Top 3 Crypto Arbitrage Strategies for Traders 1

Top 3 Crypto Arbitrage Strategies for Traders

Trading
• Digitex
April 28, 2021

Sometimes, the same asset is priced differently on two separate markets.

This is when arbitrage comes into play, in which traders spot such market inefficiencies and take advantage of them to make a profit on the price differences.

For example, when BTC trades at $50,000 on exchange A and at $50,200 on exchange B, arbitrageurs could purchase the digital asset on the prior platform and move it to the latter service to sell for a profit (in this case, it would result in a $200 profit for one BTC).

Unlike the traditional financial industry where such inefficiencies are hard to find nowadays, the cryptocurrency space often presents excellent arbitrage opportunities.

For that reason, we have collected the best three crypto arbitrage strategies in this article.

Let’s see them!

1. Simple Arbitrage

As its name suggests, simple arbitrage is among the easiest crypto arbitrage strategies out there and is essentially what we described in our previous example.

When you spot an opportunity, you deposit funds to the cryptocurrency exchange with the lower price, purchase the digital asset, and withdraw it to the other platform to sell it for a higher price.

Since you don’t have to perform any other trades than the ones above, this crypto arbitrage strategy can be executed quickly.

However, due to its simplicity, there is a higher chance of other arbitragers spotting and taking advantage of the same opportunity.

2. Triangular Arbitrage

Taking place either across multiple exchanges or on the same platform, triangular arbitrage aims to profit from the inefficiencies across three cryptocurrencies.

For example, an arbitrage opportunity occurs when the BTC/USDC pair is trading at 50,000 USDC, and one ETH equals 2,000 USDC, but the BTC/ETH pair is priced inefficiently at 30 ETH instead of 25 ETH.

In such a scenario, you execute the triangular arbitrage strategy with the following steps:

  1. You deposit funds to the exchange and purchase 1 BTC for 50,000 USDC.
  2. As the second step, you trade the BTC/ETH pair to convert your Bitcoin to 30 ETH.
  3. Finally, you sell the 30 ETH for 60,000 USDC.

As you can see, this opportunity would have generated you 10,000 USDC in profits with a 20% ROI on three trades. This type of opportunity is very infrequent and must be jumped upon immediately before the exchange’s algorithm quickly corrects the error.

3. Yield Arbitrage

Yield arbitrage allows traders to profit on interest rate inefficiencies between two DeFi lending or staking platforms.

Since the decentralized finance industry is quite new – yet growing at a rapid pace – it’s not unusual to spot irregularities related to interest rates or yields.

With yield arbitrage, a trader borrows funds in a stablecoin with a lower annual percentage yield (APY) for borrowing, exchange it to another stablecoin with a higher supply APY, and uses the latter cryptocurrency to lend funds to others.

An example yield arbitrage strategy goes as follows:

  1. On a DeFi lending platform, DAI’s borrowing APY is 5%, while USDC’s supply APY is 10% (both are USD-pegged stablecoins).
  2. You deposit USDC to the platform and use it as collateral to borrow DAI.
  3. After that, you exchange your DAI back to USDC.
  4. As the final step, you lend the USDC to others to make a profit on a 5% spread between the two coin’s APYs.

While this crypto arbitrage strategy can work excellently on a single or across multiple DeFi lending protocols, it is crucial to take gas fees into account, which have been notoriously high on Ethereum lately.

Closing Thoughts

When the right opportunities are identified and executed quickly, arbitrage strategies can provide lucrative profits to traders.

However, it’s important to note that the simplest opportunities are the easiest to discover. For that reason, you need to act fast before they disappear.

Furthermore, while some crypto arbitrage opportunities may seem highly profitable at first glance, other factors (e.g., excessively high trading costs or when an exchange charges a high fee for withdrawals) may decrease your earnings or even lead to losses.

For that reason, you need to take everything into account and research every opportunity extensively before executing your crypto arbitrage strategies.

April 28, 2021
Trading

Top 3 Crypto Arbitrage Strategies for Traders

Digitex
Top 3 Crypto Arbitrage Strategies for Traders 2

Sometimes, the same asset is priced differently on two separate markets.

This is when arbitrage comes into play, in which traders spot such market inefficiencies and take advantage of them to make a profit on the price differences.

For example, when BTC trades at $50,000 on exchange A and at $50,200 on exchange B, arbitrageurs could purchase the digital asset on the prior platform and move it to the latter service to sell for a profit (in this case, it would result in a $200 profit for one BTC).

Unlike the traditional financial industry where such inefficiencies are hard to find nowadays, the cryptocurrency space often presents excellent arbitrage opportunities.

For that reason, we have collected the best three crypto arbitrage strategies in this article.

Let’s see them!

1. Simple Arbitrage

As its name suggests, simple arbitrage is among the easiest crypto arbitrage strategies out there and is essentially what we described in our previous example.

When you spot an opportunity, you deposit funds to the cryptocurrency exchange with the lower price, purchase the digital asset, and withdraw it to the other platform to sell it for a higher price.

Since you don’t have to perform any other trades than the ones above, this crypto arbitrage strategy can be executed quickly.

However, due to its simplicity, there is a higher chance of other arbitragers spotting and taking advantage of the same opportunity.

2. Triangular Arbitrage

Taking place either across multiple exchanges or on the same platform, triangular arbitrage aims to profit from the inefficiencies across three cryptocurrencies.

For example, an arbitrage opportunity occurs when the BTC/USDC pair is trading at 50,000 USDC, and one ETH equals 2,000 USDC, but the BTC/ETH pair is priced inefficiently at 30 ETH instead of 25 ETH.

