The system calculates the balance ratio of two crypto assets in the portfolio based on the investor's initial total funds (actual fund plus virtual fund), and places orders based on the configured threshold and the balance ratio. When the price change causes the ratio of a currency to exceed its threshold, a limit order will be filled to drive the ratios back to the preset level, thus achieving automatic rebalancing.
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Example: An investor wants to construct a portfolio of equal-weighted BTC and USDT, i.e., balance ratio = 50%: 50%, but he can only invest in 1 BTC and 30,000 USDT. Assuming the current BTC/USDT index is 50,000, the investor can increase the USDT virtual amount to 20,000 to create a balanced portfolio. The virtual amount helps investors achieve the expected portfolio balance ratio, but it is not the leverage and thus will not bring in liquidation risk.
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If the investor sets the number of single side orders set to 2 and the threshold set to 1%, the system automatically places two orders to buy BTC and two orders to sell BTC. If BTC price rises to make the portfolio ratio 51%: 49%, the pre-placed BTC sell orders will be filled, and the asset ratios will return to 50%:50%. The system will cancel all unfilled orders before placing another set of buy and sell orders based on the current portfolio.
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Advantages of RMM strategy: