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Position Size Analysis Crypto Trading 101

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understanding position size crypto trading guide

How to Find The Best Position Size to Reduce Risk

Discover How Important is Position Sizing in Crypto Trading and Learn How to Calculate Your Position Size to Run a Low-Risk Plan of Action.

When we all pitched our hats into the crypto trading arena, we sought to study many different investment techniques to help us gain an edge in the market. These techniques usually involve technical analysis mainly focused on when to buy or when to sell.

Basing our analysis of many indicators to choose from, we create trading rules to follow.

In this article, I want to go over a critical but often overlooked point. Your Position Size! Although there are many indicators to use, their main focus is market timing (we all want to hit the highest bid and take the lowest bid). These indicators never teach the most crucial component.

This component is. How much to trade? The “how much” is more important than the timing of the indicator. If you’re a smart trader, you want to know any low, high, and close info. However, for you to see, you must be using the correct position size.

When allocating funds to a particular investment, you will use position sizing to calculate how much you can buy based on your risk tolerance and goals.

By determining the appropriate position size upfront, you can have more control of the risk in your trading portfolio and maximize its potential for gains.

Managing risk is one of the most important aspects of crypto trading, as it is essential to ensure that your account stays positive over the long term. That and appropriate position size is a necessary skill to practice good risk management.

Position size is one great way to manage your risk. It is the risk in the number of trades you place. Because the risk in each buy you take will also affect the size parameters of your position and, in turn, will affect the size of your trading account.

Once you understand how to size your trades correctly and you’ve calculated yours based on your account balance and trading preferences, you can input those numbers in your crypto bot trading limit values. More on that later.

Position Size Overview

To calculate the ideal position size in your trading account, you first need to figure out your stop and risk levels.

Your stop level is the point at which you’re willing to walk away from a trade, and your risk level is the percentage or dollar amount of your account that you’re ready to gamble on any given transaction.

Once you have determined these, you can calculate your ideal position size.

The steps and calculations to determine the size of your trade position are simple. Here’s an overview of the steps to follow and some examples to help explain the process.

  • Decide how many crypto coins you want to keep in your portfolio.
  • Determine your account risk
  • Determine your purchase price. Use the method in this helpful article to determine the purchase price.
  • Set your stop loss. The stops mentioned may be set at a specific price based on your reading of the chart, or it may be a percentage based on your calculation of the coin’s volatility.
  • Calculate the position size. (I will give you the formula later).

What is position size?

Briefly, position size refers to specifying how many units or how much of your account you are risking on a particular trade. It is not enough to determine the risk percentage per trade or the dollar amount you are willing to lose.

You need to know how to convert that percentage or amount into the number of units you need to buy or sell for a cryptocurrency pair.

Position size refers to the number of contracts or altcoins you need to place in a trade. The risk in each exchange you take will also affect the size parameters of your position and, in turn, will affect the size of your portfolio shrinkage.

In other words, the larger the size of the position you are trading, the greater the risk of your portfolio. Conversely, the larger the position you are trading, the greater the potential for higher returns.

This way, you can take too much risk in one transaction. It can also prevent you from being surprised when your losses are too significant, or your winnings are too small.

Calculating the correct position size will give you an idea of how much you could lose or how much you could gain on a trade.

To get started, you need to estimate how much of your account you’ll be comfortable losing if the trade doesn’t go your way.

From there, you need to get the value of the pair you are trading. Using these variables, you can calculate the number of units to trade.

Of course, you should also remember that higher risk leads to higher reward potential, and lower risk can also mean lower returns.

You need to be able to balance the line between risking too much and risking too little.

After all, you don’t want to have a slight potential for profit after all the hard work you’ve put into analyzing the markets and creating a good trade setup.

Ultimately, sticking to the correct position size and sound risk management practices can be the determining factor in your profitability.

Therefore it will prevent your account from exploding into a series of losses on particular trades and allow you to adjust your risk preferences based on your confidence in the transaction.

Now, let’s elaborate more on the above points.

How to Determine Account Size

Your account balance is pretty easy to calculate. But then, you need to calculate how much of that balance you are willing to allocate to different trading strategies.