In such a scenario, you execute the triangular arbitrage strategy with the following steps:

  1. You deposit funds to the exchange and purchase 1 BTC for 50,000 USDC.
  2. As the second step, you trade the BTC/ETH pair to convert your Bitcoin to 30 ETH.
  3. Finally, you sell the 30 ETH for 60,000 USDC.

As you can see, this opportunity would have generated you 10,000 USDC in profits with a 20% ROI on three trades. This type of opportunity is very infrequent and must be jumped upon immediately before the exchange’s algorithm quickly corrects the error.

3. Yield Arbitrage

Yield arbitrage allows traders to profit on interest rate inefficiencies between two DeFi lending or staking platforms.

Since the decentralized finance industry is quite new – yet growing at a rapid pace – it’s not unusual to spot irregularities related to interest rates or yields.

With yield arbitrage, a trader borrows funds in a stablecoin with a lower annual percentage yield (APY) for borrowing, exchange it to another stablecoin with a higher supply APY, and uses the latter cryptocurrency to lend funds to others.

An example yield arbitrage strategy goes as follows:

  1. On a DeFi lending platform, DAI’s borrowing APY is 5%, while USDC’s supply APY is 10% (both are USD-pegged stablecoins).
  2. You deposit USDC to the platform and use it as collateral to borrow DAI.
  3. After that, you exchange your DAI back to USDC.
  4. As the final step, you lend the USDC to others to make a profit on a 5% spread between the two coin’s APYs.

While this crypto arbitrage strategy can work excellently on a single or across multiple DeFi lending protocols, it is crucial to take gas fees into account, which have been notoriously high on Ethereum lately.

Closing Thoughts

When the right opportunities are identified and executed quickly, arbitrage strategies can provide lucrative profits to traders.

However, it’s important to note that the simplest opportunities are the easiest to discover. For that reason, you need to act fast before they disappear.

Furthermore, while some crypto arbitrage opportunities may seem highly profitable at first glance, other factors (e.g., excessively high trading costs or when an exchange charges a high fee for withdrawals) may decrease your earnings or even lead to losses.

For that reason, you need to take everything into account and research every opportunity extensively before executing your crypto arbitrage strategies.

Latest News

traders

The Digitex Mission: To Create More Winning Traders

Digitex Futures
Trading
• Adam Todd
April 8, 2020

Everybody likes to win. Winning makes you feel good. When you feel good you think positively about yourself and your environment and it has a domino effect on other aspects of your life. As a short term scalper on the futures markets and on Betfair’s horse racing markets, I would have winning streaks that lasted weeks and sometimes months without having a losing day. 

The positive psychological and physiological effects of constantly winning cannot be overemphasized. Apart from enjoying good health and feeling genuinely happy most of the time, a positive mental attitude attracts good things into your life in a way that can’t be fully explained logically. Feeling and acting like a winner will change your life and will positively affect everyone around you. 

This is why it’s so personally satisfying for me to be developing a trading platform whose primary mission is to create more winning traders, with no interest in making money from charging commissions on trades. I’ve been lucky enough to experience having a winning mentality for years and the thought of bringing that to millions of people is tremendously exciting. 

But how can the Digitex Futures exchange survive with such a cum-by-yar, happy-clappy philosophy of wanting to make its traders happy? Shouldn’t a futures exchange be run by a bunch of bean-counting suits that want to squeeze every ounce of value out of every last trader for the benefit of the exchange’s stakeholders?

Well, if an exchange needs to make money from charging commissions on trades then yes it probably should be run by bean-counting suits. But Digitex is different. Digitex makes its money by increasing the value of its native currency, the DGTX token. 

Do you want to try your hand at commission-free bitcoin futures trading? Sign up for an account on the beta right now. With the mainnet coming up in April, you can practice your trading skills, get a feel for our one-click trading ladder and start preparing to win

SIGN UP
Winning Traders Are the Best Form of Marketing

Creating winning, winning traders is absolutely the best way to run our business, because winning traders are the very best form of marketing for the Digitex Futures exchange, and that will directly translate to increased demand for DGTX tokens. 

The average winning trader probably has 50 or more people in their life, both family and friends, who are aware of their trading success and will try to emulate it. Winning traders will create very strong viral marketing loops because a winning trader encapsulates everything that most people dream of. 

The winning trader enjoys financial success coupled with complete freedom. He or she works for nobody, operating outside the boundaries of normal society, with no clients, producing no products and without providing any service to anyone.

They can work whatever hours they want to, from wherever they want in the world. A winning trader is like a predator with the ability to live off its wits in a world where the vast majority of people are struggling to survive.

I think that a futures exchange whose mission is to create as many winning traders as possible has the potential to be absolutely massive. 

Because winning traders will be happy. They will feel good. Their lives and the lives of their families will improve. There will be a large number of people who have a genuinely strong affection for the Digitex Futures exchange and its native currency, the DGTX token. 

How Will Digitex Create More Winning Traders?

By eliminating transaction fees on trades, the exchange won’t constantly be siphoning off liquidity from the pool of money that is deposited into the exchange by its traders. That money is allowed to churn around the markets, constantly being won and lost amongst traders without the insidious leakage that occurs on every other exchange in the form of commissions. Eventually, that money will be won by the better traders, not taken by the exchange. 

Also, system gains that are made from the exchange’s liquidation engine are not kept forever by the exchange in an ever-growing insurance fund. Instead, system gains are redistributed to traders through market maker bots that are programmed to lose. This means traders must compete amongst themselves for these losses, further increasing liquidity and demand for DGTX tokens, but as a collective group, those traders will be rewarded with however much the market maker bots lose.

