I. What is Strategy Trading

Introduction:

Strategy Trading is the use of quantitative strategies for trading, often referred to as quantitative strategy trading in traditional financial markets.

Why learn strategy trading?

When investors trade manually, they can observe only short time spans with limited sample data, often trading based on patterns observed in the short term, yet the results are often unsatisfactory. In the process of finding effective trading strategies and technical parameters, manual traders often need months or even years of trial and error, wasting large amounts of money with very high sunk costs. Moreover, not all efforts yield positive returns - there are many investors with over ten years of trading experience who still incur losses, making trading a very expensive endeavor and causing many to dread it.

With the development of computer technology, strategy trading has become an important tool for improving this situation. Strategy trading uses advanced mathematical models to replace subjective human judgment, utilizing programs to screen from massive historical data for high-probability events that can bring excess returns, formulating corresponding strategies for trading. This reduces the impact of investor emotional fluctuations on trading, especially during market mania or crashes, avoiding irrational trading behavior, and can greatly shorten the trial-and-error process while lowering sunk costs.

I. Quantitative Strategy Trading is the Trend

With the rapid advancement of internet technology, big data, artificial intelligence, and cloud computing have begun to transform various industries, including the financial sector. Finance is increasingly combining with information technology, mathematical models, and data analysis, with investment gradually shifting from manual trading to quantitative strategy trading.

Quantitative strategy trading has a relatively short history domestically, but has actually existed for a long time - overseas it has been around for over 30 years. Due to the discipline and systematic nature of quantitative models, returns are more stable and market share continues to expand. Statistics show that over 70% of funds globally use quantitative strategy trading, and an estimated 20% of funds in the domestic market use quantitative strategy trading. Nearly all top global investment banks use quantitative strategy trading, such as James Simons' Renaissance Technologies and Ray Dalio's Bridgewater Associates. James Simons, a representative of quantitative strategy trading, achieved an average return of 35% from 1989-2008, while Warren Buffett, a representative of value investing, achieved an average return of 20% from 1989-2008. The track record of quantitative strategy trading is truly impressive.

Quantitative strategy trading is the future trend and is gaining recognition from more people. Why is quantitative strategy trading so popular?

II. What are the Advantages of Quantitative Strategy Trading?

1. Save significant time monitoring markets, quickly capture trading opportunities

Manual trading often requires traders to spend significant time monitoring the market to capture trading opportunities. In rapidly changing markets, it's easy to miss trading opportunities or fail to adjust positions in time according to market conditions. Since market conditions lack clear direction most of the time, this leads to very low efficiency for manual traders. Quantitative strategy trading uses programs to automatically execute established strategies, can capture trading opportunities 24 hours a day without interruption. Even when extreme market conditions occur, it can enter and exit positions according to the strategy immediately, without requiring humans to judge various trading details in real-time, greatly improving trading efficiency and saving investors significant time and energy.

2. Quantitative strategy trading is highly efficient, reduces trial-and-error costs, improves trading understanding

Manual trading requires significant time and money to find effective trading strategies, but quantitative strategy trading can leverage massive historical data and backtesting systems to generate large numbers of trading strategies in a very short time (such as a few days), interpret the strengths and weaknesses of strategies from multiple perspectives, and identify the most effective trading system and technical parameters. It can comprehensively assess the feasibility of strategies without using real money, making it highly efficient.

Quantitative strategy trading doesn't require trial and error with real money, can greatly reduce investors' sunk costs. Moreover, using quantitative strategy trading can rapidly improve users' understanding of trading, such as how to determine trading direction; how to set entry and exit conditions; how to adjust position size; how to control strategy risk; and final returns versus market conditions. Even if a user completes a simple, complete strategy trading, they can rapidly improve their understanding of trading.

3. More reasonable positions, reduce account risk

Manual traders have limited energy and can only run a few strategies, manage a few accounts and a small number of positions, easily leading to excessively large positions. Once market conditions experience severe fluctuations causing large position changes, manual traders find it difficult to attend to the entire account and the position ratios of strategies, potentially leaving positions constantly in a high-risk stage.

Quantitative strategy trading can simultaneously manage a basket of accounts and numerous strategy combinations, with multiple strategies and multiple account combinations running simultaneously while operating independently without interference. Strategies can intelligently adjust positions based on market conditions, precisely calculate the positions and fund allocation ratios of multiple strategies and accounts, avoiding the irrationality and randomness of manual orders that causes fund allocation imbalance, greatly reducing the risk of the entire account.

