In the world of algorithmic trading bots and platforms, the terminology public and private trading strategy is frequently used. Public and private trading strategies refer to the level of visibility and accessibility of a particular trading strategy used in the market. We take a look at the different properties of these types of strategies and help you decide which best suits your trading needs.
What is a public trading strategy?
A public trading strategy is one that is widely available and can be easily replicated by other traders if the algorithm is publicly displayed. This type of strategy is often shared on social media platforms, trading forums and trading platforms.
Public strategies in the context of algorithmic trading, is all to do with the visibility and accessibility of the trading strategy. This means most people are able to participate in the trading algorithm by depositing funds or assets into the fund, vault, pool or other platforms. In some cases the trading algorithm code itself is displayed or a summary of what the strategy does is shown, for people to then decide whether or not they want to participate in the algorithm.
Public trading strategies are beneficial for traders who are new to the market and looking for a proven strategy to follow. They also offer an opportunity for experienced traders to evaluate the performance of different strategies.
What is a private trading strategy?
On the other hand, private trading strategies are not widely available and are typically only shared among a small group of traders or funds. These strategies are often kept secret and are not shared on public platforms. Private trading strategies are often used by professional traders and institutions who have a significant amount of capital to invest and want to maintain an edge over the competition or keep it private so more traders do not get involved, thus reducing the risk of market fluctuation specific to the strategy.
Public vs private
In the context of algorithmic trading, public strategies are often based on technical indicators, backtesting and historical data, which can be easily replicated by other traders. Private strategies, on the other hand, may incorporate proprietary algorithms, quantitative analysis and unique data sets that give the trader a significant advantage over others in the market.
In cryptocurrency markets, the use of private trading strategies is particularly prevalent due the high volatility of these markets and reduces the risk of market manipulation. As a result, many professional traders and institutional investors use private trading strategies to gain an edge over the competition and maximise their returns within the cryptocurrency market.
Here are some advantages and disadvantages of both types of trading strategies.
Public trading strategies
- Accessibility: Public trading algorithms are widely available and can be easily replicated by other traders. This makes it easy for new traders to get started with a proven strategy, even if they have little to no experience in the market.
- Transparency: Public trading algorithms often use well-known indicators and data sources, making it easy for traders to understand how the algorithm makes decisions. This can help traders to evaluate the performance of different strategies and make informed decisions about which strategies to follow.
- Competition: Since public trading algorithms are widely available, they can be easily replicated by other traders. This can lead to increased competition, which can make it harder for traders to achieve consistent returns.
- Lack of uniqueness: Public trading algorithms often use well-known indicators and data sources, which can make it difficult for traders to gain a significant edge over others in the market.
Private trading strategies
- Edge: Private trading algorithms often incorporate proprietary algorithms and unique data sets that give the trader a significant advantage over others in the market. This can help traders to achieve consistent returns and out-perform the market.
- Confidentiality: Private trading algorithms are not widely available, which can help traders to maintain an edge over the competition.
- Lack of accessibility: Private trading algorithms are not widely available, which can make it difficult for new traders to get started with a proven strategy.
- Cost: Private trading algorithms often require significant investment in terms of time, expertise, and technology, which can be prohibitively expensive for many traders.
Which type of trading strategy is best for me?
In summary, public trading algorithms are widely available and easy to replicate, but they can be subject to intense competition and may not offer a significant edge over other traders. Private trading algorithms, on the other hand, offer the potential for a significant edge over other traders, but they are not widely available and can be expensive to implement. The choice between public and private trading algorithms will depend on your goals, level of experience, and capital.
Trading Strategy offers both public and private strategies targeted to suit all types of traders for decentralised markets. If you are interested in our upcoming public trading strategies joining our Discord here, or if you are an institutional or hedge fund looking to leverage our comprehensive market data sets and advanced trading framework then get in touch via email here.