2024-10-19 16:16:59Bybit's Copy Trading mechanism operates by replicating the Master Trader's order parameters to the Followers' accounts, one order at a time, after the Master Trader places them. It is essential to note that Bybit will combine orders into a position if they are in the same direction and trading pairs. The settlement will always be based on the average entry price derived from these combined orders.
The execution of each order is influenced by real-time market conditions, making every trade unique. As a result, discrepancies can arise when combining these trades with others in the same direction and trading pair, which can significantly impact the average price and final settlement. It is essential for traders to acknowledge that all investments carry inherent risks before engaging in Copy Trading. Users must assume full responsibility for comprehending and accepting these risks prior to commencing any trading activities.
In this article, we will explore the various scenarios that may result in differences between the positions of Followers and Master Traders.
- Missed Copy Trades
- Market Conditions, Volatility and Liquidity
- Limitations of Smart Copy Mode
- Limitations of Advanced Copy Mode
- Trading Bot
Missed Copy Trades
Before we get into the details of unexecuted copy trades, let’s look at a table that visualizes the changes in average entry price between the Followers and Master Traders.
|
Master Trader |
Follower | ||||||
|
Order Execution Time |
Order Qty. |
Order Price |
Average Entry Price |
Order Qty. |
Order Status |
Order Price |
Average Entry Price |
|
Time A |
1 |
30,000 |
30,000 |
0.5 |
Copied |
30,000 |
30,000 |
|
Time B |
3 |
20,000 |
22,500 |
- |
Missed Copy Trade |
- |
30,000 |
|
Time C |
2 |
30,000 |
13,750 |
- |
Missed Copy Trade |
- |
30,000 |
|
Time D |
1 |
10,000 |
13,214.28 |
1 |
Copied |
10,000 |
16,666.67 |
From the above results, we can see how unexecuted copy trade can result in discrepancies between the average entry price of Followers’ and Master Traders’. Below are some common reasons for missed unexecuted copy trades.
|
Insufficient Available Balance |
When the Follower’s available balance in the Copy Trading is not even sufficient to place an order that meets the minimum order size requirement, the order will not be placed and this caused the trades failed to copy. |
|
Calculated Order Cost Exceeds Available Balance |
Similar to the previous scenario, if the required order cost for an order exceeds the Follower’s current available balance invested to the Master Trader, the order placement will be failed. Due to the rapid fluctuation of market prices, there is always no guarantee on the exact price the order will be filled with. In the event that the calculated cost of the order exceeds the available balance, the system automatically rejects the order to ensure that follower's account remains within a safe and manageable balance. |
|
Price Deviation (Slippage) Exceeds Threshold |
Bybit's Copy Trading Service features a price protection mechanism to mitigate slippage risks upon Follower’s order creation. The system implements a default maximum slippage allowance of 0.1% per order, which can be adjusted by users up to a maximum of 5%. To illustrate this process, let's consider distinct timings for trade executions: A, B, and C.
|
|
Maximum Position Margin Limit Reaches the Cap |
The maximum position margin limit is a parameter that can be set by Followers to effectively manage risk and exposure for users. It is a predefined limit on the position value a user can hold for each trading pair. By default, the maximum position margin for each contract type is capped at 300,000 USDT.
When a Follower's position reaches the maximum position margin value limit for a particular trading pair, any additional orders will not be placed, leading to deviations in the overall number of trades being executed and position average entry price from the Master Trader's. It is essential to highlight that Followers have the flexibility to customize their trading settings according to their preferences and risk tolerance. By adjusting the Max. Position Margin to a lower value, for instance, 20 USDT, the maximum position value will be significantly reduced, making it more achievable to reach the cap. Under such conditions, Followers may encounter instances of failed copy trades due to the restriction on the maximum position value.
|
|
Enabled Copy Guard |
Copy Guard is an advanced feature designed to safeguard Followers from initiating trades if the system detects that the executed price for the Follower is less favorable than that of the Master Trader. If the system determines that the executed price for the Follower would be less favorable than the Master Trader's price, the trade will not be copied. |
|
Holding more than 400 entry orders |
Bybit copy-trading mechanism operates on a meticulous order-by-order logic, ensuring precision and reliability. However, a large number of entry orders executed in rapid succession within a short timeframe could lead to a substantial and imprudent utilization of funds. Such scenario exposes investors' funds to heightened risks within a limited timeframe, potentially resulting in significant disparities between the Master Trader's and the followers' positions. Under such scenario, the system will temporarily cease the follower's account from copying the Master Trader's orders. |
Market Conditions, Volatility and Liquidity
In Copy Trading, there may be slight variations in price execution, influenced by market conditions and liquidity, which can result in differences in the overall position composition.