Not only has Digitex removed the mechanical edge of commissions that exists on every other exchange, but through loss-making market makers, there is actually going to be a mechanical edge working in the disciplined traders’ favor. Both of these advantages will be more efficiently capitalized on by short term, active traders whose trading strategies will create highly liquid futures markets.

Of course, this doesn’t mean that everyone on the Digitex Futures exchange will make money. Trading is still a zero-sum game, but there will be a much higher percentage of winning traders than exists on other fee-charging exchanges who don’t redistribute system gains through market maker losses. I would guess that probably 20% of traders on the Digitex Futures exchange will be profitable and they will take their profits from the other 80% of traders. 

If we have a million traders on our exchange, that means there could be over 200,000 people around the world who can positively change their lives with financial freedom and a winning mentality that positively affects everyone around them. There are millions of people in this world for whom making just $50 a day from their computer is a life-changing amount of money.

And I’m so excited and grateful to have the chance to create a product that can potentially affect the lives of so many people in such a profound and meaningful way. Thank you all for your continual support! Cheers!

You don’t need real DGTX tokens for trading on the testnet, but if you want to stock up on DGTX at a knock-down price right now amid market conditions, there’s never been a better time. Hop on over to the Treasury now and enjoy a seamless, frictionless transaction with zero fees and zero KYC.

BUY DGTX
April 8, 2020
Digitex Futures
Trading

The Digitex Mission: To Create More Winning Traders

Adam Todd
traders

Everybody likes to win. Winning makes you feel good. When you feel good you think positively about yourself and your environment and it has a domino effect on other aspects of your life. As a short term scalper on the futures markets and on Betfair’s horse racing markets, I would have winning streaks that lasted weeks and sometimes months without having a losing day. 

The positive psychological and physiological effects of constantly winning cannot be overemphasized. Apart from enjoying good health and feeling genuinely happy most of the time, a positive mental attitude attracts good things into your life in a way that can’t be fully explained logically. Feeling and acting like a winner will change your life and will positively affect everyone around you. 

This is why it’s so personally satisfying for me to be developing a trading platform whose primary mission is to create more winning traders, with no interest in making money from charging commissions on trades. I’ve been lucky enough to experience having a winning mentality for years and the thought of bringing that to millions of people is tremendously exciting. 

But how can the Digitex Futures exchange survive with such a cum-by-yar, happy-clappy philosophy of wanting to make its traders happy? Shouldn’t a futures exchange be run by a bunch of bean-counting suits that want to squeeze every ounce of value out of every last trader for the benefit of the exchange’s stakeholders?

Well, if an exchange needs to make money from charging commissions on trades then yes it probably should be run by bean-counting suits. But Digitex is different. Digitex makes its money by increasing the value of its native currency, the DGTX token. 

Do you want to try your hand at commission-free bitcoin futures trading? Sign up for an account on the beta right now. With the mainnet coming up in April, you can practice your trading skills, get a feel for our one-click trading ladder and start preparing to win

SIGN UP
Winning Traders Are the Best Form of Marketing

Creating winning, winning traders is absolutely the best way to run our business, because winning traders are the very best form of marketing for the Digitex Futures exchange, and that will directly translate to increased demand for DGTX tokens. 

The average winning trader probably has 50 or more people in their life, both family and friends, who are aware of their trading success and will try to emulate it. Winning traders will create very strong viral marketing loops because a winning trader encapsulates everything that most people dream of. 

The winning trader enjoys financial success coupled with complete freedom. He or she works for nobody, operating outside the boundaries of normal society, with no clients, producing no products and without providing any service to anyone.

They can work whatever hours they want to, from wherever they want in the world. A winning trader is like a predator with the ability to live off its wits in a world where the vast majority of people are struggling to survive.

I think that a futures exchange whose mission is to create as many winning traders as possible has the potential to be absolutely massive. 

Because winning traders will be happy. They will feel good. Their lives and the lives of their families will improve. There will be a large number of people who have a genuinely strong affection for the Digitex Futures exchange and its native currency, the DGTX token. 

How Will Digitex Create More Winning Traders?

By eliminating transaction fees on trades, the exchange won’t constantly be siphoning off liquidity from the pool of money that is deposited into the exchange by its traders. That money is allowed to churn around the markets, constantly being won and lost amongst traders without the insidious leakage that occurs on every other exchange in the form of commissions. Eventually, that money will be won by the better traders, not taken by the exchange. 

Also, system gains that are made from the exchange’s liquidation engine are not kept forever by the exchange in an ever-growing insurance fund. Instead, system gains are redistributed to traders through market maker bots that are programmed to lose. This means traders must compete amongst themselves for these losses, further increasing liquidity and demand for DGTX tokens, but as a collective group, those traders will be rewarded with however much the market maker bots lose.

Not only has Digitex removed the mechanical edge of commissions that exists on every other exchange, but through loss-making market makers, there is actually going to be a mechanical edge working in the disciplined traders’ favor. Both of these advantages will be more efficiently capitalized on by short term, active traders whose trading strategies will create highly liquid futures markets.

Of course, this doesn’t mean that everyone on the Digitex Futures exchange will make money. Trading is still a zero-sum game, but there will be a much higher percentage of winning traders than exists on other fee-charging exchanges who don’t redistribute system gains through market maker losses. I would guess that probably 20% of traders on the Digitex Futures exchange will be profitable and they will take their profits from the other 80% of traders. 

If we have a million traders on our exchange, that means there could be over 200,000 people around the world who can positively change their lives with financial freedom and a winning mentality that positively affects everyone around them. There are millions of people in this world for whom making just $50 a day from their computer is a life-changing amount of money.

And I’m so excited and grateful to have the chance to create a product that can potentially affect the lives of so many people in such a profound and meaningful way. Thank you all for your continual support! Cheers!

