How to Use Strategy Trading to Trade Like a Pro

Published in

Coinmonks

6 min readJul 7, 2022

“Without strategy, execution is aimless. Without execution, strategy is useless.”
― Morris Chang

Wikipedia defines trading strategy as a fixed plan that is designed to achieve a profitable return by going long or short in markets. A trading strategy ought to be objective, consistent, quantifiable, and verifiable. It is very important to use a trading strategy while trading to establish the specifications for trades to take, when to execute, when to exit a trade and how much capital you should risk on each location. If followed correctly, they provide you with a way to objectively assess whether a trade is worth the upfront risk.

Binance’s Strategic Trading homepage includes Grid Trading, TWAP, VP and other automated algorithmic trading features. Binance’s strategy homepage allows traders a comprehensive look at Spot and Futures Grid Trading strategies and their performance and popularity among traders, and gives allows traders to quickly copy their settings.

Benefits of Strategy trading

Strategy Trading helps traders find themselves in very favorable market conditions for their strategies in order to avoid being on the other side of the trend market.
It helps traders implement appropriate risk management measures by setting appropriate leverage ratios and setting appropriate take profit and stop loss orders to avoid losses due to market fluctuations.

What is Futures Grid Trading？

Grid Trading is a trading bot that automates the buying and selling of futures contracts. Designed to order from the market at preset intervals within a set price range. Grid trading creates an order grid where orders are placed above and below the set price and the price gradually increases or decreases. This is how you build your trading grid. For example, a trader can place a buy order each $ 1,000 higher than the Bitcoin market price and a sell order each $ 1,000 higher than the Bitcoin market price. This abuses the shunt condition.

Futures grid trading performs best in volatile and sideways markets when prices fluctuate within certain limits. This technique seeks to make a profit with a small price change. The more grids you include, the more often you trade. However, this is costly because the profits you get from each order are small.

Please Note that grid creation can fail in the following situations:
If you are currently doing grid trading with the selected symbol.
If the selected symbol has open orders or positions.
For hedge position mode, set to one-way mode.
If you exceed the limit, the total amount of grid transactions triggered by work and limits will be 10.

Setting up your Futures Grid Trading Strategy

After logging in, go to the USDⓈ-M Futures trading interface and click Grid Trading.

https://www.binance.com/es-ES/support/faq/f0c2bd5bc16c40b9998d22549e91cd1c

Select a symbol to execute the strategy and set the grid parameters. Click Create to confirm.

What is TWAP Algorithmic Trading?

TWAP (Time Weighted Average Price) is an algorithmic trading execution strategy aimed at achieving an average execution price close to the time weighted average price for a period specified by the trader. The TWAP trading algorithm is part of the Binance Futures Execution Algorithm API solution, where users can programmatically leverage Binance’s internal algorithmic trading capabilities to break large orders into smaller volumes and run them automatically on a regular basis to minimize price impact.

The TWAP trading algorithm aims to optimize the average price of a trade by distributing the execution of orders over a specified time period. Traders typically employ a TWAP strategy to process large orders while mitigating significant market impact. TWAP is mostly preferred to provide a better execution price when, the order size larger than available liquidity on the order book and when there is anticipation of high price volatility period with no clear up or downward trend.

Illustration of TWAP Algorithm Execution Patterns

Setting up a TWAP strategy

Determine the trade size, which is the total size of the contract you choose to buy or sell. The minimum allowable size of the TWAP strategy is equivalent to 10,000 USDT. When a TWAP policy completes all commands, the TWAP command will stop.
Select the duration, which is the targeted TWAP execution period. The minimum duration is 5 minutes, and the maximum is 24 hours.

What is Volume Participation Algorithmic Trading?

The Volume Participation (VP) trading algorithm is an opportunistic execution strategy that allows for larger orders to be executed with specified urgency. It aims to complete trades at a rate that approximates a fraction of real-time market volume within target volume participation. VP is extremely useful if you wish to limit the market impact of your orders while targeting the average market price during execution. The volume participation algorithm aligns with the order matching strategy to execute large nominal orders that exceed the market’s liquidity while minimizing market impact.

New to trading? Try crypto trading bots or copy trading

To check the status of a VP order, you can use the query order endpoints (GET sapi/v1/algo/futures/openOrders or GET sapi/v1/algo/futures/historicalOrders). Please note that no WebSocket notification will be available for orders filling updates. Besides, receiving “success”: true does not mean that your order will be executed. For instance, should your futures balance be insufficient, or your account be in Reduce Only status, you will receive “success”: true, but the order will fail to execute.

Illustration of Volume Participation Algorithm Execution Patterns

How to Use Strategy Trading Landing Page

To access the Strategy Trading Landing Page go to Binance and click Trade>>> Strategy Trading.

Use the filters to display a specific panel of Grid trading strategies

Display the corresponding ROI, NLP or popularity

Copy Popularity highlights how often an order was copied across Spot Grid or Futures Grid on Binance.

In Futures Grid, Direction shows the current direction of the Grid Trading Strategy, which can be Long, Short or Neutral.

Replicate / Adjust Grid Trading Parameters on Spot Grid and Futures Grid Select Use Parameter to display the order and its Shared Parameters.

Using the Mock Trading Environment to Practice Strategy Trading is also possible so as to be better. Here are the steps…

From the Binance homepage, click on Profile>>> Mock trading

Grant access to the Testnet and click Continue

There is a risk free starting balance of 3000USDT available for you as demo balance to practice with and subsequently get better at strategy trading. Click Back to Live once you are confident enough to start trading for real