OKX collaborates with the high-quality data platform AICoin to launch a series of classic strategy research, aiming to help users better understand and learn different strategies through data testing and analysis of core dimensions such as strategy characteristics, and to avoid blind use as much as possible.

Martingale Strategy, also known as Dollar Cost Averaging (DCA), is a trading method that focuses on position management. The core idea is "add to the position when losing to average down, reset when making a profit." The main feature is that after each loss, the trading amount is doubled until a victory is achieved. The basic assumption of this strategy is that as long as the capital is large enough, the ultimate victory will make up for all previous losses and bring profits. As a high-risk strategy, Martingale is suitable for traders with sufficient capital and the ability to withstand potentially huge losses.

This strategy is mainly divided into two application forms in the cryptocurrency market: Spot Martingale and Contract Martingale.

The 3rd issue introduces the Martingale strategy and uses 3 major data models to conduct actual tests on Spot Martingale and Contract Martingale:

  Model 1: Contract DCA and Spot DCA under a 5-minute uptrend cycle

  Model 2: Contract DCA and Spot DCA under a 5-minute downtrend cycle

  Model 3: Contract DCA and Spot DCA under a 5-minute sideways trend cycle

The standard for this issue's data testing operation:

Long DCA: Open a long position when the market starts, and when the market falls, carry out additional buying operations, with a maximum of 5 additional purchases, and set a stop-loss line for the 5th additional purchase. When the market rebounds and rises to the target price, sell once to obtain profits.

Contract DCA: Based on the logic of Long DCA, it adds the operation of opening a short position. Open a short position when the market starts, carry out additional buying operations when the market rises, with a maximum of 5 additional purchases, and also set a stop-loss line for the 5th additional purchase. When the market retraces and falls to the target price, buy once to obtain profits.

A brief summary of Spot Martingale and Contract Martingale: In a sideways market, Contract DCA is more suitable; in a clearly upward trend market, Spot DCA is more suitable, but both require vigilance against risks.

Comparison of Advantages and Disadvantages

                                               Martingale Strategy

Category

Spot Martingale

Contract Martingale

Trading Targets

Direct trading of actual assets
such as BTC, ETH

Trading derivatives
such as USDT perpetual contracts, coin-based contracts

Investment Amount

Full purchase required

Only margin required, low initial capital requirement

Maximum Loss

Maximum loss limited to the investment amount

Involves leverage
Under isolated margin, the maximum loss is the margin
Under cross margin, the maximum loss is the account funds

Holding Period

No expiration date, can be held long-term

No expiration date, can be held long-term

Market Fluctuation

Relatively small price fluctuations

Profit fluctuations are usually more intense

Applicable Market Conditions

Uptrend & sideways markets

Contract short DCA is suitable for sideways & downtrend markets
Contract long DCA is suitable for sideways & uptrend markets

Usage Operation

Relatively simple operation

Relatively complex operation, requires consideration of more factors

Advantages

Reduces holding costs
Relatively safe

Amplifies profits
High capital efficiency

Disadvantages

Large capital occupation
Slow profits

Extremely high risk
High psychological pressure

Both forms of the Martingale strategy follow the same basic principles: increase trading volume when experiencing losses, lower the average price, and expect eventual profits to cover previous losses. However, they have significant differences in specific operations, risk characteristics, and applicable scenarios. The choice of strategy should be dynamically adjusted based on the trader's risk tolerance and market trends, while also paying attention to reasonable risk control measures to reduce potential losses.

Whether it is Spot or Contract Martingale, both are considered strategies that focus on position management. Spot Martingale strategy reduces the average cost by doubling the purchase, but one should be cautious of continuous downward risks; while Contract Martingale strategy amplifies profits and risks by doubling the opening position, and one should be cautious of the risk of liquidation.