You don’t need real DGTX tokens for trading on the testnet, but if you want to stock up on DGTX at a knock-down price right now amid market conditions, there’s never been a better time. Hop on over to the Treasury now and enjoy a seamless, frictionless transaction with zero fees and zero KYC.

BUY DGTX

Latest News

Digitex Futures Proposes the Idea of Token Burning to the Community 3

Digitex Futures Proposes the Idea of Token Burning to the Community

Digitex Futures
Trading
• admin
June 24, 2019

In this latest post and video, CEO Adam Todd outlines a proposal for introducing token burning into the tokenomics of the Digitex (DGTX) token. This is currently just a proposal and whether or not it is implemented will depend on the response from the community. We will post an article later this week that contains more details about how such proposals will be submitted and voted on when Digitex becomes a DAO. Below are the mechanics of how the proposed system would work.

The Concept:

The Liquidation Engine of the Digitex Futures exchange penalizes highly leveraged traders that allow their account balance to drop below the required Maintenance Margin amount needed to maintain their open position, thus forcing the exchange to take over their position and liquidate it. When force liquidating a position the exchange stops out the trader at his bankruptcy price as if he lost his entire Initial Margin but it is probable that the exchange gets a better price. All additional funds made when the exchange gets a better price are deposited into an Insurance Fund. The entire balance of the Insurance Fund is burned every night at midnight UTC.

The Mechanics:

  1. Traders on the Digitex Futures exchange must have sufficient Initial Margin in their trading account to open a futures position.
  2. After opening a futures position, a trader must have sufficient Maintenance Margin in their trading account to keep that position open.
  3. Initial Margin is calculated as: Contract Value divided by Leverage Rate.
  4. Maintenance Margin is calculated as 50% of Initial Margin.
  5. If the trader’s account balance falls below the Maintenance Margin requirement to maintain the current open position, the system will cancel the unmatched orders on that market to free up the margin requirements of those unmatched orders. If after doing this,  the account balance is still below the required Maintenance Margin, the system will take over the trader’s position and liquidate it.
  6. The Liquidation Engine takes over positions from traders whose account balance has fallen below the minimum required Maintenance Margin amount to maintain their open position on a futures market.
  7. After assuming a trader’s open futures position, the system will attempt to immediately close that position by submitting a buy or sell order at the bankruptcy price.
  8. The bankruptcy price is the price at which the trader will lose his entire Initial Margin amount that he posted to open the position.
  9. For Long positions, the bankruptcy price is calculated by subtracting the Initial Margin requirement from the trader’s entry price. For Short positions, the bankruptcy price is calculated by adding the Initial Margin requirement to the trader’s entry price.
  10. After assuming a trader’s position, if the system is able to liquidate that position at a better price than bankruptcy price, the additional funds are placed into the Insurance Fund.
  11. Example trade: Bob places a limit order to buy 1 BTC/USD futures contract at 10,000 at 100x leverage which requires Initial Margin of 100 DGTX. He has exactly 100 DGTX in his trading account and shortly after placing it, his buy order is filled. His Maintenance Margin requirement is therefore 50 DGTX, which means his account balance must have at least 50 DGTX in it to maintain this open Long position. If the price drops to 9,950 his account balance falls to 50 DGTX and the system will take over his position and will submit a sell order at the bankruptcy price of 9,900 (Entry Price – Initial Margin).
  12. In the above example, if the system submits a sell order at 9,900 when the last traded price is currently 9,950, it is probable that the position will be closed at a better price than 9,900. If the position is liquidated at 9,940, then 40 DGTX will be added to the Insurance Fund.
  13. This effectively means that traders who allow their position to be force liquidated by the exchange by allowing their account balance to go below the required Maintenance Margin level will always lose the full Initial Margin amount they posted to open that position, even if the position is closed at a better price than bankruptcy price. Any additional funds that are made by getting a better price than bankruptcy price are added to the Insurance Fund and not to the trader’s account. This will incentivize traders to avoid forced liquidations which are a risk vector for the exchange.
  14. This liquidation system is very similar to how BitMEX takes over and liquidates bankrupt traders’ positions. Note here how consistently their Insurance Fund balance increases with virtually no daily drawdowns of any significance over a period of years, even during periods of high volatility.
  15. The BitMEX Insurance Fund balance has increased 99 days out of the last 100 days and this is typical performance going back for years.
  16. If the Insurance Fund of the Digitex Futures exchange performed in approximately the same way as BitMEX’s Insurance Fund then we would have burned tokens 99 days out of the last 100 days.
  17. Instead of building up a huge Insurance Fund that may never be needed, Digitex can transfer that value to other Digitex (DGTX) token owners whilst still having the safeguard of an Insurance Fund.
  18. All account balances are denominated in Digitex (DGTX) tokens and all trading profits and losses are in Digitex (DGTX) tokens. Therefore, the Insurance Fund balance is denominated in Digitex (DGTX) tokens.
  19. The entire balance of the Insurance Fund will be burned every day at midnight UTC.
  20. This means the Insurance Fund will always be empty, but it has the power to issue new tokens to cover its liabilities. It is highly likely that the number of new tokens that must be occasionally issued to cover losses will be significantly less than the number of tokens that are burned every day.
  21. The token burning process will be fully verifiable and the corresponding number of Digitex (DGTX) tokens that are destroyed will be subtracted from the available supply as displayed on etherscan.io.
  22. In the event of system losses during periods of high volatility when the exchange is unable to liquidate assumed futures positions without suffering losses, the Insurance Fund can issue new Digitex (DGTX) tokens to cover those losses. This process will be fully verifiable and any new tokens issued will be visible on etherscan.io.
  23. The Insurance Fund will have its own page on the exchange where all token burning and token issuance activity and history can be clearly seen and verified on etherscan.io.
  24. Possible variations of this system that can be voted on by the DAO are whether we burn tokens on a weekly, monthly or quarterly schedule instead of daily. Also, the DAO can decide on whether to burn all tokens in the Insurance Fund or whether to keep a certain minimum balance to avoid the need for token issuance after one losing day.