Commonly, most traders tend to risk 1 to 3% of their total balance on a single trade. It is infrequent to risk a higher percentage because losses can quickly accumulate and wipe out your trading account.

For example, having an open order of maybe $10,000 BTC in your trading account, it’s best not to consider that as your capital. Because anything can happen, and you can lose. So basically, your account size is the amount you are willing to risk in trading overall.

How to Determine Account Risk

determine account risk

It is also essential to determine how much you are willing to lose on a trade. By choosing the percentage risk, you are ready to lose on a transaction. Typically, there is a general rule of risking 2% of your total capital.

The 2% Risk Principle

One of the first rules a trader is likely to learn is always using a stop loss to manage risk. There is also a rule of not risking more than 2% of the total value of your trading account in a particular trade.

Still, if you’re a new trader, you’re using a trading bot, or you want to be more cautious, feel free to change this value to 1% or lower instead. On the other hand, feel free to raise it to 5% if you’re more aggressive and willing to take more risk.

The main idea is to risk a percentage you are comfortable losing.

For instance, if you invest 25% of your account size in a trade, with a stop loss of 5%, the overall transaction will risk around 2% of your account’s value.

Without a doubt, the 2% principle and the stop loss are significant for risk management. However, it won’t account for the risk of a coin price spike through the stop loss price or slippage when there is insufficient liquidity to execute the stop-loss order at the wanted price.

Using my trading account, for example, I usually never invest more than 1% of the value of my trading account in a single trade. Across my account, I will be investing in 10-15 positions, each relatively small, to protect my general account from catastrophic single position events.

I will strongly suggest you be extra cautious when trading on margin or futures.

risk per trade calculation example

Using a Stop Loss Based on Volatility

Using a stop loss based on volatility and the 2% principle still does not handle the worst-case scenario when the price exceeds the stop-loss value. To start dealing with these worst-case scenarios, you can further reduce the position size.

The approach I take is to limit the overall capital that I will invest in a single trade to 1% of the value of my trading account. If you multiply the current coin price by the number of assets invested, you will reduce the maximum total amount at risk and the position’s size again.

For example, buying five different coins, ETH, XRP, BTC, BNB, and LTC, investing $500 on each would cost 5 x $500, or $2500. In the worst-case scenario, all of that 2500$ would be at risk.

However, if you reduced the position size price to 250, only $1250 would be invested in the positions. Reducing the position size more in this way means that you could lose a maximum of 1% of your trading account balance in the worst case.

How to Determine Your Trade Risk

How do you find out your trade risk?

It is simple. Once you have identified your account size and account risk, it is paramount to decide on the position sizing of your specific trades. You can begin to calculate the number of coins you are going to purchase.

The rule is to take good money management from the monetary risk by controlling your stake with the size of the position. Think in terms of the percentage you’ve earned, not the profit you’ve made. Practice and keep practicing.

There are many ways to determine this for specific trades. Some traders use the analysis of market fluctuations to establish these points, while others use volatility indicators. But these are just a few examples; there are hundreds of them.

However, you must have a stop loss value in place before calculating your trade position.

For example, if you trade BTC/USDT and the price was $50000 and set your stop loss at $40000, you will stay on the trade until the value drops to $39999. Once you have determined the stop loss, you can calculate your position size.

determine your trade risk

Using Position Size Based on Volatility

A helpful risk management technique is to value the position for volatility.

Instead of using a fixed percentage of a coin price for a stop loss, or investing a fixed rate of the account value in each position, use a multiple of the coin’s recent average volatility to calculate a stop-loss (determined using the ATR indicator).

At the same time, keep your capital at risk well below 2%.

For example, assuming you have a trading account value of $100,000 (which includes both cash and market value of current positions), you don’t want to risk more than 1% per trade, and the average volatility of the share is $2.

The total amount at risk for the transaction must not exceed $100,000 * 0.01 or $1,000.

How to Calculate Your Position Size

We have talked about all the necessary things to put in place before calculating your position size, from determining your account size to determining your account’s trade risk.

