Fusion Gridbot

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Contents

Fusion Gridbot Client Information Document

DRAFT - Last Updated: Nov 27 2024

1. Bot Strategy

Fusion Gridbot Overview

The Fusion Gridbot is a hybrid trading strategy that combines elements of market making and grid bot techniques, enhanced with smart exits and an adaptive trading range. The bot is designed to capitalize on market movements by placing a series of limit orders at predetermined intervals, allowing for systematic buying and selling within a defined price range.

Exclusive Trading of SOL

  • Focus on SOL: The bot exclusively trades SOL (Solana) due to its optimal risk-to-reward ratio observed in our backtesting. SOL has consistently provided performance metrics that align well with the Fusion Gridbot's trading parameters.

Trading Philosophy

  • Volatility Focus: We chose SOL not for directional speculation, but specifically for its volatility characteristics.
  • Professional Approach:
    • Unlike traditional investors hoping for upswings, we operate more like professional gamblers who rely on mathematical edge rather than luck
    • We focus on the consistent "grind" of small profits rather than large directional moves
    • Our strategy is designed to survive and profit through both favorable and unfavorable market conditions
  • Backtesting Methodology:
    • We deliberately tested our strategy starting from historical price peaks that never recovered
    • Even in worst-case scenarios, the strategy demonstrated significant account growth over time
  • Profit Mining vs Investing:
    • We are not investors waiting for price appreciation
    • We are "profit miners" who systematically extract value from market volatility
    • Our success relies on careful risk management and consistent execution rather than market direction

Trading Mechanics

  • Configuration Value: The bot operates with a 3x configuration value, meaning it uses up to three times the account balance for trading activities, divided across multiple grid levels.
  • Grid Structure: The total trading range covers a 50% span of the SOL price, divided into 0.25% grid steps.
  • Initial Buy and Grid Completion:
    • Initial Purchase: Each grid starts with an initial purchase of 10% of the allocated capital.
    • Grid Completion: A grid completes when either:
      • The price action rises 5% above the initial purchase price, or
      • (Optional) When configured, the bot can trigger an early exit if accumulated grid trading profits offset a lower price, making the overall position profitable despite being below the initial purchase price.
  • Cycle Continuation: Upon grid completion, the bot initiates a new grid with an updated range, ensuring continuous trading activity.

2. Risk Parameters

Risk Management Techniques

  • Backtesting and Early Exits: We employ rigorous backtesting to optimize the bot's settings and utilize early exit strategies to mitigate potential losses.
  • Stop-Loss Orders:
    • Dynamic Grid Exit: The bot features a configurable dynamic exit mechanism that can close positions based on net position loss thresholds.
    • Manual Override: Our team can manually close positions and halt trading at any time if market conditions warrant intervention.
  • Manual Hedging During Volatility:
    • Protective Measure: During periods of extreme market volatility, we may manually place a hedge on a correlated asset. This serves as a last-resort effort to safeguard the account against significant losses.
    • Profit Enhancement: When volatility is anticipated, manual hedging can also enhance profits.
  • Manual Intervention Limitations: Despite best efforts, manual interventions may not always prevent losses.

Trader Intervention

  • Professional Oversight: A trader on our team actively monitors all accounts and may execute direct trades simultaneously across all accounts, unless explicitly requested otherwise by the client.
  • Trade Parameters:
    • All direct trades include a stop-loss and take-profit order.
    • Trades adhere to a minimum risk-to-reward ratio of 4:1.
  • Performance Motivation: This structure incentivizes our trader to maintain a win rate over 25%, aiming to generate profits for both the clients and the operation.

Drawdown Protocol

  • Manual Monitoring: While there is no automated maximum drawdown limit set, our trader is tasked with initiating a hedge before a 20% drawdown occurs.
  • Process Execution: This is a manual process, emphasizing the importance of active monitoring during market downturns.

3. Methods

Algorithm Simplicity

  • Configuration-Based Operations: The bot operates on predefined configurations and straightforward conditional statements (if-then logic).
  • No Complex Algorithms: There are no advanced algorithms or decision-making processes; the bot follows the settings determined through backtesting.

Backtesting

  • Optimization Process: Regular manual reviews of backtesting results are conducted to fine-tune the bot's settings for optimal performance.

Continuous Trading

  • Always Active: The bot trades continuously, placing limit orders as per the configuration, except in the following circumstances:
    • Manual intervention to close positions and halt trading
    • Exchange downtime or technical issues
    • Server maintenance or unexpected system failures
    • Non-payment of fees at the agreed 30-day interval
    • Other unforeseen circumstances beyond our control

4. Use and Access of Funds

API Key Management

  • Encryption and Security: Clients' API keys are encrypted and stored on private servers, each dedicated per client.
  • Firewall Protection: Servers are protected behind a firewall, with access limited exclusively to administrators via a secure VPN.
  • Trading Focus: Our systems and code are strictly limited to trading operations only.