We encourage you all to share your feedback on Telegram and/or Twitter, and we will collect all your questions throughout the week. This Friday, 28th June at 3 pm UTC, Adam will host another live AMA to further discuss the Digitex token burning proposal. Again, whether or not this will be implemented depends on the response from the community. We encourage you all to participate in sharing your feedback!

June 24, 2019
Digitex Futures
Trading

Digitex Futures Proposes the Idea of Token Burning to the Community

admin
Digitex Futures Proposes the Idea of Token Burning to the Community 4

In this latest post and video, CEO Adam Todd outlines a proposal for introducing token burning into the tokenomics of the Digitex (DGTX) token. This is currently just a proposal and whether or not it is implemented will depend on the response from the community. We will post an article later this week that contains more details about how such proposals will be submitted and voted on when Digitex becomes a DAO. Below are the mechanics of how the proposed system would work.

The Concept:

The Liquidation Engine of the Digitex Futures exchange penalizes highly leveraged traders that allow their account balance to drop below the required Maintenance Margin amount needed to maintain their open position, thus forcing the exchange to take over their position and liquidate it. When force liquidating a position the exchange stops out the trader at his bankruptcy price as if he lost his entire Initial Margin but it is probable that the exchange gets a better price. All additional funds made when the exchange gets a better price are deposited into an Insurance Fund. The entire balance of the Insurance Fund is burned every night at midnight UTC.

The Mechanics:

  1. Traders on the Digitex Futures exchange must have sufficient Initial Margin in their trading account to open a futures position.
  2. After opening a futures position, a trader must have sufficient Maintenance Margin in their trading account to keep that position open.
  3. Initial Margin is calculated as: Contract Value divided by Leverage Rate.
  4. Maintenance Margin is calculated as 50% of Initial Margin.
  5. If the trader’s account balance falls below the Maintenance Margin requirement to maintain the current open position, the system will cancel the unmatched orders on that market to free up the margin requirements of those unmatched orders. If after doing this,  the account balance is still below the required Maintenance Margin, the system will take over the trader’s position and liquidate it.
  6. The Liquidation Engine takes over positions from traders whose account balance has fallen below the minimum required Maintenance Margin amount to maintain their open position on a futures market.
  7. After assuming a trader’s open futures position, the system will attempt to immediately close that position by submitting a buy or sell order at the bankruptcy price.
  8. The bankruptcy price is the price at which the trader will lose his entire Initial Margin amount that he posted to open the position.
  9. For Long positions, the bankruptcy price is calculated by subtracting the Initial Margin requirement from the trader’s entry price. For Short positions, the bankruptcy price is calculated by adding the Initial Margin requirement to the trader’s entry price.
  10. After assuming a trader’s position, if the system is able to liquidate that position at a better price than bankruptcy price, the additional funds are placed into the Insurance Fund.
  11. Example trade: Bob places a limit order to buy 1 BTC/USD futures contract at 10,000 at 100x leverage which requires Initial Margin of 100 DGTX. He has exactly 100 DGTX in his trading account and shortly after placing it, his buy order is filled. His Maintenance Margin requirement is therefore 50 DGTX, which means his account balance must have at least 50 DGTX in it to maintain this open Long position. If the price drops to 9,950 his account balance falls to 50 DGTX and the system will take over his position and will submit a sell order at the bankruptcy price of 9,900 (Entry Price – Initial Margin).
  12. In the above example, if the system submits a sell order at 9,900 when the last traded price is currently 9,950, it is probable that the position will be closed at a better price than 9,900. If the position is liquidated at 9,940, then 40 DGTX will be added to the Insurance Fund.
  13. This effectively means that traders who allow their position to be force liquidated by the exchange by allowing their account balance to go below the required Maintenance Margin level will always lose the full Initial Margin amount they posted to open that position, even if the position is closed at a better price than bankruptcy price. Any additional funds that are made by getting a better price than bankruptcy price are added to the Insurance Fund and not to the trader’s account. This will incentivize traders to avoid forced liquidations which are a risk vector for the exchange.
  14. This liquidation system is very similar to how BitMEX takes over and liquidates bankrupt traders’ positions. Note here how consistently their Insurance Fund balance increases with virtually no daily drawdowns of any significance over a period of years, even during periods of high volatility.
  15. The BitMEX Insurance Fund balance has increased 99 days out of the last 100 days and this is typical performance going back for years.
  16. If the Insurance Fund of the Digitex Futures exchange performed in approximately the same way as BitMEX’s Insurance Fund then we would have burned tokens 99 days out of the last 100 days.
  17. Instead of building up a huge Insurance Fund that may never be needed, Digitex can transfer that value to other Digitex (DGTX) token owners whilst still having the safeguard of an Insurance Fund.
  18. All account balances are denominated in Digitex (DGTX) tokens and all trading profits and losses are in Digitex (DGTX) tokens. Therefore, the Insurance Fund balance is denominated in Digitex (DGTX) tokens.
  19. The entire balance of the Insurance Fund will be burned every day at midnight UTC.
  20. This means the Insurance Fund will always be empty, but it has the power to issue new tokens to cover its liabilities. It is highly likely that the number of new tokens that must be occasionally issued to cover losses will be significantly less than the number of tokens that are burned every day.
  21. The token burning process will be fully verifiable and the corresponding number of Digitex (DGTX) tokens that are destroyed will be subtracted from the available supply as displayed on etherscan.io.
  22. In the event of system losses during periods of high volatility when the exchange is unable to liquidate assumed futures positions without suffering losses, the Insurance Fund can issue new Digitex (DGTX) tokens to cover those losses. This process will be fully verifiable and any new tokens issued will be visible on etherscan.io.
  23. The Insurance Fund will have its own page on the exchange where all token burning and token issuance activity and history can be clearly seen and verified on etherscan.io.
  24. Possible variations of this system that can be voted on by the DAO are whether we burn tokens on a weekly, monthly or quarterly schedule instead of daily. Also, the DAO can decide on whether to burn all tokens in the Insurance Fund or whether to keep a certain minimum balance to avoid the need for token issuance after one losing day.

