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EducationalMay 17, 2021

The Best Robo Trading Strategies to Use on Delta Exchange

Shubham Goyal
May 17, 2021

Crypto trading can be a highly rewarding endeavor. Crypto derivatives trading, even more so. What can possibly top these though? We’ve got just the right thing! Very recently, we at Delta opened up a completely new avenue to maximize your profits on trading cryptocurrency derivatives. We did this by introducing Robo trading. Robo trading is a form of automated crypto trading that allows you to deploy your capital, sit back and let the trading bots do their work. However, it is important that you utilize an efficient trading bot strategy and keep a constant check on their portfolio regularly.

How does this work? For starters, there are multiple trading bot strategies that can be utilized to automate crypto trading. In this post, we will be looking at 3 broad types of trading strategies, with at least one specific trading bot strategy in each type.

However, before you read further, make sure to read the fundamentals of Robo trading here.

Robo Trading Strategies

Delta, as of May 2021, offers 3 broad categories of Robo trading strategies, namely the momentum strategy, arbitrage strategy, and the AMM (Automated Market Makers) strategy. Momentum strategy consists of three unique strategies, while arbitrage and AMM have one each. Each strategy aims to maximize the profits from the capital invested – which is usually in the form of USDT. Let’s go into detail on each of these strategies and understand their differences, so we can make informed decisions.

1. Momentum Strategy

Momentum trading is a strategy in which traders look to go long on positions that look to be on the rise and turn short when the position seems to lose its steam. Cryptocurrencies, being inherently volatile, is one of the best assets to use this strategy on, as the goal is to work with the volatility and profit off the momentum, so to speak, Delta offers three different momentum robo trading strategies, the Top 20 momentum, DeFi Momentum, and Top 2 Momentum.

a. Top 20 Momentum

The Top 20 Momentum strategy is the first robo trading strategy that was launched on the platform. As of 21 February 2021, this automated crypto trading strategy is operating at 89% of its capacity, managing 216.7K USDT, with a per-unit cost of 16.16 USDT. This strategy boasts of 61.92% returns since its inception on 31st December 2020. This momentum strategy focuses purely on taking long and short positions based on short-term price momentum of all the top 20 coins selected on the basis of market cap.

b. DeFi Momentum

This fairly recent robo trading strategy (launched on 3rd February 2021) is a momentum strategy that focuses on trades in DeFi assets selected on the basis of market cap. This strategy aims to maximize holding periods in profitable trades while minimizing loss-making trades by taking on long or short positions based on price momentum. DeFi, being a volatile and trending market, is a perfect candidate for a momentum strategy.

c. Top 2 Momentum

The Top 2 Momentum strategy is fairly similar to the Top 20 Momentum strategy, except for the fact that this deals primarily with only Bitcoin and Ethereum. Taking advantage of the surge in popularity and the inherent volatility of both BTC and ETH, this strategy has already delivered a return of 18.8% over the two-week period since inception and can take a 3x max gross leverage.

2. Arbitrage Strategy

Arbitrage strategies aim to capitalize on the price differential between two markets. For instance, if the going rate of BTC in exchange A is, say $50,000, while at exchange B it is $48000, the trader will buy from exchange B and sell at exchange A for a $2000 profit. While this example may be a bit far-fetched, the trading bot strategy aims to capitalize on the price differential between the derivatives market and the spot market, earning a premium in the process. While the process of spotting these anomalies may take forever for a human, it is an immensely easy job for an automated crypto trading bot.

a. Cash Future Arbitrage

The Cash Future arbitrage strategy aims to capture a premium in BTC and ETH futures over their respective spot markets. The strategy awaits the convergence of futures and spot prices at/near the expiry of the futures.

In the case of a market-neutral set-up, the bot is programmed to trade in perpetuals and spot pairs.

3. AMM Strategy

AMM Strategy, or the Automated Market Maker strategy, attempts to capture a dynamic premium that people are willing to pay over the fair price for liquidity. If the trading bot strategy aims to take advantage of users willing to sell an asset for a lower than fair price value or willing to buy an asset for more than the market price.

a. Large Cap AMM

Large Cap AMM strategy aims to provide both bids and offers to the order books of BTCUSDT and ETHUSDT contracts listed on the Delta Exchange. Additionally, it limits its exposure and modifies its open orders based on current inventory and market conditions.

Most of the trading strategies like Arbitrage or momentum strategies require you to continually track different information on different platforms, making it a near-impossible task for an average trader. However, with specialized trading bots, you can reap the benefits in terms of profits without having to perform extensive, time-consuming, and mundane tasks. It is very easy to get started on automated trading on Delta Exchange, all you’ve to do is sign up, and head over to the robo trading section, choose your strategy and you’re set.

However, keep in mind that no trading strategy is fool-proof, and this is also the case with robo trading strategies. Robo trading strategies improve efficiency and reduce the time and effort to execute different trading strategies but cannot directly minimize the risks involved.

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