Strategy Testing 01 | OKX and AICoin Research Institute: Fixed Investment Strategy

OKX and AICoin, a high-quality data platform, jointly launched a series of classic strategy research, aiming to help users better understand and learn different strategies through data measurement and strategy characteristics and other core dimension analysis, and try to avoid blind use.

The fixed investment strategy is one of the most classic strategies in strategy trading. In layman's terms, strategy trading is a tool that helps users conduct automatic transactions, which has the advantages of reducing risks and simplifying operations compared to manual transactions. The fixed investment strategy is a method of regular fixed-amount transactions, which disperses the risks of one-time investment in the market and smoothes transaction costs. By adhering to fixed-amount transactions for a long time, the effect of time compounding can be used to achieve the goal of profit.

The first issue introduces the fixed investment strategy, and uses 2 data models to test the BTC fixed investment strategy:

1) Analyze the returns that fixed investment can generate under different halving cycles since the birth of Bitcoin

2) Analyze the returns generated by annual fixed investment in the past 4 years

This data test will use a fixed investment strategy model based on time points. The fixed investment standard is: fixed investment at 0:00 (UTC+8) every Monday, and the fixed investment amount is 0.1 BTC. Before each fixed investment, the profit of the previous fixed investment will be settled once, leaving the total principal invested before.

Summarize the fixed investment strategy in one sentence: For long-term holders of BTC, the market will feedback long-term value.

Pros and cons comparison

In general, the fixed investment strategy is a long-term trading strategy suitable for ordinary traders. It can effectively smooth market fluctuations and cultivate disciplined trading habits, but it also requires traders to have a certain degree of patience and long-term vision.

Model 1 

Analyze the returns that can be generated by fixed investment in different halving cycles since the birth of Bitcoin  

Model 2 

Analysis of the annual fixed investment income in the past four years

Note: Due to the setting of the backtest system, the transaction amount includes the total cost of buying and selling BTC, such as buying 0.1 BTC on the first fixed investment day, selling 0.1 BTC on the second fixed investment day and buying 0.2 BTC at the same time, and so on.

Analysis and Summary

The fixed investment strategy of Model 1 is based on the Bitcoin industry cycle, spanning four industry cycles from the initial reward of Bitcoin's birth to the third halving. The number of fixed investments, transaction amounts and yields in each cycle are different. Model 1 shows that with the passage of time and the rise in Bitcoin prices, the fixed investment returns have increased significantly, and it is impossible to capture the maximum returns. For example, the yield in the second cycle was 9.74%, while the yield in the third cycle jumped to 170.03%. Model 1 is suitable for long-term traders. Through fixed investments over a longer time span, Bitcoin can be gradually accumulated, market fluctuations can be smoothed, and significant long-term returns can be obtained. Although the winning rate fluctuates in each cycle, it is generally maintained above 50%, showing high stability and risk resistance. Although the yield is high, it is mainly due to the large fluctuations in the price of Bitcoin itself, and its robustness is insufficient. Therefore, it is necessary to pay attention to the impact of market fluctuations on returns.

The fixed investment strategy of Model 2 is based on the year, and analyzes the annual fixed investment returns of Bitcoin from 2020 to 2023. The number of fixed investments per year is fixed at 52 times, and the total amount of coins held remains at around 5.2 BTC. The yield of annual fixed investment fluctuates greatly. For example, the yield in 2021 was 21.47%, while in 2022 there was a negative return of -48.75%. This shows that the annual fixed investment strategy is significantly affected by short-term market fluctuations. Model 2 highlights that even in the short term (such as one year), the fixed investment strategy will face the risk of negative returns. It is suitable for traders who observe market performance in the short term. Through annual fixed investment, they can quickly assess market conditions and adjust trading strategies. Although the returns fluctuate greatly, the winning rate is still 50%. Overall, although there have been positive returns in recent years, the yield level is lower than that of Model 1, and the short-term winning rate and yield are not as stable as long-term strategies.