Now, how do you calculate your position size?

Calculating the position size is straightforward. Let’s say you had an account balance of $20,000 and were willing to risk 1% per trade. Plus, you know you’ll set your invalidation value at 5%.

This way, you would calculate by looking at the invalidation point, and to find it, you have to consider the size of the coin you will be trading.

Using the following position size formula

Account balance X account % risk per trade / (Stop loss distance from the presumed entry price) = Position size

Using an account size of $20,000 for example ($ 20,000 X 0.01) / (0.05) = $4000 Here we have our position size to be $4000.

Using this calculation, we have determined that the appropriate position size for this trade is $4000. It is essential to consider the leverage ratio and the margin required to trade $4000 if you’re margin or futures trading.

Position size to keep the risk around 2% per trade may work well with a $25,000 account, but if you only have $1,000, it’s only $20, which doesn’t let you invest much.

With micro accounts, a risk of $20 will usually be your position with an invalidation point of stop loss of 100, which is enough for almost any trade.

The reason for the deviation has to do with the variables that go into the calculation. First, you are willing to risk a certain percentage.

Changes in your risk percentage will change the amount you are ready to risk. The stop-loss price will then affect the amount you are willing to risk.

Look at a calculation. Each variable helps establish how much you are willing to risk. It gives you the power to calculate the size of your position dynamically. It helps you assess the risk you are taking in establishing a position.

Position size is a great way to add trade discipline to your investing decisions. There are several position size calculators available online. The one described here follows the dynamically calculated approach, allowing you to modify various factors to establish the best position size for your portfolio.

Smaller Position Sizes

With more significant positions, the price fluctuations could be shocking. In addition to controlling the financial risk of negative news affecting an asset’s price, targeting smaller position sizes also helps your trading.

If you have 10-15 relatively short positions on my account, you will not lose sleep in any situation. Smaller position sizes give you a “healthy level of indifference” to the price movements of a single position. To demonstrate how this works, let’s increase our stop loss value to 10%.

$20,000 X 0.01 / 0.1 = $2000

Here our position size has changed. We now have it at $2000. Using more minor transactions gives you more conviction to hold a position and let it go as planned.

Gunbot Position Size

If you’re trading manually, it can be difficult to avoid making emotional decisions regarding trading or investing. When the stakes are high strong emotions, can lead to risky behavior. That’s why you’ll need to control them to avoid making mistakes.

And what better tool to control your emotions than our automated crypto trading program?

You can’t control every outcome, but planning your trading system will help you manage risk and make emotionless decisions in the heat of the moment.

A sound trading strategy is difficult to develop on your own, but with Gunbot by your side, that’s something you won’t have to worry about.

How can you apply what you have learned about position sizing to Gunbot?

You can do it by adding your position size value to your strategy balance settings, more specifically, the TRADING LIMIT (TL) value.

It is straightforward, and it’s a Gunbot global setting which means it will apply to any pair using that strategy.

Here’s an example of how your strategy balance settings look in the Gunbot GUI

gunbot trading limit example in GUI

When trading with Gunbot, be mindful of the base currency established by the exchange because your trading limit value gets bounded to the “base currency.”

Gunbot’s default trading limit value is set in Bitcoin (as shown in the above screenshot). So if you’re trading the USDT-BTC pair, make sure you edit this with a whole number, telling Gunbot you want to sell X amount of USDT per trade.

Usually, you would set 10, 25, 100, or similar instead of 0.002.

Similarly, you would adjust your trading size if you’re trading on markets where BNB, ETH, or similar coin is the base currency.

Always use a number a bit higher than the minimum required by the exchange rules, so you got some room to pay the fees.

Note: If you’re margin or futures trading, this value will represent your wanted number of contracts.

You also have the choice of setting a percentage of your available base currency if you prefer. If you put a value here above 0, it will tell Gunbot to ignore your TRADING LIMIT, and it will use the set percent in its place.

And lastly, you can use all your available base currency balance, which I won’t recommend, but is ultimately your choice.

Conclusion

It is incredible how small changes in risk management can have such a significant and positive impact on your trading strategy.

