drop/rise percentage for additional positions. When the price of the token drops/rises by the corresponding percentage, a DCA order will be executed to increase your position and lower the average cost.
### 2.Max DCA Orders
Max DCA Orders mean the maximum number of DCA orders that can be placed per cycle. For example, if the max DCA is set to 8, the system will place 8 DCA orders after the initial order is filled based on the Price Deviation.
### 3.Amount Multiplier
The bot will divide the total investment amount into several equal parts to buy at the bottom of each cycle. This value determines the multiplier for the “buying at the bottom” amount next time in relation to the previous purchase amount, with an input range of 1-2.
### 4.PT Ratio Per Cycle
In each cycle, Take Profit Price = Current cycle’s Average position cost x PR, For long positions, PR = (1 + Profit Taking Ratio + 0.1%) / (1 - Transaction Fee ratio). For short positions, PR = (1 - Profit Taking Ratio - 0.1%) / (1 - Transaction Fee ratio). When the Take Profit price is triggered, the strategy will try to sell all coins you have bought to take profit. The bot will end the current trading cycle and start the next one as specified after the order is fully executed. The trading fees have been deducted from the profit obtained after profit-taking.
### 5.Stop Loss
For long positions, Stop Loss Price = Average Position Cost × (1 - Stop Loss %). For short positions, Stop Loss Price = Average Position Cost × (1 + Stop Loss %). When the SL price has been triggered and the order is fully filled, the current strategy bot will be terminated.

### 3.How to use Futures Martingale？
### 3.1 AI Bot
Currently, there are 3 types of AI bots for Futures Martingale: Conservative Arbitrage, High-Risk Arbitrage, and Low-Risk Arbitrage. Each type is backtested with 7-day and 30-day historical data to generate the parameters with the highest annualized returns. Users can choose different AI Bots based on returns and their own risk appetite.

**1.Conservative Arbitrage **
  Conservative arbitrage is characterized by large price gaps, a high ratio of profit, and a moderate frequency of adding positions. Users must wait patiently until they find the right time to enter the market, thereby achieving stable profits at low risks.

**2.High-Risk Arbitrage**
High-risk arbitrage involves small price gaps, a low ratio of profit, and less frequency in adding positions. Typically, users who are more risk-tolerant, possess robust financial assets, and are experienced in frequent trading are better suited for this strategy.

**3.Low-Risk Arbitrage**
Low-risk arbitrage features large price gaps, a larger total number of positions added, and a smaller ratio of profit. This reduces the risk of missing downturn opportunities while balancing profitability and risk.

### 3.2 Manual Setting

**1.Basic Parameters**
There are 3 parameters: Price Scale, PT Ratio Per Cycle, and Max DCA Orders.

**1）Price Scale: **When the initial order is bought at the market price in each cycle, positions will be added if the price drops by a certain percentage. The range for this setting is between 0.1% and 10%.

**2）PT Ratio Per Cycle:** In each cycle, when you buy at the bottom in batches and then witness a market upturn, you can take profit by selling out when you’ve achieved a certain profit percentage. Setting this parameter, the input value must be ≥ 0.1%.  The formula is as follows: Current cycle’s Average position cost x PR. For long positions, PR = (1 + Profit Taking Ratio + 0.1%) / (1 - Transaction Fee ratio). For short positions, PR = (1 - Profit Taking Ratio - 0.1%) / (1 - Transaction Fee ratio).

**3）Max DCA Orders: **The number of positions added in each cycle determines how much the funds the Bot will use. For example, if the initial order quantity of the Bot is 0.1 BTC, and the number of added positions each time increases exponentially by a power of 2, with 5 as the maximum DCA orders, then the order quantity for each round will be 0.1 BTC, 0.2 BTC, 0.4 BTC, 0.8 BTC, 1.6 BTC, 3.2 BTC.

**2.Advanced Parameters**

**1）Amount Multiplier**
This value determines the multiplier for the “buying at the bottom” amount next time in relation to the previous purchase amount, with an input range of 1-2.

**2)  Stop Loss Ratio**
For long positions, Stop Loss Price = Average Position Cost × (1 - Stop Loss ratio). For short positions, Stop Loss Price = Average Position Cost × (1 + Stop Loss ratio). When the SL price has been triggered and fully executed, the current Bot will be terminated. The stop loss target range is 0.1% - 99.99%.

**3)  Trigger Price**
The Martingale bot is triggered and executed only when the latest market price reaches the trigger price.

### 3.3 Customize Parameter Settings
"Customize parameters" allows users to freely set the "Price Scale" and "Buy-in Amount" based on their own needs, without being influenced by the system's formulaic algorithms.

**1.Sequence No:** This is the maximum number of buy-ins per cycle.

**2.Price Scale:** If the price drops/rises by a specified percentage compared to the last buy-in price, the next position will be added.

**3.Buy-in Units: **The number of traded cryptocurrency units to buy/sell per order, with the initial order quantity counted as 1 unit. Users can freely set this value under “Customize parameters,” with a maximum of 10,000 units.

**4.Add a Position: **Adding a position means increasing an additional buying opportunity.
Users can input the corresponding number of additional positions as needed.

**5.Delete a Position:** Deleting a position means reducing an additional buying opportunity.

## 4.Pros of Futures Martingale

### 1.Two-way long/short trading
Traders can freely choose to go long or short with the Futures Martingale Bot to adapt to current market trends, whether uptrend or downtrend.
### 2.Boost profit with leverage
The Futures Martingale Bot supports leverage, allowing traders to enhance their profits by adjusting leverage according to their own trading habits.
### 3.Flexible parameter settings to control your risk
It supports 3 creation modes: AI bot, Manual, and Customize Parameter. Users can customize parameters to align with their own needs and have full control over the bot's position scaling, take profit, and stop-loss strategies.

## 5.Risks of Futures Martingale
1.When market prices deviate significantly in the opposite direction of the trading direction, the bot's positions may suffer some floating losses and even face forced liquidation. Therefore, it is advisable for users to manage stop-loss prices reasonably.

2.As the Futures Martingale bot runs, its positions will gradually increase, and so as risks. Users need to reasonably control the proportional and multiplier settings for position scaling to prevent frequent or excessively large add-on positions, which ultimately increases the risk of forced liquidation.

3.If unpredictable situations like token delisting or trading suspension occur during Futures Martingale's operation, the bot will automatically stop.

4.Throughout the operation of Futures Martingale, the bot will periodically settle funding fees according to the current fee rate rules of the futures market.

5.When the profit-taking ratio per cycle of Futures Martingale is greater than the current maximum price deviation ratio of the futures market, profit-taking orders will wait for futures mark prices to move to suitable levels before placing orders.

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