Mercor Developer AMA Series — LX Trading
LX Trading is a developer on the Mercor platform, who has a background in strategy consulting with 15 years of experience in mergers, acquisitions and cost reduction programs. Over the course of his career, they supported many global corporations taking tough decisions using complex financial models. Since 2017 they have been actively trading crypto with a self-developed and extensively backtested momentum strategy. In 2020, they programmed their strategy in python and launched several trading bots. Currently, they have 25 active bots with more than 1.000 followers.
Check out all trading bots of LX Trading here:
Premium Quality
Recently, we have announced an extension of our partnership with LX Trading. Mercor will be offering premium algorithms on its platform as of the full launch. Mercor sets the bar for developers of these premium algorithms high, as only the best quality algorithms can be qualified as premium. LX Trading proved to be more than fitting to be a premium developer on the Mercor platform and will therefore provide Mercor users with premium algorithms after the full launch!
The premium algorithm-webpage of LX Trading is now live, and can be found at the following link:
Please note: the premium algorithms will only be live after the full platform launch.
Early Bird
LX Trading is one of the early birds in terms of joining the Mercor platform. Since the release of the Mercor Early Beta environment, LX Trading gave us valuable feedback and suggestions. Besides that, they are testing out our platform with their top-notch algorithms. Explore the AMA and you will understand the reason behind their successful algorithms!
The Mercor Developer AMA Series
Mercor values transparency and education highly. We like to keep our community up to date and as informed as possible. That’s why we launched a new Mercor series: the Mercor Developer AMA series. Given their extensive expertise and after achieving incredible results, we figured LX Trading would be a fitting candidate for our second Mercor developer AMA series.
In this article, we will set out last week’s AMA, held in the Mercor community chat. The article will give you an insight into a prime developer on the Mercor platform. The AMA was a great success and gave exclusive insights into the benefits of algo trading. Below is a detailed summary of what was covered in the AMA. Enjoy reading!
The AMA
Mercor CEO:
‘It is time for our third developer AMA! LX Trading has a background in strategy consulting with 15 years of experience in mergers, acquisitions and cost reduction programs. Over the course of their career, they have supported many global corporations taking tough decisions using complex financial models. Since 2017 they have been actively trading crypto with self-developed and extensively backtested momentum strategies. In 2020, they programmed their strategy in python and launched several trading bots. Currently, they have 25 active bots with more than 1.000 followers.
The best question will receive a 0.5 BNB investment reward!’
Mercor CEO:
‘Welcome LX!
Could you please give us a brief introduction about yourself (background, experience)?’
LX Trading:
My name is Alex, hence the alias LX.
I’m a strategy consultant with 15 years of experience in mergers, acquisitions and cost reduction programs. Throughout my career, I have supported many global corporations taking tough decisions to buy, sell and optimize companies using complex financial models.
I started developing trading bots 4 years ago. Currently, my company RYFEN has 25 active bots with more than 1.000 users across different platforms.
More background info can be found on ryfen.com’
Mercor CEO:
‘Amazing CV you got there. How and when did you get involved in algorithmic trading?’
LX Trading:
‘I learned programming at the Delft University of Technology. With real robots, not trading bots 😉. I learned about financial markets during my MBA at IESE Business School in Barcelona. I got introduced to crypto by a good friend who worked at the trading desk of Goldman Sachs in London.
Since 2017 I have been actively trading crypto with my self-developed and extensively backtested momentum strategy. In 2020, I have programmed this strategy in python and launched several trading bots.’
Mercor CEO:
‘You have been all over the world!’
LX Trading:
‘Only for holidays.. 😉 But I have worked in Amsterdam, London and Barcelona.’
Mercor CEO:
‘Great to see your knowledge comes from international experience and from established institutions like Goldman Sachs.’
LX Trading:
‘Yes, the professor at IESE was also from Goldman Sachs — pretty tough guys. But my main background is helping companies to buy and sell other firms.’
Mercor CEO:
‘Have you learned about specific subjects during your studies and lectures that you use now within algo trading?’
LX Trading:
‘The most important thing I learned [from the ex Goldman Sachs professor] is that the efficient market hypothesis is not true. It is hard to beat the market, but not impossible.’
Mercor CEO:
‘That’s promising to hear. Beating the market is the end goal of course!’
