By Jason Victor
February 4, 2020
Routefire is excited to announce its first major modification to the RFXW trading algorithm — the Trailing Limit Flex setting!
Picture this. You need to sell 100 BTC and the market is volatile, even bearish.
An algorithmic order is clearly the best way to handle the situation. Volatile markets call for cool, systematic execution and quick reaction times — best fit for a computer, to be sure.
But we humans seem to have an instinct to control our robots, so we don't just want to fire off 100 BTC to RFXW with risk settings ABC. What if the best price for those risk settings is still... bad? We want some quantitative certainty on the outcome.
Of course, limit prices can be somewhat helpful. If nothing else, they give us peace of mind — a lower bound that can be established, one below which we prefer to hodl over sell.
But what if we want to be more aggressive than just setting a "lower bound"? This is where the Trailing Limit Flex comes in. The idea is simple: a limit price is set that is initially "better" than the current best quote. If the market moves downward over time, the limit price is moved down accordingly.
This allows the trader to be aggressive and even take a view on the market while still ensuring that the limit on the order remains "reasonable" relative to the current market price.
The "Flex" part of the Trailing Limit Flex is that the Flex can be set anywhere from 0% to 100%. At 100%, a 5% move in the market results in a 5% change in the limit price; at 50%, it results in a 2.5% change; and at 0%, there is no change.
While there are many uses for a tool like the Trailing Limit Flex, the most common one is trading into volatile or adverse market conditions. Deciding whether to sell at current levels, average out, or hold and wait when the market has been moving against you is the hardest decision a trader ever makes. I believe the most important thing the TLF feature does is enable the trader to establish price targets as well as degree of flexibility afforded to the algorithms.
Try it out! Using the RFXW algorithm, set the Trailing Limit Flex setting to 100% (or whichever intermediate value you choose) and put in a limit price that is better than what's currently available. If the market moves far enough against you, you'll notice the limit price is internally adjusted and orders will fill at levels outside the bounds initially established.
If you have any questions or feedback on the TLF feature, please feel free to reach out to us at email@example.com.