Model One

This model is: Contract DCA and Spot DCA under a 5-minute uptrend cycle

                        Figure 1: Contract DCA under a 5-minute uptrend cycle; Source: AICoin

Figure 2: Spot DCA under a 5-minute uptrend cycle; Source: AICoin

Model One

Category

Spot Martingale

Contract Martingale

Trading Pair

BTC/USDT

BTC/USDT perpetual

Time

2024/05/24-2024/06/07

2024/05/24-2024/06/07

Trading Amount

100,000U

100,000U

Leverage

1x

1x

Fee Rate

0.05%

0.05%

Cycle

5 minutes

5 minutes

Total Triggered Trading Signals

12 times

36 times

Completed Trades

6 times

18 times

Profitable Trades

5 times

15 times

Loss-making Trades

1 time

3 times

Trading Amount

1,234,337.49 USDT

2,460,757.1 USDT

Total Profit

4,131.34 USDT

806.72 USD

Profit Rate

4.13%

0.81%

Model Two

This model is: Contract DCA and Spot DCA under a 5-minute downtrend cycle

Figure 3: Contract DCA under a 5-minute downtrend cycle; Source: AICoin

Figure 4: Spot DCA under a 5-minute downtrend cycle; Source: AICoin

Model Two

Category

Spot Martingale

Contract Martingale

Trading Pair

BTC/USDT

BTC/USDT perpetual

Time

2024/04/01-2024/04/19

2024/04/01-2024/04/19

Trading Amount

100,000U

100,000U

Leverage

1x

1x

Fee Rate

0.05%

0.05%

Cycle

5 minutes

5 minutes

Total Triggered Trading Signals

28 times

74 times

Completed Trades

14 times

37 times

Profitable Trades

9 times

30 times

Loss-making Trades

5 times

7 times

Trading Amount

2,645,655.49 USDT

7,308,788.44 USDT

Total Profit

-13,192.14 USDT

-1,951.23 USDT

Profit Rate

-13.19%

-1.95%

Model Three

This model is: Contract DCA and Spot DCA under a 5-minute sideways trend cycle

Figure 5: Contract DCA under a 5-minute sideways trend cycle; Source: AICoin

Figure 6: Spot DCA under a 5-minute sideways trend cycle; Source: AICoin

Model Three

Category

Spot Martingale

Contract Martingale

Trading Pair

BTC/USDT

BTC/USDT perpetual

Time

2024/08/10-2024/08/20

2024/08/10-2024/08/20

Trading Amount

100,000U

100,000U

Leverage

1x

1x

Fee Rate

0.05%

0.05%

Cycle

5 minutes

5 minutes

Total Triggered Trading Signals

10 times

32 times

Completed Trades

5 times

16 times

Profitable Trades

3 times

14 times

Loss-making Trades

2 times

2 times

Trading Amount

1,010,896.2 USDT

3,291,423.95 USDT

Total Profit

-1,727.8 USDT

5,679.07 USDT

Profit Rate

-1.73%

5.68%

Analysis and Summary

Sharp fluctuations are not conducive to the Contract DCA strategy, which is more suitable for sideways markets. Among them, the Contract short DCA is suitable for sideways and downtrend markets, while the Contract long DCA is suitable for sideways and uptrend markets. Spot DCA performs well in an uptrend market.

The Contract DCA strategy demonstrates strong adaptability in different market environments, especially in sideways markets. Spot DCA performs well in an uptrend market but poorly in sideways and downtrend markets. Contract DCA generates profits through more frequent trading and a higher win rate, but it may also bring higher risks. Spot DCA has a lower trading frequency and may be more suitable for long-term traders or risk-averse traders.

In general, when their additional investment parameters are set to 1, they behave very similarly to a grid. However, when the additional investment parameters are set to 2 (or higher), they may lead to a sharp increase in capital requirements and bring significant psychological pressure to traders. In particular, Contract Martingale, due to the leverage effect, poses more significant risks and may lead to liquidation.

Specifically:

Choose a strategy based on risk tolerance

High risk tolerance: Consider Contract DCA, especially in sideways markets.