We encourage you all to share your feedback on Telegram and/or Twitter, and we will collect all your questions throughout the week. This Friday, 28th June at 3 pm UTC, Adam will host another live AMA to further discuss the Digitex token burning proposal. Again, whether or not this will be implemented depends on the response from the community. We encourage you all to participate in sharing your feedback!

Latest News

A Closer Look at Automated Futures Trading 5

A Closer Look at Automated Futures Trading

Digitex Futures
Trading
• Sarah Rothrie
February 19, 2019

One of the first questions on our recent survey asked whether you prefer to use bots, manual trades, or both. A massive 80% of our respondents said they exclusively trade manually, whereas only around 5% prefer to do all their trading with bots. The remaining 15% use a combination of both automated futures trading and manual techniques. So, what are the main advantages of both these strategies? Let’s take a closer look.

Bot Trading Isn’t for Beginners

Relying on automated futures trading isn’t recommended for new traders, not least because they’ll miss out on the opportunity to spend time actively learning about markets and trading styles.
Moreover, traders should also have some understanding of the markets to make sure that when they’re using a bot, they can set it up in the best way to maximize returns.
Nearly 70% of our survey participants said they have at least some trading experience, but still, only 20% automate any of their trading activities with bots.
Of course, many experienced traders may prefer to stick with manual trading. However, if any of our readers are considering changing their trading technique from manual to automated (or even vice versa), here we set out the case for both sides.

Pros of Automated Futures Trading with Bots

Bots provide the opportunity for trading without you needing to be actively involved. If you already have some trading experience, and you’re the kind of person who wants to limit screen time and take a more hands-off approach, using a trading bot could be a good bet for you.
Here are some of the advantages of using a bot to automate your trading activities.

Bots Never Sleep

Whereas manual trading relies on you being awake and present, a bot works in the background. Stock traders on a major exchange with fixed opening hours probably don’t need to worry about trading activities during the nighttime hours.
However, 24/7 trading can be a huge advantage in other markets, such as forex, and especially cryptocurrencies, where the markets can move sharply at any moment.
A bot will ensure you can profit from these movements whether you’re asleep, on vacation or just having a duvet day!
This isn’t to say a full “set and forget” strategy is advisable. You should still monitor your positions carefully, even with the most sophisticated bot running your trading.

Elimination of Human Error and Emotion

We humans are fallible creatures, and trading is a high-stakes activity. Fatigue, fear, or over-optimism can lead to rash decisions or mistakes.
A bot won’t accidentally enter an extra zero in an order or deviate from the trading plan because it had a couple of bad trades and fear intervened in the decision-making process.

Speed and Volume

Trading bots can crunch vast amounts of data at the same time, monitoring an array of trading pairs and making orders in the same instant a position is generated. In trades where every second counts, this can have a severe impact on your profits or losses.
At Digitex, we understand the importance of speed, which is why we’re delivering traders a one-click ladder trading interface so they never have to take their eyes off the price action.

Backtesting

One of the risks in using bots for automated futures trading is that if the rules are not fine-tuned to tell the bot precisely what you want it to do, you could be in big trouble. For example, you may set up a bot with a rule that says never buy higher than the last sale price.
However, this only prevents a buy transaction from happening. If you don’t also put a stop-loss rule in place, the market could bottom out, and you’re stuck with losing positions you could otherwise have sold before the dip.
Therefore, most bots allow you to do backtesting. You input the rules you want the bot to apply and ask it to run them against historical data. This way, you can ensure your bot is performing exactly as you expect it to before you run it on any live trading.

Pros of Manual Trading

While there are some pretty compelling arguments for using a trading bot, there are also many good reasons why some of our users prefer to keep the human touch on their trading. These include:

Cost

Automated futures trading programs come with monthly or annual fees. As a general rule, the more sophisticated the program, the higher the fees. The cost of running a bot is going to eat into your profit margins. Manual trading doesn’t come with these additional overheads.
Of course, as Digitex operates on a zero-fee model, our users have the opportunity to offset some of these costs compared to using other exchanges.

The Human Touch

A good trader will have a feel for the markets. Humans can notice when something unexpected is happening and adjust the trading plan accordingly, whereas a bot will just keep executing according to its rules.
Manual trading allows you to decide whether you have made enough or whether you think the market will keep on delivering returns. Bots require these rules to be set in advance.

Flexibility to Use Any Exchange

Not all automated trading software has the necessary integrations to work with all exchanges. In some cases, you can end up paying more for the flexibility of more exchange integrations. For example, the Cryptohopper software works with nine crypto exchanges, but it costs less than Haasbot, which is integrated with many more.

