Relative Order Size

15.0 Relative Order Size

15.1 Instead of manually defining an order size, this method makes the order sizes a percentage of the balance of the asset to be allocated. For a buy order it takes a percentage of the available Base asset, and for a sell order it takes a percentage of the available Quote asset.

15.2 This method has two main advantages, and a small disadvantage: 15.2.1 It has a stabilizing effect on your assets. Over a few trades you should have a similar amount of both assets (in value, not amount). Even if you start completely one-sided, it will quickly put you in balance. Balanced order sizes also make the most profit. This makes the strategy cope somehow with trends; never selling out an asset, and always trying to rebalance them.

15.2.2 It will automatically reinvest profits, increasing your actual order sizes and giving you the powerful effect of compounding profits.

15.2.3 You will never have to be afraid of running out of either asset. It will not happen.

15.2.4 If the price trends enough to fill several orders on one side, and then returns, the bot will make a loss. It will sell bigger amounts at lower prices and smaller amounts at higher prices. When it then reverses, the strategy will buy more at higher prices and less at lower prices.

15.3 Order size has an effect on Center Price Offset based on asset balances. Because the offset depends on how much your assets are in imbalance (actually asset imbalance affects how much of the allowed offset is used), order size affects it. With a 50% Relative Order Size, the imbalance would change very significantly with one filled order, and cause an oscillation that decreases your effective spread to 50% of your nominal spread or even less.

15.4 Your profits are in direct proportion to your order size. But how well the strategy can deal with trends is reversely correlated to order size. The smaller the order size, the better it handles trends. In general, I think it's best to start with a small order size, probably 1 - 5 %, and see how it copes when price trends. From there one can gradually increase it. Also, the smaller the spread, the smaller should order size also be.