4. Reduce trading costs, hide the tracks of large positions

Trading cost is a cost item that cannot be ignored in trading, especially for large fund users. Single concentrated orders may drive up market prices, causing problems like soaring trading costs. At the same time, users also expose trading intentions and trading details, causing market followers. Quantitative strategy trading, such as iceberg orders, can split large orders when placing them, hide entry, and reduce trading costs.

III. What are the Disadvantages of Quantitative Strategy Trading?

Quantitative strategy trading has many advantages, but also disadvantages.

1. Quantitative strategy trading is highly professional with a high barrier to entry. Investors need not only professional trading knowledge to write profitable trading strategies, but also certain programming ability to express trading strategies in programs and run them successfully. At the same time, they must handle details such as backtesting strategy historical returns and adjusting trading strategy parameters. The learning cost is too high, keeping the vast majority of investors out, so quantitative strategy trading remains relatively niche.

2. Quantitative strategy trading tests the effectiveness and profitability of strategies based on historical data, which leads quantitative strategy trading to easily fall into the historical data trap, overfitting historical data, resulting in strategies that show good returns during backtesting but may not perform ideally in live trading.

3. Once quantitative strategy trading encounters erroneous commands and the program lacks risk control, at minimum the strategy stops running, at worst it causes catastrophic consequences. For example, the August 16 Everbright Securities "fat finger" incident, where the arbitrage strategy system malfunctioned, generating massive market orders, causing multiple A-share heavyweight stocks to hit their daily limit, and the Shanghai Composite Index instantly rose 5.96%.

IV. OKX Launches Strategy Trading Series, Lowering the Barrier

To address the high barrier to entry of quantitative strategy trading, OKX has developed a series of relatively mature quantitative strategies. Users don't need to write trading strategies or run programs with programming - they can use them directly. Moreover, OKX has launched many smart modes providing strategy parameters, greatly lowering the barrier for users to adopt quantitative strategy trading. Currently OKX has launched 14 strategy trading products, divided into two major categories: basic strategies and advanced strategies.

These strategies include grid strategies suitable for ranging markets, price-locking strategies suitable for trending markets, and arbitrage order strategies with very low risk, etc. OKX will continue to develop new strategy products, providing users with a rich strategy pool, popularizing strategy trading, and improving users' profitability.

V. Strategy Trading Has Different Use Cases

Quantitative strategy trading is a very useful trading tool that is gaining increasing attention. Various quantitative strategies have different suitable market conditions. Users need to understand how to set parameters for different strategy trading products and when to use them most efficiently. For example, when the market is depressed and prices have fallen significantly, and users want to buy at the bottom, they can refer to the dollar-cost averaging strategy; in ranging markets, simply holding digital assets yields very small returns, so spot grid strategy can be considered.

If strategies are applied improperly - for example, using spot grid when prices are continuously falling - the situation of being fully trapped may occur, not only failing to generate returns but potentially causing serious losses.

This requires us to have a deep understanding of strategy trading products, understanding the internal logic of different products' trading systems, where the risk points lie, how to select different investment targets, etc., all of which affect the final returns of the strategy and require users to understand in detail. This is also the purpose of creating this series of courses.

Currently, the OKX web platform has launched a Strategy Square, enriching strategy types to meet various investment needs, and supporting the one-click copy function for expert strategy parameters. You can enter Strategy Square here to start your strategy trading journey.

Key Points of This Issue:

Disclaimer

This article may contain product-related content not applicable to your region. This article is intended only to provide general information and is not responsible for any factual errors or omissions contained herein. This article represents only the author's personal views and does not represent the views of OKX. This article is not intended to provide any recommendations, including but not limited to: (i) investment advice or investment recommendations; (ii) offers or solicitations to buy, sell or hold digital assets; or (iii) financial, accounting, legal or tax advice. Holding digital assets (including stablecoins) involves high risk, may fluctuate significantly, and may even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For questions regarding your specific situation, please consult your legal/tax/investment professional. The information appearing in this article (including market data and statistics, if any) is for general reference only. While we have taken all reasonable precautions in preparing these data and charts, we accept no responsibility for any factual errors or omissions expressed herein. © 2025 OKX. This article may be reproduced or distributed in full, or excerpts of 100 words or less from this article may be used, provided such use is non-commercial. Any reproduction or distribution of the entire article must prominently state: "Copyright © 2025 OKX. Used with permission." Permitted excerpts must cite the article name and include attribution, for example "Article Name, [Author Name (if applicable)], © 2025 OKX". Derivative works or other uses of this article are not permitted. Some content may be generated or assisted by artificial intelligence (AI) tools.

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