Author: OKX

In the cryptocurrency market, data has always been an important basis for trading decisions. How to see through the complex data and discover valuable information to optimize trading strategies has always been a hot topic in the market. Therefore, OKX has specially planned the "Insight into Data" column, and has joined mainstream data platforms such as AICoin and Coinglass, as well as relevant institutions, to explore a more systematic data methodology from common user needs, hoping to provide a reference for the market.

In this issue of "Insight into Data," the OKX strategy team and the FMZ quantitative institution delve into the concept of quantitative trading and discuss in detail how ordinary people can get started with quantitative trading. We hope it will be helpful to you.

OKX Strategy Team: The OKX strategy team is composed of experienced professionals dedicated to driving innovation in the global digital asset strategy field. The team brings together experts in market analysis, risk management, and financial engineering, providing solid support for OKX's strategic development with deep professional knowledge and rich business experience. FMZ Quantitative Team: FMZ Quantitative is a company dedicated to providing professional solutions for cryptocurrency quantitative trading users. FMZ Quantitative not only provides users with comprehensive 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.

1. What 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 individual decision-making, quantitative trading analyzes the market using historical data, algorithms, and technical indicators to find trading opportunities and execute trades automatically. OKX's strategy robots provide powerful and flexible automated trading tools, supporting various strategies (such as grid and martingale strategies), as well as strategy backtesting and simulated trading, helping users find the most suitable tools in different market environments.

FMZ Quantitative Team: Quantitative trading, also known as programmatic trading, is not fundamentally mysterious. When users operate on a trading website or software, such as obtaining market data, 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. The API can be loosely understood as accessing specific network links to obtain return information, such as opening https://www.okx.com/api/v5/public/funding-rate?instId=BTC-USDT-SWAP in a browser, which will return: {"code":"0","data":[{"fundingRate":"0.0001510608984383","fundingTime":"1717401600000","instId":"BTC-USDT-SWAP","instType":"SWAP","maxFun. The "fundingRate":"0.0001510608984383" is the current funding rate of the BTC-USDT perpetual contract. By modifying the instId=BTC-USDT-SWAP in the link, you can obtain the corresponding funding rate information for other currencies. Similarly, by accessing the corresponding API link and filling in the appropriate parameters, you can basically complete the operations we do on the website or app. If this entire process is controlled by a program to achieve our preset goals (trading or others), this is also quantitative trading.

In short, all the information acquisition and order trading decisions that used to be completed by our brains can now be handed over to a program entirely or partially.

2. Which Types of Users 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 beginners or advanced users, they can quickly start using strategies.

• For novice users (traders with little or no quantitative trading experience), we currently provide: 1) User-friendly interface and preset strategies, which allows users to choose from platform preset strategies, such as grid strategies, dollar-cost averaging strategies, etc. These strategies usually do not require complex settings and deep market knowledge. Users only need to select and configure a small number of parameters to start using them, without the need for programming or in-depth technical knowledge. 2) Simulated trading and backtesting, to understand the potential performance of strategies under different parameter settings, reducing the risk in actual trading. These features help users accumulate experience before investing real funds.

• For advanced users (traders with some quantitative trading experience or technical capabilities), OKX's strategy robots also have highly customizable strategies, such as grid and martingale strategies, providing rich advanced parameters, or signal strategies that can execute Trading View PineScript, suitable for users with programming and data analysis capabilities.

FMZ Quantitative Team: We often encounter roughly four types of users:

• Professional traders. As professional traders, trading is their livelihood, and they must master all advanced tools to assist themselves, so quantitative trading is almost a must for them. Professional traders often have mature and profitable strategies. By programming the strategies, they can apply them to more exchanges and trading pairs, greatly enhancing trading efficiency.
• Programming enthusiasts. For individual traders with a programming background, quantitative trading tools provide an excellent opportunity to combine programming skills with the cryptocurrency market. They can customize trading strategies according to their needs, develop trading tools, and optimize strategies through backtesting, saving a lot of learning time in the early stages.
• Traders in need of effective strategies. Some traders may not have stable trading strategies yet, and quantitative trading tools can also help them. These tools usually include a strategy library and strategy marketplace, where traders can test other open-source strategies and find suitable ones through data analysis and backtesting.
• Ordinary traders with learning ability. Even ordinary traders without a programming background can benefit from the automation features 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 backtesting to evaluate strategy effectiveness, thereby improving trading efficiency and reducing human errors in actual operations.

3. What are the Advantages and Disadvantages Compared to Manual Trading?

OKX Strategy Team: The advantage of quantitative trading lies in its systematic and objective nature. By executing trades through preset algorithms and rules, it avoids the interference of emotions in decision-making. It also has high trading efficiency, capable of handling large amounts of data and conducting high-frequency trading, capturing market opportunities 24/7 without stopping. Users can also test and optimize strategies with historical data to enhance the reliability and testability of the strategies.