The position size effectively determines how many coins you can buy without exceeding your maximum loss.

Also, the position size helps you to limit the number of losses incurred in the trade. It is part of an investment strategy that enables you to decide on the size of the coin to enter into in each transaction.

Things for you to Remember:

  • Your position size is NOT the same as your risk amount. Still, it originates from it.
  • You need to know your risk amount, your entry, and stop-loss to calculate your position size.
  • To calculate your position size, divide your risk amount by your stop loss distance.
  • The closer your stop loss is to your entry, the bigger your position size will be.

With the above examples, even beginner trader can adequately position their trade size without risking too much in a single position.

You will get prepared regardless of what happens in any situation. You will never be afraid of taking significant losses.

Using this concept is what differentiates professional crypto traders from average traders.

This article has helped explain what position size means in layman’s terms, the benefits, and how you can incorporate it into your trading.

It takes a bit of time to master, but there are online tools that can help you calculate your position size simply by providing account balance, risk percentage, currency pair, stop loss, and position size. However, to be extra careful, you should be able to do that on your own as well.

Crypto trading and investing are not just about making money but also about keeping your risk in check. Position sizing is an excellent approach that helps traders and investors decide how many units of security they can purchase, which helps control risk and maximize returns.

Remember, as a trader; you won’t control what the market will do next. The only control you have is how much exposure you will have to the movements of the crypto markets you trade and then, ultimately, your total portfolio exposure.

Every trader has to deal with risks daily. Unfortunately, most traders don’t have a trading strategy that takes into account position sizes and stops.

Gunbot is your strategy’s engine; let it take over your trading and maximize your profit automatically today.

gunbot position size

Gunbot Support Resistance Strategy Ultimate Guide

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gunbot support resistance strategy

Learn How to Use the GunBot Support Resistance Strategy to your Advantage.

Understand how to Identify these trading zones on a chart so you can structure your Gunbot support resistance strategy for success.

Explore key concepts and fundamental techniques logic for setting up your support and resistance trading rules.

You can configure this strategy to buy and sell crypto automatically when they are at certain thresholds of a given distance from one another. You can set the parameters of support and resistance to suit your preferences.

For instance, you can configure the Gunbot support resistance strategy to place sell orders when an asset falls below a certain threshold and buy orders when it climbs above a point.

Undoubtedly, the concept of support and resistance has proven to be one of the most reliable trading strategies in the world of technical analysis.

Why? Because it lays the foundation upon which everything else is built.

Support and resistance work like invisible lines on a crypto chart; however, these lines are not all invisible to professionals.

Professional traders mark these lines on a crypto chart with extreme discipline and focus. The reason is, of course, that they understand that the direction of prices is determined at these predefined price slots.

The good news is that it won’t take long to learn how to do this independently.

You may be wondering, “Why does this work?”

Again, the good news is that I’ll give you the answer right away. The reason these concept works is attributed to the psychology of those who participate in the market. This simple concept largely determines the outcome of any trade.

Actions are predictable because people are predictable. People remember the past and have a propensity to behave in the future based on those memories.

Whether you want to admit it or not, most people follow the crowd and make illogical decisions regardless of the current facts. There is nothing more substantial than the behavior displayed in the crypto market every day.

The sentiment of traders justifies the concept of Support and Resistance. Optimism leads traders to justify buying, while fear leads traders to justify selling.

When you fully understand this simple ideology and commit to it, you will quickly realize that you have inherited the first step to market success.

Support acts as a floor for the price, often preventing it from falling further. Resistance acts as a cap that contains a cryptocurrency price from rising. Hence the name Support & Resistance!

Support & resistance will work the same as a roadmap. It will work as a reliable framework to show you where essential buying and selling times are out of balance. This in itself has a competitive advantage in the market!

Always remember that the movement of prices is driven by excessive supply and demand in a financial market. Demand equals buying pressure, while supply represents selling pressure.

What are Support and Resistance?

discover how to use support and resistance

Support is the idea that some imaginary force supports the market. If the market is trading above an S/R area, that area is called support.