LX Trading:
‘It still took me a few years to develop a trading model that has an edge’
Mercor CEO:
‘Well you did a great job ;). So, what is the story and mission of LX Trading?’
LX Trading:
‘The crypto market is getting very sophisticated. Without realizing it, you are trading against a long list of professionals, hedge funds and whales. Without a bot to help you, it will be pretty to make money in the coming years.I want to make it easy and fun for people to invest in crypto and make sure users stand a chance in this market. Pretty hard… to make money’
Mercor CEO:
‘That’s a noble goal… What you’re saying aligns directly with the Mercor vision: making trading easy and letting the bots do the work!’
LX Trading:
‘Furthermore, I think hodling is risky as we might be approaching a new bear market (starting somewhere in 2022). Hodling is great in a bull market, but not fun in a bear market’
Mercor CEO:
‘That’s why we have you guys!
What do your algorithms focus on? How do the algorithms of LX Trading differ from other algorithms?’
LX Trading:
‘The algorithms all work with a momentum strategy. The bots scan the market 24/7 and enter a (spot) position when the algorithm identifies the start of an uptrend. The bots assume that the trend will continue and stay in the position until they get confirmation that the trend is over, no matter how long that may be. Although this means the bots never buy the bottom and never sell the top, the strategy consistently outperforms the market over time.
In crypto, the market often trends for much longer than you expect. Most people sell too soon or buy too early. That’s where the bot outperforms others.
For example, a market can be overbought (on the RSI) for weeks and still continue to go up. The bot tries to capture all of that upside potential.’
Mercor CEO:
‘Very interesting, outperforming the market ourselves by just trading would be a hard job to do. How does the bot actually identify these trends?’
LX Trading:
‘Sorry, that is part of the secret sauce. Perhaps you can rephrase the question?’
One thing I do want to share is that my bots don’t use a hard stop loss as these get hunted by other bots and hit very often.’
Mercor CEO:
‘Haha, of course, let’s keep that sauce secret ;)’
Mercor CEO:
‘How long does it take to develop your strategies? And how do you choose which token you would like to focus on?’
LX Trading:
‘It took me about a year to develop the first version of the strategy, and then 3 more years of iteration to improve the performance.
The better the algorithm, the more difficult it gets to find ways to optimize. About 99% of all ideas fail in backtesting as they don’t perform as well as the current version. A strategy is never really finished — I’m always thinking about different variations that can further improve the returns.
To choose the token, I look at the size of the liquidity pools. This ensures the bot can move in and out of the market quickly
By the way, to really stress test a strategy, I use forward testing. This ensures the model is not overfitted to historic data.’
Mercor CEO:
‘That’s an impressive amount of time. Comforting to know that you put significant effort in creating these strategies to ensure traders of the greatest results.
Speaking about backtesting, to what extent do you think it’s absolutely necessary?’
LX Trading:
‘The strategy is built up from different rules (if -> then) to determine a buy or a sell. Every single rule of my model has to be backtested (and forward tested) extensively to ensure it will work in the long run. I never ever use a rule that is not tested
This is really important to me. Most influencers on Twitter, Youtube, Telegram post ideas without mentioning how successful that idea would have been if applied to all data in the past 10 years.
If you did that, you would likely see that the idea doesn’t work in the long run.’
Mercor CEO:
‘That’s good to know, very reassuring. Seems like you do thorough testing before you deploy any bots.’
LX Trading:
‘The reality of building a trading algorithm is that once you find a profitable strategy, it is more likely that you have made an error in your model, than that you have found gold 😉
But the basis of the algo’s I use on the Mercor platform have been running for years, so I can assure you that they work (in the long run).’
Mercor CEO:
‘Unfortunately, some things are too good to be true. Now that we know how good you are testing the bots and seeing your results on the platform, we can be pretty confident about that.’
LX Trading:
‘To determine the optimal settings of a trading algorithm, many quantitative traders use a process called “backtesting”. Backtesting refers to applying a trading system to historical data to verify how a system would have performed during the specified time period. By running these tests with different settings, the “optimum” settings can be discerned. Unfortunately, tweaking a system to achieve the greatest level of past profitability often leads to a system that will perform poorly in real trading. This over-optimization (“overfitting”) creates systems that look good on paper only.
