ATS Strategy & Risk Management
There are two main types of ATS strategies: Trend and Reversal. The choice of which strategy to use should be mainly based on the market volatility you expect.
A “Trend” strategy is generally more successful with less volatile assets. For less volatile assets, there is generally a higher statistical probability that the price of the asset will continue in the same trend. The “Trend” strategy will automatically buy you a Call (UP) option when the asset reaches a new higher level and will buy you a Put (DOWN) option when the asset reaches a new lower point.
A “Reversal” strategy is generally more successful with more volatile assets. For an asset that is more volatile, there is a higher statistical probability that the price of the asset will reverse the trend. The “Reversal” strategy will automatically buy a Put (DOWN) option when the asset reaches a new high point and will buy you a Call (UP) option when the asset reaches a new low point.
The ATS offers you risk management features with the “Take Profit” and “Stop Loss” features. These features let you set your desired daily profit or limit your losses. Once the ATS reaches any of these amounts, it will pause itself for the rest of that day and resume the following day, thus not risking any more funds.
Please note: The algorithm used to determine the daily profit or loss does not include trading fees as part of its calculation.
How to use the Risk Management features:
These features are designed to give our traders the peace of mind that even when they are offline, the ATS will manage various pre-defined scenarios.In order to make these features (Take profit and Stop loss) work optimally, it is important to bear in mind these key issues:
1. Both features will stop the ATS for that day. The ATS will continue its operation the following day (after midnight UTC), and will begin a new calculation for the daily profit and loss. If you want the ATS to stop permanently, you will need to stop it manually.
2. Both features take into consideration only trades taken by the ATS. If you also trade manually, your P&L are not added to the calculation of the profit or loss for the ATS. The calculation is done after each expiration.
3. The ATS will pause itself once one of the conditions is reached. At that moment, it will also cancel all pending (unmatched) orders that it created. But, if there are open positions still waiting for expiration, these cannot be cancelled. These positions may ultimately affect the final P&L of that day. At the end of the trading day, the profit or loss may be higher or lower than what you set up. This depends on the amount of options you chose for the ATS to trade on, and the amount of actual trades that took place.
4. Trade fees are not taken into consideration for the profit or loss calculations. Profit or loss, in this calculation, is only the ratio of profitable and unprofitable traded contracts. For example; if you set up the ATS to stop after a profit of $10 (price of one contract), the ATS will pause itself once the amount of profitable contracts traded, minus the amount of unprofitable contracts traded, is 1 or higher.
Uptrend: 100-(100/1-RS) RS uptrend
Downtrend: 100+(100/1-RS) RS downtrend
RS uptrend = Sum of Gains over the past 400 periods RS downtrend = Sum of Losses over the past 400 periods
Reversal down: 100-(100/1-RS) RS reverse down
Reversal up: 100+(100/1-RS) RS reverse up
RS reverse down = Sum of Gains over the past 400 periods RS reverse up = Sum of Losses over the past 400 periods