No Need to Learn a New Toolset

It will take time to learn how to use trading automation tools to maximum effect. In the world of trading, time is money. You may prefer to stick with manual trading simply so you can stay focused on the task itself.
If you have some trading experience and feel like you’re ready to start experimenting with automation, hopefully, we’ve helped you understand the benefits and drawbacks. Regardless of whether you decide to use trading bots or rely on your own efforts, remember there’s no substitute for a solid trading strategy and careful execution.
Stay tuned for more insights from our trading experts on the Digitex news blog over the next few days. We’re here to help you raise your trading game! And if you’re not yet on our waitlist for the Digitex exchange public launch, join the one million people who are by signing up on the Digitex Futures homepage.

February 19, 2019
Digitex Futures
Trading

A Closer Look at Automated Futures Trading

Sarah Rothrie
A Closer Look at Automated Futures Trading 6

One of the first questions on our recent survey asked whether you prefer to use bots, manual trades, or both. A massive 80% of our respondents said they exclusively trade manually, whereas only around 5% prefer to do all their trading with bots. The remaining 15% use a combination of both automated futures trading and manual techniques. So, what are the main advantages of both these strategies? Let’s take a closer look.

Bot Trading Isn’t for Beginners

Relying on automated futures trading isn’t recommended for new traders, not least because they’ll miss out on the opportunity to spend time actively learning about markets and trading styles.
Moreover, traders should also have some understanding of the markets to make sure that when they’re using a bot, they can set it up in the best way to maximize returns.
Nearly 70% of our survey participants said they have at least some trading experience, but still, only 20% automate any of their trading activities with bots.
Of course, many experienced traders may prefer to stick with manual trading. However, if any of our readers are considering changing their trading technique from manual to automated (or even vice versa), here we set out the case for both sides.

Pros of Automated Futures Trading with Bots

Bots provide the opportunity for trading without you needing to be actively involved. If you already have some trading experience, and you’re the kind of person who wants to limit screen time and take a more hands-off approach, using a trading bot could be a good bet for you.
Here are some of the advantages of using a bot to automate your trading activities.

Bots Never Sleep

Whereas manual trading relies on you being awake and present, a bot works in the background. Stock traders on a major exchange with fixed opening hours probably don’t need to worry about trading activities during the nighttime hours.
However, 24/7 trading can be a huge advantage in other markets, such as forex, and especially cryptocurrencies, where the markets can move sharply at any moment.
A bot will ensure you can profit from these movements whether you’re asleep, on vacation or just having a duvet day!
This isn’t to say a full “set and forget” strategy is advisable. You should still monitor your positions carefully, even with the most sophisticated bot running your trading.

Elimination of Human Error and Emotion

We humans are fallible creatures, and trading is a high-stakes activity. Fatigue, fear, or over-optimism can lead to rash decisions or mistakes.
A bot won’t accidentally enter an extra zero in an order or deviate from the trading plan because it had a couple of bad trades and fear intervened in the decision-making process.

Speed and Volume

Trading bots can crunch vast amounts of data at the same time, monitoring an array of trading pairs and making orders in the same instant a position is generated. In trades where every second counts, this can have a severe impact on your profits or losses.
At Digitex, we understand the importance of speed, which is why we’re delivering traders a one-click ladder trading interface so they never have to take their eyes off the price action.

Backtesting

One of the risks in using bots for automated futures trading is that if the rules are not fine-tuned to tell the bot precisely what you want it to do, you could be in big trouble. For example, you may set up a bot with a rule that says never buy higher than the last sale price.
However, this only prevents a buy transaction from happening. If you don’t also put a stop-loss rule in place, the market could bottom out, and you’re stuck with losing positions you could otherwise have sold before the dip.
Therefore, most bots allow you to do backtesting. You input the rules you want the bot to apply and ask it to run them against historical data. This way, you can ensure your bot is performing exactly as you expect it to before you run it on any live trading.

Pros of Manual Trading

While there are some pretty compelling arguments for using a trading bot, there are also many good reasons why some of our users prefer to keep the human touch on their trading. These include:

Cost

Automated futures trading programs come with monthly or annual fees. As a general rule, the more sophisticated the program, the higher the fees. The cost of running a bot is going to eat into your profit margins. Manual trading doesn’t come with these additional overheads.
Of course, as Digitex operates on a zero-fee model, our users have the opportunity to offset some of these costs compared to using other exchanges.

The Human Touch

A good trader will have a feel for the markets. Humans can notice when something unexpected is happening and adjust the trading plan accordingly, whereas a bot will just keep executing according to its rules.
Manual trading allows you to decide whether you have made enough or whether you think the market will keep on delivering returns. Bots require these rules to be set in advance.

Flexibility to Use Any Exchange

Not all automated trading software has the necessary integrations to work with all exchanges. In some cases, you can end up paying more for the flexibility of more exchange integrations. For example, the Cryptohopper software works with nine crypto exchanges, but it costs less than Haasbot, which is integrated with many more.

No Need to Learn a New Toolset

It will take time to learn how to use trading automation tools to maximum effect. In the world of trading, time is money. You may prefer to stick with manual trading simply so you can stay focused on the task itself.
If you have some trading experience and feel like you’re ready to start experimenting with automation, hopefully, we’ve helped you understand the benefits and drawbacks. Regardless of whether you decide to use trading bots or rely on your own efforts, remember there’s no substitute for a solid trading strategy and careful execution.
Stay tuned for more insights from our trading experts on the Digitex news blog over the next few days. We’re here to help you raise your trading game! And if you’re not yet on our waitlist for the Digitex exchange public launch, join the one million people who are by signing up on the Digitex Futures homepage.

Latest News

Are Traders Born or Made? 7

Are Traders Born or Made?

Digitex Futures
Trading
• admin
February 18, 2019

We wanted to learn a little more about our community. So we asked you guys your level of trading experience, what strategies and trading tools you use, and, most importantly, whether you think that traders are born or made. Thank you very much to the 1,600+ who took the time to respond to our survey. Here’s what we found out.

