Strategy Test 05 | OKX and AICoin Research Institute: Time Weighted and Iceberg Commissioning Strategies
Take you through classic strategies in the simplest way possible.
OKX has launched a series of classic strategy research in collaboration with the high-quality data platform AICoin, aiming to help users better understand and learn different strategies through core dimensions such as data testing and strategy characteristics analysis, and avoid blind use as much as possible.
Time weighted strategy and iceberg commission strategy are two common trading strategies for large order splitting, particularly suitable for bulk trading and quantitative trading.
Time weighted strategy is a strategy of splitting large orders and eating them out on a time basis. The purpose is to evenly distribute large orders within a specified time frame to minimize the impact on market prices. The basic principle is to divide a large order into multiple smaller orders and execute them in sequence at predetermined time intervals, so that the average price of the entire transaction process approaches the market average price. This strategy can effectively avoid the market impact caused by a one-time order, reduce the risk of slippage, and is usually suitable for traders or institutional traders who want to avoid market fluctuations from having a significant impact on trading prices.
The iceberg commission strategy is a trading strategy that involves splitting large orders and placing them in batches. Its purpose is to conceal the actual trading volume by dividing large orders into multiple smaller visible orders, in order to prevent other market participants from detecting the intention of large transactions and thus avoid drastic fluctuations in market prices. The basic principle is to break down a large trading order into several small sub orders, and only display a portion of them to the market. After a sub order is fully executed, the system will automatically generate the next sub order until the entire large order is completed. This allows the market to only see the "tip of the iceberg" while hiding the true size of orders, typically suitable for institutional traders or traders with large funds who wish to conceal their strength.
In practical transactions, two different strategies can be chosen according to different usage scenarios to better manage the execution of large orders. By using a time weighted strategy to disperse the impact of time and utilizing an iceberg strategy to hide trading volume, traders can effectively control market shocks and slippage risks while protecting trading intentions. These strategies are widely used in high-frequency trading, institutional trading, and large order execution, especially in markets with poor liquidity or high volatility.
Overall, the time weighted strategy has multiple advantages in practical applications. Firstly, the market impact is relatively small. Dividing large orders into multiple small orders based on the time cycle and gradually executing them reduces the impact on market prices. Secondly, price smoothing. By dispersing trading time, it is possible to avoid drastic price fluctuations caused by large trading orders, thereby obtaining a more average transaction price. Thirdly, it should be simple and easy to understand. The strategy logic is relatively simple, easy to understand, and the operation is simple. It can be used with one click on the OKX platform. Fourth, high controllability. You can set prices, time intervals, quantities, etc. according to your own needs to improve the flexibility of execution.
However, its drawbacks are also relatively obvious. For example, execution risk. Due to the timing and batch execution, if there are significant market fluctuations, it may not be possible to obtain the best price, and so on. The AICoin time weighted strategy can randomize the time interval and transaction quantity during runtime, making the strategy more difficult to identify and snipe.
The iceberg delegation strategy also has multiple advantages in practical applications. Firstly, conceal the true intention. The iceberg commission strategy divides large orders into multiple small orders and gradually releases them in the market, effectively hiding the actual size of large orders and reducing the risk of being discovered and exploited by the market. Secondly, gradually implement. Gradually executing orders can help reduce the impact of large trading orders on market prices and obtain better transaction prices. Thirdly, flexibility. The displayed order quantity and frequency can be adjusted according to market conditions, with strong adaptability.
Of course, the iceberg commission strategy also has its drawbacks. For example, liquidity risk. Due to only exposing a portion of orders, if market liquidity suddenly decreases, there may be situations where orders cannot be executed in a timely manner, and so on. The AICoin iceberg commission strategy can randomize order positions, order intervals, and transaction quantities during runtime, making the strategy more difficult to identify and target.
Theoretical Analysis - Performance of Two Major Strategies in the Bull Bear Market
Firstly, a theoretical analysis of the performance of time weighted strategies in bear and bull markets.
1) Performance in a bull market
In a bull market, the time weighted strategy avoids the impact of large purchases on the currency price by entrusting in batches, thereby reducing the cost of buying. This strategy can achieve good excess returns in a bull market.
2) Performance in bear markets
In a bear market, time weighted strategies have strong defensive capabilities. By setting a limit price for buying orders, it is possible to avoid excessive buying during bear markets, thereby reducing the risk of losses. At the same time, batch orders in bear markets can better grasp low points and increase profit opportunities.
Overall, time weighted strategies have significant advantages in dynamic environments. If the user's main goal is to diversify the market impact of large orders and gradually execute them over a longer period of time, time weighted strategies are a good choice, but attention should be paid to the risks brought by market fluctuations.
Secondly, theoretical analysis of the iceberg strategy's performance in bear and bull markets.