The reverse is true if the market is trading below an S/R zone; this zone is resistant. In general, there is no usable difference between the two.

In other words, support means there is enough buying pressure (volume) at a given price point to stop a downtrend, and resistance means there is enough selling pressure (volume) at a given price level to stop an uptrend.

Support places a floor below the market, and resistance sets a high above the market.

Support levels give the coin support and generally cause coins to rebound higher. Coin prices are supported off the horizontal line. This is a price at which buyers start to outperform sellers.

This support floor indicates that sellers are getting less enthusiastic about exiting and selling their coins.

A support level keeps prices high. Coin prices continue to fall to the support level and are expected to recover continuously. However, when coin price breaks above a significant support level, the prices are likely to drop, and investor fear increases.

Resistance levels are the exact opposite and tend to bounce coins lower. A resistance level represents the highest price you are willing to pay for an action. The sellers beat the bulls. Coin prices continuously rise to the overvalued resistance level and then fall again.

When the coin price goes through a significant resistance level, the price is likely to rise rapidly as investor greed sets in and becomes a reality.

The support and resistance barrier levels will change roles often. Once an action gains enough momentum to clear each level, that level’s position is now reversed.

Support and resistance levels are validated on horizontal lines; they will often be found in round numbers. The longer prices stay on a significant horizontal line, the more this price area will be valid.

A support level is an area of the price that can stop a possible decline in the coin price, while a resistance level is an area that is an obstacle to a higher future price. Support and resistance levels are either horizontal or tilted lines.

How to use Support and Resistance

Support and resistance is a concept that the market will experience opposition to one degree or another in a given area. The market will tend to struggle in the S/R areas and will rebound often.

Pivot points are the first thing to know when looking for S/R areas. Pivot points are a significant change in direction. These are peaks or troughs in price action; peaks are high swings, and lows are low swings.

Just one candle up and one candle down is not a turning point, at least not in time.

Swings are generally characterized by sails stretching in one direction and then moving and going the other way. Recognizing pivot points is the first step in finding areas of S/R.

What are other steps to consider?

Drawing Support and Resistance Level

The best and most common way to visualize or draw these S/R levels is to look for oscillation points. Once you have found the swing points, you should aim to draw the line as close as possible to the candle bodies at the top or bottom of the swing.

There is a better idea to work here. Try not to cut the body of the candles. Also, they will lose market value or respect once these levels are passed, so keep your S/R lines up to date.

The strength of S/R levels

There are two important means to look at the strength of an S/R zone. The first is to look at the size of the oscillation point that made the level. The second way is to find multiple swings at the same level.

Finding the breakout is one of the best ways to use S/R to trade. The breakout occurs when a candle crosses and closes on the other side of an S/R level.

Most traders use the concept of candle close as a confirmation or commitment that the market has broken out of a support or resistance level and then continues in the direction of the breakout.

Some people will trade the bounce, assuming the level will hold.

Identify Resistance

An example of resistance would be when the market has reached a significant high point (SHP). Contrary to the primary trend, the market corrects and establishes a series of swing highs (SH), eventually registering an important low point (SLP).

By looking at the trading chart, you can easily identify the trend high (SHP) and low (SLP) and a series of high swings (SH) that fall between the two extreme points.

The selection of maximum swings is simple. There must be at least three bar heights.

Identify Support

An example of support would be that the market has hit a significant low point (SLP). The market is rallying against the main trend and settling into a series of low swings (SL), eventually registering a significant high point (SHP).

It is easy to identify the trend high (SHP) and low (SLP) and a series of oscillating lows (SL) that fall between the two extreme points.

Selecting low swings is simple. There must be a minimum of three low bars.

Psychological Support and Resistance

Psychological support and resistance levels are critical static levels, and these are fine diving lines between bulls and bears. Psychological price levels influence the sentiment of traders.

When the price is above a psychological price level, the sentiment is bullish; however, as soon as the price goes below the psychological price level, the sentiment turns bearish.

These are tricky trading areas because the bulls and bears respect each other.

