dYdX Strategy Design Example: Random Trading Strategy

Introduction to dYdX Strategy Design

With growing demand from users, the FMZ platform now supports dYdX, a decentralized exchange. Traders can now mine liquidity on dYdX using their strategies. This tutorial walks through designing a random trading strategy—not for profit but for learning purposes. Let's explore how to design a strategy that makes random trades, focusing on the educational aspect rather than performance metrics.

Random Trading Strategy Design

Core Concept

The strategy involves random trade decisions without relying on indicators or price analysis. Here’s the breakdown:

1. Trade Conditions:

   • Long Entry: Random number between 1–50.
   • Short Entry: Random number between 51–100.

2. Exit Rules:

   • Fixed take-profit and stop-loss levels to define "win" or "loss" conditions.
   • Note: Trading costs (slippage, fees) may reduce the win rate below 50%.

3. Position Sizing:

   • Start with minimal trade size.
   • Increase trade size multiplicatively after losses (e.g., martingale-like approach).

Strategy Code

var openPrice = 0
var ratio = 1
var totalEq = null
var nowEq = null

function cancelAll() {
  while (1) {
    var orders = _C(exchange.GetOrders)
    if (orders.length == 0) break
    for (var i = 0; i < orders.length; i++) {
      exchange.CancelOrder(orders[i].Id, orders[i])
      Sleep(500)
    }
    Sleep(500)
  }
}

function main() {
  if (isReset) {
    _G(null)
    LogReset(1)
    LogProfitReset()
    LogVacuum()
    Log("Reset all data", "#FF0000")
  }
  exchange.SetContractType(ct)
  var initPos = _C(exchange.GetPosition)
  if (initPos.length != 0) throw "Initial positions detected!"

  exchange.SetPrecision(pricePrecision, amountPrecision)
  Log("Precision set:", pricePrecision, amountPrecision)

  // ... (rest of the code)
}

Key Parameters

• Name: "Guess High/Low (dYdX Edition)".
• Stop-Loss/Profit: User-defined thresholds.
• Slide Price: Adjust for order execution.

Backtesting Notes

• Conducted on Binance Futures for bug-checking (not performance validation).
• Caution: Avoid overfitting—results may not reflect live trading.

👉 Explore advanced trading strategies

Live Trading Disclaimer

Warning: This strategy is for educational purposes only. Do not use it in live trading.

FAQ

Q1: Can this strategy be profitable?
A: Unlikely—random trading typically has negative expectancy due to costs.

Q2: Why increase trade size after losses?
A: It’s a high-risk approach akin to martingale, which can compound losses.

Q3: How to adjust stop-loss/take-profit?
A: Test different values to balance win rate and risk-reward ratio.

Q4: Is slippage accounted for?
A: Yes, via the slidePrice parameter in orders.

Final Notes

• Focus on learning strategy design, not profitability.
• Always validate strategies in simulated environments before live use.

👉 Learn more about decentralized trading