Strategy Overview

1. Mean Reversion (MR) Strategy

The Mean Reversion (MR) strategy is predicated on the assumption that asset prices will revert to their long-term mean or average value over time. This strategy capitalizes on the tendency of prices to oscillate around their mean by buying assets when prices are below their average and selling when prices are above.

• Implementation:

  • Identify the mean or average price of an asset over a specified period.

  • Generate buy signals when the asset's price falls below the mean by a certain threshold.

  • Generate sell signals when the asset's price rises above the mean by a certain threshold.

  • Utilize technical indicators such as moving averages (e.g., 3-day and 8-day moving averages) to aid in identifying mean reversion opportunities.

• Advantages:

  • Capitalizes on natural market fluctuations.

  • Can be effective in both rising and falling markets.

• Risks:

  • Prolonged deviations from the mean can lead to significant losses.

  • Requires accurate identification of mean and appropriate thresholds.

2. Dollar Cost Averaging (DCA) Strategy

The Dollar Cost Averaging (DCA) strategy involves spreading out investments over various price points rather than making a single investment at one price. This approach helps to average the purchase price over time and reduces the impact of market volatility.

• Implementation:

  • Divide the total investment amount into smaller, equal parts.

  • Invest these smaller amounts at regular intervals, regardless of the asset's price.

  • In a downtrend, continue buying to lower the average purchase price.

  • In an uptrend, spread out sales to maximize profits.

• Advantages:

  • Reduces the risk of making a large investment at an unfavorable time.

  • Smooths out the effects of market volatility.

• Risks:

  • May not fully capitalize on short-term market opportunities.

  • Requires consistent investment discipline.

3. Countertrend Grid Strategies (CCG)

Countertrend Grid Strategies (CCG) involve placing a series of buy and sell orders at predefined intervals below and above the current market price. This strategy is designed to profit from market fluctuations by buying during declines and selling during recoveries.

• Implementation:

  • Set up a grid of buy and sell orders at regular price intervals.

  • As the price drops and hits buy orders, acquire more assets.

  • As the price rises and hits sell orders, liquidate assets to lock in profits.

  • Use technical analysis and historical data to determine optimal grid spacing and order sizes.

• Advantages:

  • Can generate profits in both volatile and range-bound markets.

  • Helps in systematic trading without emotional interference.

• Risks:

  • Requires significant capital to maintain positions across the grid.

  • Market trends that do not revert can lead to accumulating losses.

Combined Strategy: MR + DCA + CCG

SFG’s comprehensive strategy combines MR, DCA, and CCG to leverage the strengths of each approach while mitigating their individual weaknesses.

• Implementation:

  • Use MR to identify mean reversion opportunities.

  • Apply DCA to spread out purchases and sales, reducing volatility impact.

  • Employ CCG to set up a grid of buy and sell orders, ensuring systematic trading.

  • Monitor market conditions and adjust parameters (e.g., grid spacing, investment amounts) dynamically.

• Advantages:

  • Diversifies risk across multiple strategies.

  • Enhances stability and profit potential through combined methodologies.

• Risks:

  • Complexity in implementation and monitoring.

  • Requires sophisticated risk management to avoid conflicts between strategies.

Market Risks

1. Market Volatility Risk: Financial markets are highly uncertain, and prices can fluctuate significantly due to various factors such as economic data, policy changes, and unexpected events. While our strategies incorporate multiple techniques to manage risk, they cannot completely eliminate market volatility risks.

2. Extreme Market Events: In events like black swan occurrences or other extreme market conditions, strategies may fail or perform poorly, leading to significant capital losses.

Strategy Risks

1. Strategy Failure: The strategies are designed based on historical data and market assumptions. Changes in future market conditions may cause the strategies to fail or not achieve the expected results.

2. Parameter Overfitting: There is a risk of overfitting parameters during backtesting, leading to discrepancies between backtested and actual trading performance.

3. Execution Risk: Technical failures, network delays, or issues with trading platforms can prevent strategies from executing as planned, potentially causing trading losses.

Capital Management Risks

1. Leverage Risk: Using leverage amplifies both gains and risks. Leverage trading can lead to principal losses or even liquidation.

2. Liquidity Risk: During periods of low market liquidity, large trades may not execute at expected prices, leading to slippage and additional losses.