From the perspective of return and risk, although Model 1 has extremely high returns in some cycles, it needs to bear the risk of large fluctuations in Bitcoin, that is, high returns are accompanied by high risks. Model 2 shows that the annual fixed investment strategy has high volatility in the short term and is not suitable for conservative traders who pursue stable returns, that is, short-term strategies are full of uncertainty. In short, the fixed investment strategy is more suitable for long-term trading and can withstand market fluctuations. For traders with a long-term trading vision, among the two models, the long-term fixed investment strategy shown in Model 1 is more suitable because it shows a higher winning rate and return rate in multiple cycles. In short, although the fixed investment strategy is relatively stable, the fixed investment strategies of different models will also have large differences, both in terms of risk and return. Users need to further distinguish when using the fixed investment strategy.

OKX&AICoinFixed Investment Strategy 

The fixed investment strategy is one of the most direct trading strategies using the average cost method. OKX's fixed investment strategy can make the implementation of the cost averaging (DCA) strategy easier, supporting the purchase of more than 20 different crypto assets. Users can use their USDT balance to invest in a single crypto asset at selected time intervals, or invest in multiple crypto assets at the same time in different proportions according to their preferred trading portfolio, thereby averaging their purchase price.

Currently, the OKX fixed investment strategy has also added new features such as pause and restart, switching trading currencies, setting the price range of fixed investment currencies (that is, allowing users to set the price range of each fixed investment currency pair, and fixed investment operations will only be performed within the price range), editing parameters, viewing history, etc., to help users trade fixed investment strategies more conveniently and efficiently.  

How to access OKX's strategy trading? Users can go to the "Strategy Trading" in the trading section through the OKX APP or official website, and then click on the Strategy Square or Create Strategy to start the experience. In addition to creating strategies by themselves, the Strategy Square currently also provides "high-quality strategies" and "high-quality strategies with strategy members", and users can copy strategies or follow strategies.  

OKX strategy trading has multiple core advantages such as easy operation, low handling fees and security.

In terms of operation, OKX provides intelligent parameters to help users set trading parameters more scientifically; and provides graphic and video tutorials to help users quickly get started and master them. In terms of handling fees, OKX has comprehensively upgraded the handling fee rate system to significantly reduce user transaction fees. In terms of security, OKX has a security team composed of top global experts who can provide you with bank-level security protection.  

Currently, OKX strategy trading provides convenient and diversified strategy varieties, which mainly include:

• Grid strategy: spot grid, contract grid, infinite grid

• Average cost: contract Martingale (contract DCA), spot Martingale (spot DCA), fixed investment strategy

• Combination arbitrage: Tunbibao, Dip Picking Bao, Escape Top Bao, Arbitrage Order

• Large order splitting: Iceberg strategy, time-weighted strategy

• Signal trading: Signal strategy

Among them, grid type and regularly purchased Tunbibao type are the simplest and easiest strategies. At the same time, arbitrage order, iceberg strategy and time-weighted strategy are more suitable for high-net-worth users, because using these strategies requires facing more complex risk conditions.  

In addition, AICoin also provides users with a variety of strategy transactions, allowing users to understand the current market more quickly and intuitively. Users can find the "Custom Indicators/Backtesting/Real Trading" option in the "Market" option on the left sidebar of the AICoin product. Click here and search for "Fixed Investment" in "Community Indicators" to find the code for the fixed investment strategy.

Disclaimer

This article is for reference only and represents only the author's views and does not represent the position of OKX. This article is not intended to provide (i) trading advice or trading recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; (iii) financial, accounting, legal or tax advice. We do not guarantee the accuracy, completeness or usefulness of such information. Digital assets held (including stablecoins and NFTs) involve high risks 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/trading professionals for your specific situation. Please be responsible for understanding and complying with local applicable laws and regulations.