Have you heard of the pioneer of Hybrid Finance already? Meet Gain DAO! Gain DAO is a crypto-based pool, currently starting out with Ether. It is powered by machine learning optimized trading algorithms that are operating in traditional financial markets. This way, Gain DAO serves as a bridge between centralized and decentralized financial systems, leveraging their strengths and creating Hybrid Finance. As a GAIN token holder, you benefit from the possible appreciation of the underlying base asset (Ether) and from algorithmic trading strategies intended to grow the amount of Ether in the Gain Pool. But how do these trading algorithms work and who provides them?
An important partner of Gain DAO is the Pool Manager. This Manager is elected by the DAO to act as the trader for a Pool and to provide algorithmic trading systems. The Pool Manager is compensated only if the month is profitable. To be considered for the role, prospective providers have to meet several strict criteria, such as a minimum of one year audited live test results. This way, we make sure we only work with the best of the best. The algorithms we use are handpicked to ensure the strongest results. Our current Pool Manager is Cornerstone Investment Group, which has developed three primary trading algorithms called Zen, Neo and Rey. Let’s take a look at their respective specialties.
Rey — the Scalper
The first algorithm, Rey, trades on the GBP/CAD pair after the US trading session concludes. Volatility is rather low during this period, which is favorable for scalping. Typically, Rey places 10–25 trades per week (depending on market volatility). Trades are usually closed within a few hours to minimize risk and maximize the effectiveness of the strategy. Rey offers two modes of operation.
In this mode, Rey avoids taking balance losses. It does sustain periods of drawdown. However, the amount of open drawdown is strictly limited, which prevents open positions from getting out of hand and causing a margin call. The trading frequency is not very high, but the system is relatively stable and spread resistant. It will be a steady performer going into the future.
In this mode, Rey is an active daily trader. It consistently makes returns and rarely has a losing month. This mode is spread dependent and does require some common sense to avoid trading days that are unusually volatile. Overall, this system takes losses when needed while maintaining an excellent return.
Zen — Mean reversion
Zen exclusively trades on the AUDNZD AUDCAD and NZDCAD currency pairs. These currencies share similarities, as their economies depend heavily on demand for the commodities they produce. Commodities generally move together as a sector, which leads to a positive correlation between each of these currencies. When this positive correlation is temporarily out of balance, this algorithm places orders in the direction of the mean. This tendency gives Zen a trading edge and allows this algorithm to consistently generate a monthly profit regardless of market conditions.
Once a currency pair becomes overbought or oversold, Zen will begin to scale into a position. The size of the trade depends on the significance of the inefficiency. The larger the imbalance, the higher the probability for a retracement to the mean. All operations that are opened on a particular currency pair are treated by Zen as one large trade and will close together once the target profit is achieved.
Neo — Looking for momentum
Neo is a momentum strategy, aiming to profit on large directional movements trading on a wide variety of assets. Neo exploits the economic and political differences between currency pairs, in order to catch large macroeconomic movements in the market. Neo accomplishes this by scouting for patterns that usually present themselves in the early stages of a trend, as well as patterns that present a good opportunity by riding an existing trend. Neo performs exceptionally well when markets are in a state of panic or euphoria. Both of these conditions present excellent opportunities to bank large profits from exaggerated price movements.