When the price is above the psychological price level, the bears are reluctant to sell, and the bulls fully control the price, but as soon as the price drops below the psychological price level, the bulls do not interfere.

A psychological support level is also a price-dependent psychological resistance level. If the price is above the psychological level, it becomes a psychological support level, and when the price drops, it becomes a psychological resistance level.

In reality, the price rarely stops at a single price level, but it can drop below or above a level before turning around.

For best “negotiation” results, it is helpful to think of these levels as zones.

Instead of static and dynamic psychological levels, they will be fixed and dynamic psychological areas.

High and low swings are the most common type of support and resistance.

When you see the market go up and then turn around and fall, you’ve just encountered resistance. It found support when the market hits a new low and then goes back up again.

Keep in mind that these ups and downs don’t just happen. Whenever the market approaches these levels, some traders with a lot of money cause the price to change.

You want to trade with these strong traders, and that’s why the ups and downs are so powerful.

Another Key: The more the price reaches these levels and turns around, the stronger those levels become.

Trend Line Support and Resistance

Trend lines are created by connecting the highs and lows of the swings as in the previous section, but the trend lines are not horizontal; they are drawn at an angle.

You have more than likely seen a market trend before. The trend in crypto markets tends to move through channels, and a line can often connect the top and bottom of the channel. This is how trend lines are formed.

As the price approaches the top or bottom of the channel, the trend lines will help the price to fall or resist its rise.

A trend line is a primary starting point for analyzing price charts.

As the market moves in any direction, not in a straight line but a zigzag fashion, the mutual location of the upper and lower points of these zigzags allows a line to be drawn connecting significant highs (peaks) or significant lows (valleys) of an appropriate level using the technical tools of the TradinView.

To draw a trendline, only two points are needed, and the third is the confirmation of the contact point. On an uptrend chart, it should be plotted using lows, on a bearish chart using peaks.

The trading channel forms the trendline and a line almost parallel to it and is drawn on the opposite side (through peaks in an uptrend and valleys in a downtrend).

The two lines are then the edges of the channel. The higher and lower boundaries of a trading chart are referred to as support and resistance lines.

The peaks represent the price levels where the selling pressure exceeds the buying pressure. They are known as resistance levels.

On the other hand, the lows represent the levels at which selling pressure succumbs to buying pressure. These are called support levels.

In an uptrend, consecutive support and resistance levels must be broken, respectively. The reverse is true in a downtrend. Although minor exceptions are accepted, these failures should be seen as early signs of a trend reversal.

The importance of trends is a function of time and volume. The more prices bounce off the support and resistance levels, the more significant the direction becomes.

Trade volume is also substantial, especially at critical support and resistance levels.

Fibonacci Support and Resistance

Many traders use Fibonacci numbers to determine support and resistance; typically, people use retracements of 38.2%, 50%, and 61.8%.

It is commonly believed that a 38.2% retracement from a trend move will tend to imply a continuation of the trend.

The retracement of 61.8% suggests that a trend change could be brewing. Crypto traders have adopted many of these rules.

How to draw Fibonacci retracement levels in Tradingview with Gunbot

  • In an up-trend, you want to identify the direction of the market. In this case, you want to be in an uptrend. Next, you want to attach the Fibonacci retracement tool on the bottom and drag it to the right, all the way to the top. Additionally, you want to monitor three potential levels of support: 0.236, 0.382, and 0.618.
  • In a down-trend, you want to identify the direction of the market. In this case, you want to be in a downtrend. Next, you want to attach the Fibonacci retracement tool on the top and drag it to the right, all the way to the bottom. Additionally, you want to monitor three potential levels of support: 0.236, 0.382, and 0.618.

tradingview chart in gunbot with Fibonacci tools Moving Average Support and Resistance

As a trader, my method is determining support and resistance in the direction of the primary trend (which is always determined by prices above or below the 89-period long-term simple moving average).

Trading platforms like TradingView will allow you to create a simple 89-period movement medium. I encourage you to look at the market this way.

Moving averages are the way to smooth the market price to see market trends more quickly.