In Terms of Trading Experience

As you can see from the chart below, much of our community is quite new to the concept of trading. Some 32.1% responded that they were new to this, with 18.5% very experienced, and almost half, at 47.6%, with some experience.
This is great to know because Digitex is planning to lower the barrier for traders and make trading futures possible for anyone, whether they’re seasoned traders or beginners.
Once the platform launches, and in the run-up before, we’ll be putting out trading videos, how-to style articles, tips from Adam, and other educational material.
So, for those of you who feel like you want or need to know more to trade comfortably, don’t worry. You’ll get up to speed in no time and once you trade with the one-click ladder, you’ll never look back again!

Looking at Trading Technique

When we asked about your trading technique, an overwhelming majority of you prefer to trade manually, with just around 20% of you responding that you either use exclusively bots or both manual and bot trading.
Again, this is really useful information for us, and we’ll be putting out an article tomorrow about bot versus manual trading. This will give you further details about what they are and the pros and cons of both. Some of the most common bots used were Cryptohopper, Gunbot, and CryptoTrader.org.

What’s Your Trading Style?

There are plenty of different trading styles out there and we wanted to glean an idea of yours. While many of you may not have one particular style, it’s clear that day trading won out here, with some swing and scalp trading also among the results.
We’ll be exploring different trading styles in more detail later on this week, so check back here to find out what you don’t know and see what kind of style you think might suit you better.

Which Markets Do You Trade?

The really cool news for us from these responses is that, while cryptocurrencies overwhelmingly take the lion’s share when it comes to trading futures markets, plenty of you also trade Forex, stocks, and other markets.
This means that when we added additional traditional futures markets to the exchange, there will already be some experience and plenty of interest. Remember, we’ll be providing plenty of educational material to fill in any gaps. That includes the low-down on traditional futures markets as well.

When it came to exchanges, Binance, HitBTC, Mercatox, and Coinbase took the top four slots, with some other popular exchanges among our community including Kucoin, Bitstamp, and Bitfinex.

Are Traders Born or Made?

To really see the results of this, check out our Twitter poll below. An overwhelming 85% of you believe that traders are made. And we couldn’t agree more!

While a trader must undoubtedly learn to manage their emotions and not succumb to FOMO and FUD, with patience and practice, you can learn to become a successful trader.
This is what we plan at Digitex. To help as many of you become confident traders who can make a living from trading on our exchange. We want to provide financial freedom, success, and to produce a happy community of traders that grows and grows, as the token price rises.
Many thanks for staying with us, we can’t wait to see you on the live exchange!
PS – We’ll be contacting our winners this week who took part in our survey to receive the official Digitex Futures hat. Cheers!

February 18, 2019
Digitex Futures
Trading

Are Traders Born or Made?

admin
Are Traders Born or Made? 8

We wanted to learn a little more about our community. So we asked you guys your level of trading experience, what strategies and trading tools you use, and, most importantly, whether you think that traders are born or made. Thank you very much to the 1,600+ who took the time to respond to our survey. Here’s what we found out.

In Terms of Trading Experience

As you can see from the chart below, much of our community is quite new to the concept of trading. Some 32.1% responded that they were new to this, with 18.5% very experienced, and almost half, at 47.6%, with some experience.
This is great to know because Digitex is planning to lower the barrier for traders and make trading futures possible for anyone, whether they’re seasoned traders or beginners.
Once the platform launches, and in the run-up before, we’ll be putting out trading videos, how-to style articles, tips from Adam, and other educational material.
So, for those of you who feel like you want or need to know more to trade comfortably, don’t worry. You’ll get up to speed in no time and once you trade with the one-click ladder, you’ll never look back again!

Looking at Trading Technique

When we asked about your trading technique, an overwhelming majority of you prefer to trade manually, with just around 20% of you responding that you either use exclusively bots or both manual and bot trading.
Again, this is really useful information for us, and we’ll be putting out an article tomorrow about bot versus manual trading. This will give you further details about what they are and the pros and cons of both. Some of the most common bots used were Cryptohopper, Gunbot, and CryptoTrader.org.

What’s Your Trading Style?

There are plenty of different trading styles out there and we wanted to glean an idea of yours. While many of you may not have one particular style, it’s clear that day trading won out here, with some swing and scalp trading also among the results.
We’ll be exploring different trading styles in more detail later on this week, so check back here to find out what you don’t know and see what kind of style you think might suit you better.

Which Markets Do You Trade?

The really cool news for us from these responses is that, while cryptocurrencies overwhelmingly take the lion’s share when it comes to trading futures markets, plenty of you also trade Forex, stocks, and other markets.
This means that when we added additional traditional futures markets to the exchange, there will already be some experience and plenty of interest. Remember, we’ll be providing plenty of educational material to fill in any gaps. That includes the low-down on traditional futures markets as well.

When it came to exchanges, Binance, HitBTC, Mercatox, and Coinbase took the top four slots, with some other popular exchanges among our community including Kucoin, Bitstamp, and Bitfinex.

Are Traders Born or Made?

To really see the results of this, check out our Twitter poll below. An overwhelming 85% of you believe that traders are made. And we couldn’t agree more!

While a trader must undoubtedly learn to manage their emotions and not succumb to FOMO and FUD, with patience and practice, you can learn to become a successful trader.
This is what we plan at Digitex. To help as many of you become confident traders who can make a living from trading on our exchange. We want to provide financial freedom, success, and to produce a happy community of traders that grows and grows, as the token price rises.
Many thanks for staying with us, we can’t wait to see you on the live exchange!
PS – We’ll be contacting our winners this week who took part in our survey to receive the official Digitex Futures hat. Cheers!

Latest News