However, quantitative trading is not perfect. First, it has a certain level of complexity, as some advanced strategies require professional statistical and financial knowledge, making the threshold relatively high. Secondly, quantitative trading may overly rely on historical data to optimize strategy parameters, and the actual market performance may not necessarily meet expectations. Since market prices change according to the assumption of random walk, past performance may not necessarily predict future profit potential, which is known as strategy overfitting. Finally, the performance of quantitative trading strategies in different market conditions may fluctuate and require continuous adjustment and optimization to adapt to market changes.

FMZ Quantitative Team: In fact, manual trading and quantitative trading are not mutually exclusive. An excellent quantitative trader is often also a qualified manual trader. These two trading methods can complement each other, and using them together can leverage greater advantages. Excellent quantitative traders need to have a deep understanding of the market. The market is complex and ever-changing, and although quantitative trading relies on data and algorithms, the foundation of these data and algorithms is still a profound understanding of the market. Only by understanding the operating mechanisms of the market, influencing factors, and the relationships between various assets, can quantitative traders design effective trading strategies. Therefore, quantitative traders must have solid market knowledge, which is usually accumulated through manual trading.

Based on our experience, the advantages can be roughly summarized as follows:

1. Automated execution of strategies, avoiding manual intervention.

Sometimes the strategy itself can be profitable, but constant human intervention can lead to losses. Programmed trading can automatically execute preset trading strategies without the need for human intervention. This means that traders can set buying and selling conditions, and the program will automatically execute trades when the conditions are met, thereby avoiding emotional fluctuations and human errors. The program runs 24/7 without the need for constant monitoring.

2. It can meet the needs of low latency, high frequency, and complex calculations in trading.

Manual trading is limited by human reaction and calculation speed, and it cannot compare to program execution. These requirements can only be met by quantitative trading.

3. Quantitative trading can use historical data to backtest and optimize trading strategies.

By simulating the performance of strategies in past markets, traders can evaluate the effectiveness of the strategies. This method can help traders optimize strategies before actual trading, increasing the probability of profit. Many manual traders rely on intuition for trading, which involves high time and financial costs for trial and error. In reality, most quantitative strategies are derived from data analysis.

Of course, quantitative trading also has some disadvantages:

1. High technical requirements:

Relative to manual trading, quantitative trading requires additional programming and data analysis abilities, resulting in a higher threshold for beginners. Learning quantitative trading undoubtedly requires a significant time investment and does not guarantee returns on the investment.

2. High costs:

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 result in rigid expenses regardless of whether the strategy is profitable or not.

3. Market risk:

Although quantitative trading can reduce human errors, market risks still exist, and strategy failure can lead to significant losses. Pre-written quantitative strategies, based on historical data backtesting, have certain limitations and may not keep up with changes outside the market. Manual traders can quickly make comprehensive judgments on various market information and are more sensitive to market changes.

4. How Can Novice Users Get Started?

OKX Strategy Team: Overall, quantitative trading presents certain challenges for novice users, but it is not impossible to get started. Here are some suggestions to help novice users better understand quantitative trading:

1. Learn the basics: First, understand the basic principles of strategies and the impact of different parameter settings on strategy performance. This is the first step to success.

2. Choose the right strategy robot: Based on your market judgment, choose the appropriate strategy robot. For example, in a ranging market, a grid strategy might 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 execute effective risk management and stop-loss strategies.

FMZ Quantitative Team: When it comes to programmed trading, many people think it has a high barrier to entry and is technically complex. In reality, learning programmed trading has become very simple. Exchanges have integrated common strategies, and quantitative teams like FMZ Quantitative provide one-stop services. With the assistance of large language models like ChatGPT, there are realistic and feasible paths for novice users to get started and even master programmed trading. The only obstacle is the willingness to take action. If you are a novice trader with many trading ideas, learning programmed trading will greatly enhance your capabilities. Below are the steps we believe are suitable for cryptocurrency traders with no programming background to get started:

1. Familiarize yourself with basic quantitative strategies:

Understanding the use of the strategy trading module on OKX will help you gain a preliminary understanding of strategy trading. For most traders, these features are already sufficient. If you have more ideas to implement, you can continue to deepen your learning.

2. Learn programming languages:

We recommend learning Javascript (JS) and Python, only requiring basic proficiency. While writing strategies, practice and learning will improve your skills quickly. JS programming language is relatively simple, and there are many open-source strategies on the FMZ platform for reference. Python is the most commonly used language for data processing, and it is very convenient for statistical analysis with Jupyter Notebook. During this time, you can also learn some data analysis. There are many Python books and tutorials available, and we recommend "Python for Data Analysis". Based on your foundation, studying for 4 hours a day will take approximately 1-2 weeks.