It is important to note that the entry and exit of trades in Follower's Copy Trading Account are filled using market orders, which are subject to slippage. The final executed price may vary from Master Trader’s due to market volume and conditions.
Limitations of Smart Copy Mode
Smart Copy Mode in Copy Trading comes with certain limitations due to its nature. Two (2) key limitations are inadequate order margin and the inability to add fresh funds, which can result in position discrepancies or higher risk for Followers.
|
Inadequate Order Margin |
All orders placed in Copy Trading are subject to minimum order sizes, such as BTCUSDT with a minimum quantity of 0.001 BTC. In Smart Copy Mode, take BTCUSDT as an example, if a Follower’s order margin, calculated based on the Master Trader’s 𝑘 ratio, is not sufficient to place an order that meets the minimum order size, the system will place an order with 0.001 BTC instead of reject the order placement to minimize failed copy trades. As a result, Followers are utilizing a higher proportion of their available balance as compared to Master Traders’, leading to position deviations from Master Traders’. |
|
Adding New Funds |
By selecting Smart Copy Mode, Followers' leverage and quantity-traded-to-available-balance ratio emulate that of the Master Trader. To illustrate how the system calculates this, consider the following example: Example 𝓍 = Follower's Available Balance (AB) 𝑘 = Master Trader's Order Cost / (Master Trader's Order Margin + Available Balance) Follower's Estimated Order Margin: 𝑘 * 𝓍 Under normal circumstances, Followers' fund utilization will follow the same ratio as the Master Trader's. However, in the event that almost 100% of the funds have been utilized as position margin, the Master Trader gains more flexibility and control to inject fresh funds into their account. This approach helps reduce overall account risk, particularly when employing full leverage or initiating additional entry orders in the future. As a consequence, Followers may not be able to replicate these actions and experience position discrepancies or higher risk. |
Limitations of Advanced Copy Mode
The advanced copy mode is more suitable for followers who prioritize the execution timing of individual orders rather than the overall position. One limitation under this mode is all orders are placed based on the follower's selected fixed order cost, which is used to estimate the required margin for placing the trade. However, this can result in a deviation in the final calculated position value compared to the Master Trader's when the Master Trader executes contracts with varying quantities in each order.
For example, let's consider a scenario where the Master Trader opens a long position in Isolated Margin mode with 10x leverage. The follower, using Advanced Copy Mode, sets a fixed margin of 100 USDT per order. In this case, the fixed order cost will be used to execute the orders, potentially leading to a discrepancy in the final calculated position value compared to the Master Trader's position.
|
Master Trader |
Follower | |||||
|
Order Execution Time |
Order Qty |
Order Price |
Average Entry Price |
Order Qty |
Order Price |
Average Entry Price |
|
Time A |
1 |
10,000 |
10,000 |
0.0988 |
10,000 |
10,000 |
|
Time B |
3 |
20,000 |
17,500 |
0.0494 |
20,000 |
13,333.333 |
|
Time C |
2 |
10,000 |
15,000 |
0.0988 |
10,000 |
12,000 |
Formulas
Order Quantity (Long) = Order Margin × Leverage / [Order Price × (0.0012 × Leverage + 0.9994)]
Average Entry Price = Total Contract Value / Total Order Quantity
Total Contract Value = [(Quantity1 × Price1) + (Quantity2 × Price2) + (Quantity3 × Price3)....]
Trading Bot
In Copy Trading, Followers have the option to copy the parameters of the Trading Bots created by the Master Trader. By default, any existing bot created by Master Trader will be copied by Followers. However, the below reasons may result in the existing bots not being copied.
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Market conditions have changed significantly after the Master Trader initially created the bot, and it is no longer suitable, those Bots will not be copied. For example, the entry price of the follower’s position created by the copied trading bot will be worse than the Master Trader’s. In this case, the Master Trader’s trading bot will deemed as not suitable to be copied.
-
Followers have insufficient funds to copy the bot.
You can refer to the Reason for Termination of your Bots under the User Center → Bots → Terminated Bots.
Conclusion
Understanding the various scenarios that may contribute to differences between the Follower's and Master Trader's positions is crucial for a transparent and successful Copy Trading experience. While minor deviations are natural due to market fluctuations and execution constraints, Bybit strives to minimize discrepancies to ensure a seamless Copy Trading journey.
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