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Algoine 101 9 months ago

Disadvantages of Copy Trade and Our Solution

Disadvantages of Copy Trading

Through years of experience, we have learned that traditional "Copy-Trade" is not suitable for algorithmic trading. In copy trading, there are master and slave accounts, and all slave accounts are directly dependent on the master account. Whatever the master buys or sells, all slaves follow suit. While this may seem appealing at first, its flaws become apparent as you delve deeper. Unlike other copy trading platforms, in Algoine, our bots operate independently of any account's actions, adhering to strategies created by professional traders, starting from scratch.

Disadvantages of Copy-Trade

  • Slave accounts are dependent on the status of the master account.
  • If a slave account starts a bot when the master account's entire budget is tied up in open positions, the slave account has to wait for the master account to close a position before opening a new one.
  • A newly started slave account may open only short positions if the master account is trying to balance its majority long positions by opening only short positions.
  • This results in a system that lacks its own mathematical calculations and decision-making mechanism.
  • Slippage can occur, where the price at which a trade is executed may differ from the expected price due to delays in copying the master trader's actions.
  • In brief, the slave account may not be able to catch the entry and exit points of the master account.
  • When all slave accounts attempt to take action at the same price point, it may result in unwanted trades at unfavorable prices due to insufficient liquidity at that price.

Example Scenario:

  1. Master account bought an asset at $1500.
  2. Slave account detects the action and
    1. Tries to buy at $1500 but it fails because the price has moved up to 1501 and keeps moving up. Master account sold it at $1600. You couldn’t catch the opportunity.
    2. Opened a market order. Then the price moved rapidly, and you opened the same position at $1515. The master account closed the position at $1515, and made a profit. Your bot opens a market sell, but you made a loss instead of profit (estimate the exchange fees, too).

Algoine's Solution and Advantages

  • Algoine's bots operate independently, not relying on the actions of a master account, providing greater flexibility and control.
  • Algoine's bots are equipped with their own mathematical calculations and decision-making mechanisms, reducing the risk of unwanted trades.
  • In contrast to traditional copy trading, Algoine minimizes the risk of unwanted trades at unfavorable prices due to insufficient liquidity.

In summary, in Algoine's system, even if the strategy owner does not run the bot, or even if they have deleted their API key, each new tenant starts from scratch and only adheres to the strategy. It is not dependent on the strategy owner's API or their trades.

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