In this study, the performance of Trendbot over varying portfolio rebalance frequencies was investigated.

 

Study Setup

 

Data

Date: May 13th, 2019 to March 25th 2021  (approx 22mo)

Coins: USDT, BTC, ETH, BNB, XRP, EOS, LTC, ADA, LINK, TRX, NEO 

Interval: 1hr

Source: Binance

 

Backtest Combinations

 

For the 2hr - 72hr rebalance frequencies, there were multiple backtests starting at different times of the day. 

 

Table 1.0 Number of backtests based on rebalance frequency.

 

For example, one 2hr rebalance frequency test rebalanced at 1am, 3am, 5am… While the second combination rebalanced at 2am, 4am, 6am, etc. 

 

Final Returns (before fees)

 

Figure 1. Trendbot returns before trading fees, based on rebalance frequencies. 

 

There appears to be an optimal rebalance frequency between 4hr - 12hr.

 

Trading Fees

 

Binance Trading Costs

 

Trading fees on Binance are 0.075% (assuming paying in BNB) and slippage of approximately 0.075%. For a total cost of 0.15% of the amount being traded.

 

Figure 2. Trading fees based on rebalance frequency.

 

As expected, more frequent rebalances suffered from higher trading costs. 

 

Tradeium Fees

 

Management fees on Tradeium are 0% for users who created Binance.com accounts after May 2020. Performance fees are 3% for the Volume30 portfolio (after full dTRM stake, 50% off) which is the cheapest portfolio required for this backtest.

 

Figure 3. Average returns across all backtests before and after Tradeium fees.

 

There appears to be a negligible effect of Tradeium fees on the performance of Trendbot. 

 

Final Returns (after fees)

Final Returns

Figure 4. Trendbot returns after trading fees based on rebalance frequencies.

 

Due to the effects of higher trading fees on more frequent rebalances, the optimal range appears to have shifted to 6hrs - 24hrs

Variation of Returns

Figure 5. Variation of Trendbot Returns amongst backtest combinations based on rebalance frequency. 

 

There were only 1-2 backtest combinations for rebalance frequencies 1hr, 2hr, and 4hr, so the variation of returns were not included for these backtests. 

 

It appears there is a larger variation of returns for less frequent rebalance frequencies. 

 

Selecting a Rebalance Frequency

 

We want to choose a rebalance frequency with a high return after fees, but also with a smaller variation of returns across backtest combinations. 

 

Although 12hr and 24hr rebalance frequencies have a slightly higher return than 6hrs in the backtests above, they also have a wider variation of returns. 

 

There appears to be minimal evidence to suggest changing the rebalance frequency from the current 6hr frequency given the high rate of return and low variation.

 

Future Rebalance Frequency Tests

 

Further tests could be done on the optimal rebalance frequency of more volatile coins and during bear markets. 

 

By: Jay (Javis) Lockhart

Founder at Tradeium