Low risk tolerance: Choose Spot DCA, especially in clearly upward-trending markets.

Combine with market trends

Upward trend: Both strategies can be considered, but be mindful of taking profits in a timely manner.

Downtrend: Use with caution, may require adjusting the strategy or temporarily observing.

Sideways trend: Contract DCA may have an advantage.

Dynamic adjustments
Flexibly adjust strategies based on market changes, do not stick to a single mode.

Risk management
Set stop-loss points, control the amount of funds for each trade, and diversify trades to reduce risks.

Combination strategies
Consider combining Contract DCA and Spot DCA to balance risks and returns.

Continuous learning and optimization
Regularly backtest and evaluate strategy effectiveness, and continuously optimize trading strategies based on new market data.

Pay attention to external factors
In addition to technical analysis, also pay attention to macroeconomic factors, industry news, and other external factors that may affect the market.

By using these strategies reasonably and adjusting them based on individual circumstances and market conditions, traders can better manage risks and increase the likelihood of returns. However, always remember that the cryptocurrency market is highly volatile, and traders should only invest funds they can afford to lose.

OKX & AICoin Martingale Strategy

Currently, OKX's strategy trading provides convenient and diversified strategy varieties. The Spot and Contract Martingale strategies on OKX have been optimized to a greater extent to align with the habits and characteristics of cryptocurrency users. Two different creation modes have been set for users with different levels of experience: Manual Creation and Smart Creation.

Manual Creation allows traders to set parameters based on their judgment of the market. This is mainly suitable for experienced traders with strong capital, while ordinary users are recommended to use the Smart Creation mode. Smart Creation allows users to set the trading amount and buying pace based on their risk preferences using parameters recommended by the OKX system.

It is worth mentioning that the system-recommended parameters are calculated based on historical market conditions and asset fluctuations, using the sophisticated algorithms of the OKX backend, providing traders with reliable trading references. Additionally, following the traditional securities trading practice of categorizing traders, the Smart Creation mode controls risks as much as possible and recommends parameters of different risk levels based on conservative, balanced, and aggressive categories, considering the user's asset status and risk tolerance.

How to access more strategy trading on OKX? Users can access the "Strategy Trading" mode in the "Trading" section of the OKX app or official website, and then click on "Strategy Marketplace" or "Create Strategy" to start the experience. In addition to creating strategies, the strategy marketplace currently also provides "Premium Strategies" and "Strategies with Signal Providers", allowing users to copy strategies or engage in strategy following.

OKX strategy trading has multiple core advantages, including easy operation, low fees, and security. In terms of operation, OKX provides intelligent parameters to help users set trading parameters more scientifically, and offers text and video tutorials for users to quickly get started and become proficient. In terms of fees, OKX has comprehensively upgraded its fee rate system, significantly reducing user trading fees. In terms of security, OKX has a security team composed of top global experts, providing users with bank-level security protection.

How to access AICoin's DCA strategy?

Global DCA Strategy: Users can find the "Global DCA" option in the "Strategy" section on the left sidebar of the AICoin product. Clicking here, users can find the global DCA strategy recommended by AICoin based on the current market conditions.

Spot DCA Strategy: Users can find the "Spot DCA" option in the "Market" section on the left sidebar of the AICoin product. Clicking here, users can find the spot DCA strategy recommended by AICoin based on the selected trading pair.

Contract DCA Strategy: Users can find the "Custom Indicators/Backtesting/Live Trading" option in the "Market" section on the left sidebar of the AICoin product. Clicking here and searching for "Contract DCA" in the "Community Indicators" will allow users to find the code for the dollar-cost averaging strategy.

Disclaimer

This article is for reference only and represents the author's views, not the position of OKX. This article does not intend to provide (i) trading advice or recommendations; (ii) solicitations or offers 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. 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/trading professionals. Please be responsible for understanding and complying with applicable local laws and regulations.

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