No Custody of Funds

  • Client Control: We do not take custody of clients' cryptocurrency assets. All trading activities are conducted via the API on the clients' own accounts.
  • Decentralized Exchange: All operations are performed on a decentralized exchange (dYdX v4), emphasizing transparency and client autonomy.

5. Impact of Withdrawals

Consultation Requirement

  • Monthly Consultations: Clients are encouraged to schedule a one-on-one consultation prior to making withdrawals, typically conducted on a monthly basis.
  • Risk of Uninformed Withdrawals: Withdrawals made without consultation may disrupt the bot's trading strategy and increase the client's risk exposure, potentially leading to severe losses or complete account liquidation.

Minimum Balance Requirement

  • $10,000 Minimum Balance: A minimum balance of $10,000 is required to maintain optimal bot performance.
  • Exchange Limitations: dYdX imposes a limit of 10 on-chain orders for accounts below $10,000, which hinders the bot's ability to operate effectively.

6. Management Fee Clarity

Fee Structure

  • Profit Sharing: We operate on a 20% profit-sharing model. This fee applies to profits exceeding the client's deposited amount.
  • Baseline Adjustment: After each withdrawal, the new account balance becomes the baseline for future profit-sharing calculations.

Monthly Maintenance Fee

  • Amount and Payment Methods: A monthly maintenance fee of $650 is required. This can be paid using DYDX tokens, USDC on the dYdX chain, or a combination of both.
  • Utilization of Rewards: Many clients utilize the rewards earned on the dYdX platform to cover this fee, minimizing out-of-pocket expenses.

Payment Schedule

  • Due Dates: Both maintenance fees and profit-sharing payments are due either 30 days from the bot's activation date or on the first of the month, depending on the client's preference.
  • Withdrawal-Triggered Payments: Any withdrawal of capital automatically triggers the calculation and payment of profit-sharing fees, even if outside the regular payment schedule.
  • Client-Initiated Payments: All fees and profit-sharing payments must be manually initiated by the client. We do not have the ability to automatically deduct any payments from client accounts.
  • Payment Process:
    1. We calculate and send the balance due to the client
    2. Client initiates payment to our designated wallet
    3. Optional consultation calls can be scheduled to review performance and discuss any questions

7. Risk Tolerance Settings

Standardized Risk Approach

  • Uniform Risk Management: All clients' accounts operate under the same risk management protocols and bot settings.
  • Custom Risk Settings: While we maintain standardized settings for optimal performance, modifications to leverage or risk parameters may be considered upon explicit client request. However:
    • Changes from the standard 3x configuration are strongly discouraged unless accompanied by active hedge positions
    • Any customization may impact the bot's proven performance metrics
    • Custom settings require additional monitoring and risk assessment

Risk Management Practices

  • Emphasis on Safety: The strategies employed aim to balance potential profits with prudent risk management, utilizing backtesting and manual interventions as necessary.

8. Reporting and Updates

Live Reporting Access

  • Web Application: Clients receive read-only access to a web application where they can monitor their account's performance in real-time.
  • Secure Access: Each client can create their own unique login credentials (username and password) to ensure data privacy.

Monthly Updates

  • Virtual Meetings: Clients may schedule monthly updates via Zoom or Google Meet at their discretion.
  • Flexible Communication: We are available for additional consultations or updates as requested by the client. Additional consultation sessions beyond the monthly update may incur a fee.

9. Accessibility to Advice

Communication Channels

  • Direct Contact:
    • Telegram: For urgent matters and quick questions
    • Scheduled Meetings: Virtual meetings can be arranged through our private scheduling system (provided during onboarding)
    • Emergency Support: Available for critical issues outside regular hours
  • Responsive Support: While we strive to be responsive, our primary focus is on maintaining and improving the trading systems. Scheduled communications help us maintain optimal service quality for all clients.

10. Resolving Issues

Issue Resolution Process

  • Open Dialogue: Any concerns or issues are to be addressed in a civil and timely manner through direct communication.
  • Best Efforts Basis:
    • No Guarantees: Services are provided on a best-efforts basis without performance guarantees.
    • Experimental Nature: Clients are reminded that this is an experimental initiative among friends, not a formal financial service.

Acknowledgment of Risks

  • Investment Caution: Clients are advised to invest only capital they can afford to lose.
  • Potential for Losses: We emphasize the possibility of significant losses, including total loss of the invested capital.