All our algorithms follow the same generic momentum strategy, but the settings are different for every trading pair. To derive these settings without presenting unrealistic returns, we used a process called “walk forward testing”. In contrast to “backtesting”, this process tests the performance in a paper trading simulation with actual market data.’
Mercor CEO:
‘So from what I understand, the best way to test your bots is a combination of backtesting and walk forward testing?’
LX Trading:
‘Yes, first you use backtesting and then walk forward testing. Only the returns from the walk forward test are representative.
Bitcoin Max (an algorithm running on the Mercor platform) currently has a walk forward return of 54x a hodl strategy. If you started with 1 BTC on 1–1–2011, you would now have 54 BTC.
If you started with 1 USD, you would now have 8.4 mln USD.’
Mercor CEO:
This is very valuable educational content for our community.
LX Trading:
‘I would love to show a picture of the returns, but that seems to be disabled in this chat.’
Mercor CEO:
‘I have changed that now, we would love to see the picture of the returns.’
LX Trading:
Mercor CEO:
‘That’s very impressive!’
LX Trading:
LX Trading:
‘These are forward testing returns. Bitcoin is the coin that is hardest to trade. It is the largest and most efficient crypto market. Therefore it is a great reference.’
Mercor CEO:
‘We are truly lucky that we have access to these bots. Especially given the fact that we can just invest in the bots and can relax after that. Kind of a passive income!’
LX Trading:
‘I’m currently optimizing my altcoin bots for the Mercor platform. These trade a portfolio of altcoins vs USDT or BTC.
The bot that trades alts vs USDT realized a 1250% return last year. Not test returns, but real returns. The bot that trades alts vs BTC realized a return of 300% in BTC. Which is 2000% in USDT
By trading a portfolio of alts, the compounding effect is much stronger as there are always interesting coins to trade.
While the BTC max bot can be out of the market for weeks (just like it is at the moment). Last trade was Nov 11 and since then the BTC price dropped 28%.’
Mercor CEO:
‘Wow. That’s unheard of. Those are dream numbers! We can’t wait until the full launch when those multi-pair algo’s can be deployed. One last question. If we are already talking about the platform, you always give us great feedback and suggestions. Could you share with us what you think of the Mercor platform, its functionalities, the team and its ambitions?’
LX Trading:
‘I joined the platform as I want to be involved in cutting-edge new developments in the industry, and I think this is one of them.
I really like the decentral setup. This could be the future of trading, in a similar way that DeFi could be the future of finance
Most important for me: it really works. Sounds obvious, but this is a great compliment to the team’
Mercor CEO:
‘Thank you for the kind words, we could not agree with you more. Great to hear, and a big compliment for our dev team. We feel very honored and grateful to have you on the platform!’
LX Trading:
‘Me too! Let’s disrupt trading together.’
LX Trading:
‘I believe one of the next steps of Mercor is to make it possible to develop bots that trade in multiple tokens. That functionality will greatly enhance the profitability of my algo’s and reduce their risk. I really look forward to that launch.’
Mercor CEO:
‘Stay tuned, full launch coming very soon!’
Mercor CEO:
‘That brings an end to the first part of the AMA. Thank you so much for your time, wise words and info on your methods. I will now open up the chat and allow community members to ask questions! Remember, the best question will win 0.5 BNB investment credits.
To all Mercorians, the chat is now open to all of your questions!
Miles_Mercor, Mercor Marketing Director:
‘Thank you, LX! Happy to have you. Let’s go Mercor!’
Kitos, Mercor Community Member:
‘LX, walk forward testing is known as paper trading because it is done on paper only… are you doing that by hand, on paper?’
LX Trading:
[In reply to Kitos]
‘No, I run the model manually and then update the settings every quarter.’
Kitos, Mercor Community Member:
[In reply to LX]
‘Cool 👍🏻 . Something to apply to my algos 😄.’