1) Performance in a bull market
In a bull market, the market is generally bullish, with strong buyer power, active trading, and high liquidity. The iceberg strategy can effectively conceal the actual size of large buy orders, avoiding the market pushing up prices, and thus buying in batches at relatively low prices in a rising market. But if the market price rises rapidly, the exposed small orders may not be fully executed, resulting in failure to buy at lower prices and inability to board the vehicle.
2) Performance in bear markets
In a bear market, the market is generally bearish, with strong selling power, relatively quiet market trading, and low liquidity. The iceberg strategy can effectively conceal the actual size of large sell orders, avoid panic selling in the market, and sell in batches at relatively high prices in a declining market. However, due to low liquidity, the small portion of iceberg orders may be difficult to quickly close, increasing the risk of pending orders being unable to be executed and may also result in inability to disembark
Overall, if you want to hide the true size of large orders and avoid market reverse operations, the iceberg commission strategy is very suitable and performs particularly well in high-frequency trading.
OKX's two major strategic entrances
Currently, OKX strategy trading provides convenient and diversified strategy varieties.
The OKX iceberg strategy adopts a more dynamic and flexible way of placing orders, rather than simply entrusting orders based on price range or proportion. This hanging method can significantly reduce slippage and achieve the goal of better hiding trading intentions. In addition, OKX Iceberg Strategy offers multiple ways to place orders, including three modes: faster transaction, balanced transaction speed, and better price. Users can choose according to their preferences and needs. Overall, the OKX iceberg strategy has many core advantages such as large order splitting, hidden trading, reducing slippage, and customizing order preferences.
The characteristics of OKX time weighted strategy are: large order splitting, timed ordering, and reducing slippage. The advantage of this strategy is that it will break down large transactions into many transactions, enter the market on time to take orders, and avoid stimulating the market with single orders; When the price meets the set conditions, quick transactions can be made through eating orders. And these orders are placed in the IOC mode for eating orders. IOC (Immediate Or Cancel) means to immediately complete and cancel the remaining orders. The parts of the commissioned orders that are not immediately completed will be immediately cancelled. For example, if the quantity of a commission is 2 and only 1.6 are completed, the remaining 0.4 will be immediately cancelled to minimize slippage. Time weighted entrustment can be used not only in spot trading, but also in perpetual contracts, delivery contracts, and leveraged trading, with a wide range of applications.
For example, how does OKX time weighted delegation run?
For example, when the market price is above the limit price for buying orders, the order will be suspended; When the market price is below the buy order limit price, the strategy resumes the order, calculates the order price based on the current latest buy price and the price distance you set, and then orders a small order to buy the order. When the price remains below the limit price for placing orders, orders will be placed regularly until the transaction quantity equals the total order quantity.
Schematic diagram of time weighted entrusted buying
Taking selling as an example, when the market price is below the limit price for buying orders, the order will be suspended; When the market price is above the limit price for buying orders, the strategy resumes the order and calculates the order price based on the current latest selling price and the price distance you set, and then orders small orders to buy orders. When the price remains above the limit price for placing orders, orders will be placed regularly until the transaction quantity equals the total order quantity.
Schematic diagram of time weighted entrusted selling
How to access OKX strategy trading? Users can enter the "Strategic Trading" mode in the "Trading" section through the OKX APP or official website, and then click on the Strategy Square or create a strategy to start the experience. In addition to creating their own strategies, Strategy Square currently offers "Quality Strategies" and "Strategies with Individual Members", where users can copy or copy strategies.
OKX strategy trading has multiple core advantages such as easy operation, low transaction fees, and security guarantees. In terms of operation, OKX provides intelligent parameters to assist users in setting trading parameters more scientifically; And provide graphic, textual, and video tutorials for users to quickly get started and master. In terms of transaction fees, OKX has comprehensively upgraded its fee rate system, significantly reducing user transaction fees. In terms of security, OKX has a global team of top experts who can provide you with bank level security protection.
How to access AICoin's strategy?
How to access AICoin strategy trading? Users can enter the "Trading" mode on the right side of the "Market" section on the AICoin homepage, and then click on "Intelligent Splitting" to start the experience. In addition to the intelligent splitting strategy, "Community Indicators" also provides many "high-quality indicators" that users can search for and add as "My Indicators".
AICoin provides intelligent parameters to assist users in setting trading parameters more scientifically, and offers graphic, textual, and video tutorials to quickly get started. Intelligent order splitting has advantages such as flexible ordering, order intervals as small as 0.3 seconds, and highly hidden order splitting numbers that opponents cannot monitor.
Disclaimers
This article is for reference only and represents the author's viewpoint, not the position of OKX. This article is not intended to provide (i) trading advice or recommendations; (ii) Offer or solicitation to purchase, sell, or hold digital assets; (iii) Financial, accounting, legal or tax advice. We do not guarantee the accuracy, completeness, or usefulness of such information. The digital assets held (including stablecoins and NFTs) involve high risks and may experience significant fluctuations. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For your specific situation, please consult your legal/tax/transaction professionals. Please be responsible for understanding and complying with applicable local laws and regulations on your own.
(责任编辑：基金专题)