11. Responsibilities

Our Responsibilities

  • Service Provision: We are responsible for developing, hosting, and maintaining the trading bot and servers.
  • Account Management: We manage trading activities as per the agreed strategies and monitor market conditions for manual interventions.
  • Treating Accounts as Our Own: We endeavor to treat every account with the utmost care and diligence, as if it were our own.

Client Responsibilities

  • Investment Decisions: Clients should ensure they are comfortable with the risks involved and only invest appropriate amounts (e.g., roughly 5% of their available capital).
  • Profit Withdrawals: Clients are encouraged to regularly take profits as part of prudent financial management.
  • Communication: Clients should maintain open communication, especially regarding withdrawals or concerns.

12. Risk Disclosures

Market Risks

  • Volatility: Cryptocurrency markets are highly volatile, which can lead to significant gains or losses.
  • No Guaranteed Returns: Past performance is not indicative of future results.
  • Possibility of Total Loss: There is a real possibility of losing the entire investment due to market conditions.

Technical Risks

  • System Failures: There is a risk of technical failures, system outages, or cyber threats that could impact trading activities.
  • Operational Risks: Despite redundant systems and monitoring:
    • Network interruptions may affect order execution
    • Exchange downtime can impact trading activities
    • Server maintenance or issues could temporarily affect bot operations
    • While our custom dashboard and trading interface can be safely accessed globally, direct access to dYdX's website may be restricted in certain regions
    • Account access while traveling internationally may be restricted in certain jurisdictions, potentially leading to account suspension if proper access protocols are not followed

Regulatory Risks

  • Decentralized Platform: Operating on a decentralized exchange may involve regulatory uncertainties.
  • Compliance: Clients are responsible for understanding and complying with any applicable laws or regulations.

13. Compensation Details

No Refunds Policy

  • Services Rendered: Fees collected cover operational expenses and services rendered; therefore, refunds are not provided.
  • Expense Transparency: Clients are informed of how fees are used to maintain and improve services.

14. Security Measures

Data Protection

  • Encryption: All client data, including API keys, are encrypted to prevent unauthorized access.
  • Privacy Commitment: We are committed to protecting client privacy and data security.

System Security

  • Secure Servers: Servers are secured with firewalls and accessible only via secure admin VPN.
  • Regular Audits: We perform regular checks to ensure the integrity and security of our systems.

15. Exit Clauses

Termination Process

  • Client Initiated: Clients may terminate the arrangement at any time, ideally providing prior notice to manage ongoing trading activities.
  • Trading Adjustments: Upon termination, we will close any open positions and cease trading activities on the client's account.

Final Settlements

  • Profit Sharing: Final profit-sharing calculations will be made upon termination, based on the account's performance up to that point.
  • Fee Settlement: Any outstanding fees will be settled as part of the termination process.

16. Safeguards and Best Practices

Recommendations

  • Maintain Minimum Balance: Clients are advised to keep the minimum required balance to ensure optimal bot performance.
  • Regular Consultations: Engaging in regular consultations helps align trading activities with the client's expectations.

Experimental Nature

  • Friendship and Collaboration: This initiative is a collaborative experiment among friends, emphasizing mutual trust and understanding.
  • No Professional Services: We are not operating as a professional financial firm; participation is based on shared interest and experimentation.
  • Continuous Evolution:
    • We acknowledge that neither our systems nor strategies are perfect
    • Losses and unexpected challenges are part of the journey
    • We are committed to learning from every setback and market curve ball
    • Our focus is on continuous improvement, both in risk management and profit optimization
    • Each challenge helps us build more robust and effective trading systems

17. Additional Information

No Insurance or Legal Jurisdiction

  • Decentralized Exchange: Due to the decentralized nature of the exchange, there is no specific legal jurisdiction governing our operations.
  • No Insurance Coverage: There is no insurance coverage for trading activities or potential losses.

Non-Business Entity

  • Not a Formal Business: This is not a commercial enterprise but an experiment conducted among friends.
  • Shared Risk and Reward: Participants share in both the potential risks and rewards inherent in the venture.

Conclusion

We aim to provide transparency and clarity regarding our operations, strategies, and the risks involved. Our goal is to collaborate in a manner that is both enjoyable and potentially profitable, while fully acknowledging the experimental and high-risk nature of cryptocurrency trading.

Acknowledgment

By participating, clients acknowledge that they have read and understood the information provided, are aware of the risks involved, and agree to the terms outlined in this document.

Contact Information

For any questions or to schedule consultations, please reach out via:

  • Telegram: As originally provided in the introduction meeting.
  • Email: As originally provided in the introduction meeting.
  • Virtual Meetings: Available upon request via Zoom or Google Meet.

Disclaimer

This document is intended to provide information and is not a legally binding contract. Clients should consider seeking independent advice if they have concerns about the risks involved.



* Please review this document carefully and let us know if you have any questions or need further clarification on any of the sections.

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