Trading bots for cryptographic. Where to begin?
Understanding the trading bots is difficult. Setting up a bot and stably closing deals in a plus is even more difficult. But I was convinced in practice that this was possible. The article contains basic information that will help the newcomer to understand the topic and make an independent decision: is it suitable for him or not.
I do not advertise anything and do not urge to use bots. Not many will be able to automate the strategy and achieve the optimal ratio of profitability and risk. More often there are people with comments: “we disagree, bots do not trade in plus” or “only their creators earn on bots”. These opinions did not appear from scratch, there are grounds for them. Wherever there is money - there are scammers. The information in this article will help you separate the wheat from the chaff.
I will try to tell simply and clearly, but the theme is not for everyone. If you do not know how to google, it is better to close this article altogether.
What do we have to do:
1. Understand the language in which we will speak ( link to the crypto dictionary )
2. Learn what trade bots are ( link to educational program )
3. See what they are ( link to the review of trade cryptobots )
4. Understand that there are no fully automated public strategies.
As well as there are no strategies that simultaneously trade in the plus and bearish, and bull markets. If you are offered a bot with promises of a stable profit - carefully read all the conditions, reviews on the forums and learn the strategy (90% built on one indicator - this is like a vocabulary of 10 words). Such proposals always hide reservations, the terms “with an asterisk” or just a classic Ponzi scheme.
No strategy based on 1-2 indicators will bring a stable profit, not to mention the fact that you can go sharply into a minus. A lack of insurance and DCA will not allow to somehow bring the position to zero.
5. To study the basic technical analysis
It is impossible to assess the effectiveness of the TA bots strategy without understanding the principles of the indicators. Exception - arbitrage bots, market makers, trading by signals:
- Arbitration. The more bots of the same type with one strategy, the worse it works. Therefore, normal arbitration bots do not sell for $ 5.
- Market makers. Option for whales, earn only on large volumes.
- Signal trading. Very risky, often under the signals hide pump / dump circuits.
Let's conditionally divide the indicators into 2 types: lagging and leading.
Lagging indicators, or trend indicators, allow you to determine the direction of price movement, that is, monitor the trend in the market. These include all types of MA, Bollinger Bands, Ichimoku, Parabolic SAR and others.
Leading ones (as a rule, they are represented by oscillators) - in their algorithm there is a slight shift forward, which allows predicting trend reversals, determining overbought and oversold zones. The classic examples of oscillators are RSI, Stochastic, Stochastic RSI, MACD, OBV, Momentum and others.
The strategy is better to combine several types of indicators. Do not forget to see what indicators the bot strategy is based on, whether it is possible to change settings or replace indicators.
6. Understand how the strategy works to understand how to tune it.
As a rule, in bots all strategies are preset, that is, they include a set of indicators with the given settings and timeframe. But at the same time, you can change any setting (there may be restrictions on the part of the developer, and you can partially edit the settings): for example, you can change the timeframe from 1 hour to 6 hours, change the RSI period from 14 to 8, add a trailing stop and so on .
Accordingly, if the strategy is pre-configured, then you need to understand what settings the bot can adjust and what it affects. The first thing you need to be prepared for when trading on a crypto market is a sharp drawdown or a change of trend to a bear one. There are no special difficulties in the bull market: you can enter any coin or buy 1% lower than the SMA and earn - almost any bot trades. On the bear, everything is different.
Conclusion: the bot strategy should secure the deposit and positions in case of any changes in the market.
Before choosing a bot, make sure you understand :
- principles of strategy;
- what settings and what will you change;
- the presence of DCA mechanisms, trailing, stop losses, shorts;
- backtests, paper trading;
- restrictions on tradable pairs, exchanges, depot;
- What are the insurance at the bot. For example, the SOM (Sell Only Mode) mode - when under certain conditions a bot no longer buys coins, but only sells. These can be triggers to change the price of Bitcoin (a decrease of 5% in the last 24 hours), to close several positions at a stop loss (that is, at a loss), or to buy several positions at a time without a single sale. Insurance can also be hold a certain percentage of the traded deposit in case of a sharp drawdown (for example, 30%) and other settings.
7. Test your backtest and paper strategy before you start trading with real money.
Some bots have a limited demo version with the ability to test the strategy. If you are a novice trader, then this is your option.
Important principles :
Backtests and paper trading do not always give a net result. I had experience when the same strategy, simultaneously launched on live and paper, gave different entry points with a difference of 3 hours. For a crypto market, such gaps can be critical and will not allow a correct assessment of the strategy. After the tests we run the strategy at a small depot (in my case it is $ 200- $ 500).
Test the strategy for at least 2-3 months before drawing conclusions. The smaller the test period, the higher the risks. “Surprises” appear constantly, even if the bot worked for the first time without failures. Depending on the capabilities of the bot and the principles of ordering, the same strategy on a different deposit can produce different results.
For example, a bot may not cope with an order above $ 2000- $ 3000, although on paper, everything could be fine. Therefore, gradually increase the volume of the depot and follow the results. Hurry to anything.
8. Diversify, diversify and diversify once again.
Pay attention to how many pairs the bot trades:
- on one
- on several (say, up to 10)
- on unlimited quantities
The second and third options are preferable. If you run a bot on one coin, then it is not recommended to connect other bots to this account due to the possibility of conflict.
Pay attention that at equal cost one bot can trade on one coin, and the other on ten. The effectiveness of the latter is much higher.
9. Learn to unload bags.
“Bags” are positions in a drawdown with a large volume. For everyone, the concept of “large volume” will be different: for someone, a $ 1,000 position with a 15% drawdown will already be a bag, and for a more experienced trader, $ 30,000 in a drawdown will not be a problem. In any case, the appearance of positions in the drawdown is a common practice for the trader.
There are at least four ways to work with bags:
- wait for a rebound - not very interesting, especially if you bought in January 2018
- close a loss - with the right strategy, an already more efficient approach, since in the remaining depot you can start trading, gradually increasing the volume
- study the DCA mechanism, which, with the right averaging, can not only reduce the loss, but also bring the position to a plus. Of course, an additional depot is needed here (see the item with bot insurance)
- start short position, if possible with careful use of leverage on the stock exchange.
If you do not have time or desire to understand this, then the marketplace may become an alternative in choosing a bot. At the moment, this is an ancient and barely alive Cryptotrader (in May I tested free bots , they did not suit me), and three other services are still in development: botee.trade , Kryll.io and Signals.network . You can read more about each in the review of trading cryptobots . Remember, the simpler the bot, the less you can expect from it.
Conclusions: do it yourself.
The best gratitude for the author is to know that the article turned out to be useful and interesting for you. If you have personal experience, share.