Automation Trading
How to Limit Risk
Picking the right tool for the job
(Click Image to Tip)
My Goal When Creating this..
Teach the tools & strategies you can call on for limiting the risk of your automation trading is important. A lot of the information I will be covering in this post will be generic information that can be tweaked for almost any trading program. Implementing and building off what I precent can be the key in saving your ass in the next downturn so you don't get stuck with bags you can't get out under. With investing in anything their is risk & reward and they are directly correlated. So find a risk/reward level your comfortable with taking because at the end of the day you are your own investor.
Here is a video breakdown of this article & my trading setup: Click Here
Define the type of trader you want to be
This is the most important step of the processes, have you ever tried digging a whole with a rake? If you've made it this far in life I'm going to assume no. You grab a shovel. You can think of trading the crypto market in the same way, pick the right tool that suits you. I've experimented with all the leading automation trading platforms & put my portfolio on the line so I can extensively test them and provide value you can use & build off. This is a list of all the trading bots & I'll outline what situations they work best for.
What is a Rake & what Options are Available
A rake is a tool that is best for people looking to trade with as little effort as possible. Trading isn't your full time job; you understand the value of automation trading but you want to be able to set it up and not have to babysit it every day. Understand you can't be ignorant of the bot as you will still need to make small tweaks every week or so when needed. This strategy typically involves using small buys with a lot of DCA's in place for the reason of creating a as hand's off approach as possible. As you continue to double down into the altcoin market with the goal of unloading your bags as you believe the alts you are investing in will eventually have a net positive swing compared to your main pair BTC/ETH/NEO/USDT
Pro's
Cons
Requires the least amount of time & maintenance
Smaller Return
Least Risky Option
Ease of Setup:
8/10
Results:
7/10
Ease of Maintenance:
8/10
Overall Rake Score:
7.5/10
Overall Rake Score:
Ease of Setup:
Results:
4/10
3/10
5/10
3/10
Ease of Maintenance:
What is a Shovel & what Options are Available
A shovel is a tool that is best for people looking to actively trade the market on a day to day basis. Trading is your full time job; you understand the value of automation trading and want to milk the market for the largest gains possible. Understand this requires a good understanding of technical analysis & constant tweaking. This strategy typically involves using large buys with a lot of indicator rules in place, you don't need to trade a lot of coins to be successful. You have a small handful of coins you trade each day & value a program that is able to execute exactly on your terms.
Pro's
Cons
Requires the most amount of time & maintenance
Large Returns
More Risky Option
Overall Shovel Score:
5/10
Ease of Setup:
4/10
Results:
7/10
Ease of Maintenance:
4/10
Yet to be Ranked & Tested
Gunbot
Basic Protection
Protection 1: DCA
A DCA is a term actively used in the automation trading industry & is your first line of protection it references your next buy point after you've dropped X% points. Establishing a good DCA level can be time consuming however its crucial to take seriously as it will saving your ass when trading the market if setup correctly. I will outline how I setup individual DCA levels and general DCA level as some of these programs allow individually specific DCA while others have a generic DCA that works for all pairs
How to Setup
Establish how many DCA's you can afford with your balance. Another youtuber (JB) who covers profit trailer made this awesome DCA calculator. Check him out or donate if you feel inclined but this tool is awesome for getting a idea of how many DCA's you should be working with depending on your balance & the amount of pairs you plan on trading.
After picking the altcoin pairs you want to trade make your way to ether Coinigy or Tradingview as its technical analysis time!
(example will be with coinigy as I explain a simple setup for PIVX)
First step is to look for rhythms in the coin you are trying to trade I outlined a quick example of a rhythm I'd attempt to trade with PIVX, this buy/sell strategy could be based on any indicator like BB, RSI, SMA and countless others. I explain these indicators in individual tutorials so I'm going to assume you've watched & created a strategy that works.
After establishing your strategy you need to look for floors that have held leading to the current price. Chose the DCA's I did because I could see that the price has historically held these levels.
This is a tool you'll find on coinigy and tradingview, now that you've found your floors you need to figure out how far down they are. Use this tool to drag where the majority of your "Buys" are executing and work your way down to each DCA floor you established & you'll see the %.
If the automation trading program allows you to set custom DCA's per pair you'd input this information into the program and instruct your bot when to make DCA's. However if your program doesn't allow custom pair DCA's and only offers a generic DCA you'll need to open a version of Excel. Follow the same format so you can find the average best DCA level for all the DCA's you'd like to set.
Protection 2: BTC Bull/Bear Protection
Like it or not BTC determine the market value of the altcoins & their is a direct correlation between the two this might change as the altcoin industry develops. But as of today this is a underlining fact of crypto trading, with that said if BTC is rocketing off or crashing it will hurt the altcoin market. If BTC rises/falls 3-4% in a day the altcoin industry will suffer, I saw this first hand when BTC originally rocketed off into a $20k USD value. The altcoin market sat in stagnation as BTC kept rising & rising until it topped off. Once BTC hit its high point the altcoins shortly followed. My point is you would have double your gains if you would of cut your losses & held BTC for the blast off to $20k & once hit that point moved into automation trading the altcoins.
Now you'll also find losses if BTC is drastically crashing in valuation, the altcoin market will directly follow any major falls in BTC. With this fact established when you see a major turn for the downside for BTC be pro-active & move your ass into USDT as your main pair & bet against the market. You can also try your luck with shorting if your feel confident or alternatively turning off the bots after moving into USDT & waiting out the fall.
Basically my point is have a general idea of how the BTC market is behaving & set a alarm on your phone if a major fall or rise is detected. You can do this with different apps, I personally use blockfolio though you might find something better with a little research.
Protection 3: Safety Net
The final protection you can add to your automation trading strategy is a safety net I especially suggest this if you are new to this space. Keeping % of your portfolio in your main pair not to be traded is a smart way to better protect yourself. This allows you a little bit of wiggle room incase you get stuck behind bags you can't get out from under. This is a last resort option, to buy back in if need be for that final double down that will hopefully get you from out under your bags.
