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Gate.io > Help Center > Smart Quant > Quantitative Strategy Guidance
More article in the group
Guide to Smart Rebalance
Gate.io
Updated at:105 days 19 hours ago
lv

1. What is smart rebalance?

Smart rebalance is a strategy that rebalances the position portfolio to restore its initially set proportions. When the proportion of a single asset in the position portfolio breaches the set rebalancing threshold and the set periodical rebalancing point comes, the assets whose proportion has increased by a percentage higher than the rebalancing threshold will be sold to buy assets whose proportion has decreased, to restore the position portfolio to its initial setting. This strategy ensures long-term steady returns by giving up on the fluctuating profits from a single asset and constantly rebalancing the position portfolio.

Example:

A position portfolio of a smart rebalance strategy consists of three digital assets: GT, BTC and ETH, whose shares are 40%, 30%, 30% respectively. The rebalancing frequency is set at 1 hour and the rebalancing threshold is 5%. As the price of each digital asset changes, the proportion of each asset in the portfolio changes along. Say within 1 hour, the price of BTC rises greatly, making the proportion of BTC in the portfolio increase to 40%; ETH's price rises only slightly, making its proportion decrease to 20%; GT's price keeps going up moderately so its proportion remains unchanged. The proportion change of BTC and ETH both exceed the set rebalancing threshold so when the periodical rebalancing point comes, the smart rebalance strategy will sell BTC to buy ETH to restore the initial proportion of each asset.

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2. Why do investors need smart rebalance?

Smart rebalance is most fit for extremely volatile markets. Through constant position rebalancing, smart rebalance strategies keep the proportion change of digital assets in reasonable small ranges, minimizing the influences from fluctuations on the markets.

When one digital asset's price rises rapidly, the gains are distributed to other digital assets in the portfolio by rebalancing the position, so that the position's profit will increase relatively steadily. When one digital asset's price falls dramatically, the loss in the position will be less than the loss from that digital asset. Smart rebalance strategies aims for long-term steady returns.

3. Which type of investors should consider using smart rebalance strategies?

For investors who do not have the time and energy to research the markets, it can be very difficult to accurately determine the timing of transactions, let alone transactions of multiple currencies. Therefore, smart rebalance is suitable for investors who plan to make long-term investments in multiple currencies or arbitrage in volatile markets and at the same time, want to save the time for tracking and eliminate the hassle of trading manually.

4. Where to set up a smart rebalance strategy?

Click on "Copy Trading" on the navigation bar and go to "Create A New Strategy"-"Strategies Templates"-(Smart Rebalance)"Create Strategy". Then add coins, set up the parameters and click on "Create".

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5.Parameters in "Smart Rebalance"

Add Coin: Add the digital assets you want to hold in the position so that they can be smartly rebalanced. Please add at least 2 digital assets. A maximum of 10 digital assets can be added to create a position portfolio.

Equal distribution: Click on "Equal Distribution" to set the shares of all digital assets added in the portfolio equal, as shown in the screenshot below. (Note: The share of each digital asset can be set manually according to your preference, but the shares must add up to 100%.)

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Total investment: Must be greater than or equal to the minimum investment amount, which is linked to the number of digital assets added to the portfolio.

"Allow Using Tokens You Already Have": When enabled, the strategy will be allowed to use the digital assets that have been added to the position portfolio in your spot account for investments.

Rebalancing frequency: The proportion of each digital asset in the portfolio changes with its price within a rebalancing period. When the rebalancing point comes, the strategy will rebalance the position portfolio to restore its set proportions.

Rebalancing threshold: When the periodical rebalancing point comes and the proportion change of a single asset in the portfolio breaches the rebalancing threshold, rebalancing will be triggered. If the rebalancing threshold is not set, the position portfolio gets rebalanced according to the rebalancing frequency alone.

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