LX Trading:
‘The simulation of the Bitcoin Max bot followed the following steps:
‘The initial settings of the algorithm were derived from backtesting on the dataset that precedes the simulation (1–7–2010 to 1–1–2011)
The initial settings were then applied to actual market data to simulate the bot’s performance in the first quarter of 2011 (1–1–2011 to 1–4–2011)
In a first iteration, the settings of the algorithm were updated based on backtesting on the total available dataset in the simulation (1–7–2010 to 1–4–2011)
The updated settings were then applied to simulate the bot’s performance in the second quarter of 2011 (1–4–2011 to 1–7–2011)
This process of updating the settings each quarter was repeated until a first cycle of 4 years was reached. After that the settings were updated each quarter based on the optimal settings of the previous 4 years (instead of the full history) and then tested on the upcoming quarter. The combined returns of all simulations form the test results displayed.’
Kitos, Mercor Community Member:
[In reply to LX]
‘Thanks for this valuable info 🙌🏻’
LX Trading:
[In reply to Kitos]
‘No thanks. Let me know if you have any questions once you are testing’
M M, Mercor Community Member:
‘Thank you LX, that was an insightful AMA. I was wondering, what altcoins will include your multi-pair algorithms, and do you see a future in NFT’s and trading algorithms?’
LX Trading:
[In reply to M M]
‘I typically use top 100 altcoins, except for the top 10 (which don’t provide a lot of upsides). NFTs are very interesting indeed, but the bot just looks at all coins and invests in the ones that move.’
M M, Mercor Community Member:
‘Alright, sounds clear, thanks! So if I invest with full launch, I can expect a return of >1200% within only a year? It sounds almost too good to be true lol.’
LX Trading:
[In reply to M M]
‘That depends whether or not we get another bull run as we saw at the beginning of 2021. Almost all returns were made in just a couple of weeks, but you have to be in the market to catch the wave at the right moment. For example, the altcoin bots were first investing in DeFi tokens, then a few months later in L1 tokens, and now mainly in metaverse tokens.’
M M, Mercor Community Member:
[In reply to LX]
‘Makes sense. Can’t wait to be honest!’
Black Sun, Mercor Community Member:
‘For example, If the price of a token at an exchange is $1 and the price in another exchange $1.5, it seems that I can take profit (Arbitrage btw those exchanges) easily by using Lx trading just with 1 account. Is this true?’
LX Trading:
[In reply to Black Sun]
‘I think that might work for small-cap coins, but my bots mainly run on large and mid-cap coins which are much more stable across exchanges.’
Envonyy, Mercor Community Member:
‘Hi, would like to ask what you think will be the greatest challenge for LX Trading and how do you plan to overcome it?’
LX Trading:
[In reply to Evonyy]
‘The main challenge is to ensure users actually make money. During the previous bull run, many users stepped in late and then kept adding money to the bots at the peak of the market. After the drop, they left with a loss, whereas the bot recovered within a few weeks. Better to invest a small amount and stay invested in the bot. That way you can really benefit.’
Envonyy, Mercor Community Member:
[In reply to LX]
‘That sounds really promising.’
Mercor CEO:
‘Let’s allow the community one more question, after that, we are wrapping up!’
Black Sun, Mercor Community Member:
‘With Master-level Trading Platform, Sophisticated Data Analytics, Diversified Brokerage Service and Full-stack Quantitative Solutions, what advantages does LX Trading have which can overpass competitors?’
Black Sun, Mercor Community Member:
‘Why should I use LX Trading instead of trading directly on crypto exchanges? LX Trading is currently collaborating with many good projects such as Mercor Finance. What are the benefits of LX Trading with that partnership?’
LX Trading:
[In reply to Black Sun]
‘If I were you I would invest a small amount in all of these to diversify. My bots have a proven track record, but I can’t guarantee any profits. On Mercor I plan to launch two portfolio bots that are not available on other platforms.’
Mercor CEO:
‘Alright that is it guys, amazing AMA and I would like to thank LX for his time and great answers! Also thanks to the community for their questions.
You can find all of the algorithms of LX Trading here:
The prize for the best question goes to M M, congrats! Please reach out via DM to receive your prize.
Wrap Up
The community got exclusive insights into the methods of our beloved bot creators and got to chat directly with the creators of these profit machines! One of Mercor’s main goals is to make algorithmic trading accessible for everybody by building a bridge between talented developers and expert algo traders and everyday investors. This AMA series is a prime example of doing just so!
The Mercor team enjoyed the AMA to the fullest and loved to see the engagement between investors and developers. On to the next one!