3. Read basic quantitative trading books:

There are many relevant books available, and you can search for them yourself. You can read them quickly to understand the types of strategies, risk control, strategy evaluation, and more. Quantitative trading involves finance, mathematics, and programming, and the content is very rich. Strategies that can be directly applied to the market will not be found directly in books. Reading relevant books, research reports, and papers is a long-term process.

4. Learn exchange API documentation and related examples, and deploy some live trading strategies:

We recommend starting with the FMZ Quantitative platform, where rich documentation and examples greatly reduce the threshold for live trading. This step requires mastering the basic strategy architecture, solving common problems such as error handling, access frequency control, strategy fault tolerance, and risk control. Write some simple modules, such as price push and iceberg orders, to practice writing live trading strategies. Backtest some basic strategies, such as grid and balanced strategies. Join relevant groups, learn to ask questions correctly, and search for relevant posts.

5. Validate strategies through backtesting and simulated trading, continuously improve, and eventually start live trading:

Proficient traders already have their own strategy ideas and can validate and improve them through backtesting and simulated trading, eventually starting live trading. Completing a complete strategy and watching orders being automatically placed is an indescribable joy. If you don't have your own strategy yet, you can start by backtesting arbitrage on some open-source strategies and grid strategies for multiple trading pairs to practice your live programmed trading skills.

6. Continuously read, think, communicate, analyze, backtest, and live trade, and practice repeatedly:

As the difficulty gradually increases and learning deepens, your skills will continue to improve.

5. 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 is not a guaranteed profit:

Many people believe that quantitative trading, relying on complex algorithms and data analysis, can guarantee stable profits. However, quantitative trading cannot guarantee profits. Although quantitative strategies optimize trading decisions through data and algorithms, market uncertainty, model assumption errors, and strategy overfitting factors can lead to losses. Quantitative trading still faces market risks and the risk of strategy failure. The key is to choose the appropriate trading strategy in different market conditions and set the corresponding strategy parameters reasonably.

2. Quantitative trading is not only suitable for large institutions and high-net-worth users:

Individual investors can also participate in quantitative trading using quantitative trading platforms and open-source tools available on the market. For example, the grid strategy, martingale strategy, and signal strategy tools provided by OKX can be used for free. While high-frequency trading does require high capital and technical thresholds, the above types of strategies do not necessarily require large amounts of capital.

3. Backtesting results do not represent future performance:

Backtesting is just one way to evaluate a strategy, but it does not guarantee future performance. Market environment changes, model assumption deviations, and strategy overfitting (over-optimization based on historical data) can all lead to actual trading results that are not as expected. Backtesting results need to be evaluated for reliability in combination with real market conditions and robust risk management.

FMZ Quantitative Team: In reality, most people do not have a deep understanding of quantitative trading and are prone to some misunderstandings. We have summarized these common misconceptions and shared them with readers:

1. Can quantitative trading always be profitable?

Many traders turn to quantitative trading after losses in manual trading, hoping to quickly profit and view it as a lifeline. However, profitability depends more on the logic of the trading strategy than the tool itself. Even if an ideal automated trading strategy is developed, unexpected problems may arise during actual trading, leading to less than ideal strategy performance. Therefore, programmed trading is not a guarantee of profit and requires continuous optimization and adjustment of strategies.

2. Does quantitative trading never make mistakes?

Although quantitative trading reduces human errors, it also introduces other errors. For example, the leakage of API keys can lead to malicious manipulation of account funds. In addition, bugs in strategies or unhandled exceptional situations can lead to erroneous trades, or even catastrophic consequences. To avoid these problems, traders need to take strict security measures and conduct thorough testing and verification before deploying trading programs to ensure the robustness and reliability of the programs.

Conclusion

The above content is from the third issue of the "Insight into Data" column launched by OKX, focusing on core issues such as how to get started with quantitative trading and precautions when using it. We hope it helps interested traders gain a more systematic understanding of quantitative trading and make wise trading decisions. In future articles in this series, we will continue to explore more practical data usage/analysis methods, providing reference for traders with different trading preferences to learn.

Risk Warning and Disclaimer

This article is for reference only. The views expressed in this article are those of the author and do not represent the position of OKX. This article does not intend to provide (i) investment advice or recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; (iii) financial, accounting, legal, or tax advice. Holding digital assets (including stablecoins and NFTs) involves high risks and may experience significant fluctuations. You should carefully consider whether trading or holding digital assets is suitable for your financial situation. For your specific situation, please consult your legal/tax/investment professionals. Please be responsible for understanding and complying with applicable local laws and regulations.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。