There are all kinds of moving averages: simple, exponential, smooth, weighted. Each has its purpose, and there are benefits to using each of them.

What is Confluence in Technical Analysis?

Confluence is a fundamental concept in trading as it is more of a technical indicator or factor that confirms a trading signal.

More than two technical factors could ensure each other and point to a high probability trade setup.

These technical factors can be support and resistance, trend lines, Fibonacci levels, bar patterns, candlestick patterns, moving averages, pivot points, etc.

Seeking confluence means looking for additional confirmation before making your trading decisions.

Confluence can provide you with high potential trading setups and is an integral part of support and resistance. If you’ve been trading for a while, you must have noticed that trading setups abound for one reason only.

You will often come across situations where there is only one basic reason to trade. It would be best to have patience as you practice confluence and seek additional reasons to confirm your trading decisions.

You will have to wait for the confluence to develop, as most of the time, it does not coincide.

Here are three examples of a confluence setup:

  1. An uptrend support line confirming the rebound of a horizontal support line,
  2. A daily S1 pivot point that coincides with the rebound of the 38.2% Fibonacci level,
  3. A break above a pennant pattern which coincides with the resistance line

These are a few examples of where confluence provides you with additional confirmation on a business setup.

If you are patient enough to find the confluence before starting a trade, the chances of winning trades increase.

As a technical trader, you need to develop your patience and avoid the habit of immediately going into a trade. Look for the confluence of at least one additional technical factor first before making your trading decisions.

Now that you have all the preliminary information about these critical trading levels let’s get on and set up the Gunbot Support Resistance Strategy on the GUI.

Gunbot Support Resistance Strategy Settings

gunbot support and resistance strategy settings

As its name suggests, the Gunbot support resistance strategy will buy at support levels and sell at resistance levels.

You can use this method to profit from small moves in the market because this strategy will take profits whenever the price reaches resistance or support.

Gunbot developers have created an easy way to work with the support/resistance strategy. You will only have to worry about one parameter to establish your point of entry. This parameter is SupRes_SPREAD.

When you add a numeric value to your SupRes_SPREAD parameter, it will designate that as a percentage of the price above the first support level when buying or below the first resistance level when you’re selling.

Then, when the price crosses this limit, Gunbot will place an order. After that, if you enabled your balance settings for multiple orders, the bot will set a buy order every time your buy conditions are “TRUE” in the market.

Remember: The support and resistance levels are not fixed points. So, it would be best if you looked at the SupRes_SPREAD as a trailing range.

Therefore is crucial that you set a value that closely follows the current pair and price range because if you set the spread too big, it will signal Gunbot to start trading straight away.

Gunbot Support Resistance Calculation Formula

Gunbot uses a proprietary algorithm to determine support and resistance levels. But you don’t have to worry about it, and when you input your desired settings, it will automatically select these values for you.

Still, here’s Gunbot Support Resistance Method

P = (H + L + C) / 3
R1 = (P 2) – L
R2 = P + (H – L)
S1 = (P 2) – H
S2 = P – (H – L)

How to Create the Gunbot Support Resistance Strategy in the GUI

The first step you have to take in creating your Gunbot support resistance strategy is to click on the “Strategies” tab on the GUI to activate the “Create new trading strategy” option.

There, give it a “Nickname” and set the Buy and Sell methods by selecting the predefined “SupportResistance” parameters.

Note: These strategy settings apply to the Gunbot Support Resistance Strategy for SPOT Trading. Read this section if you need the steps for the SupRes strategy for Futures trading, provided you have our market maker bot unlocked.

Here’s an example of how it will look in the Gunbot GUI:

gunbot support and resistance strategy creation on GUI

The strategy will associate these parameters with all the pairs that use this process.

If you want a specific parameter value to differ for one or more pairs, you can define an override particular to the crypto pair you wish to trade differently.

Remember to set these values by editing your config.js file and mixing the buy or sell methods with other pre-made strategies.

Gunbot Support Resistance Buy Settings

These are the central values that will activate your Gunbot strategy entry points.

gunbot support and resistance buy settings on GUI

BUY_ENABLED“: Toggle to “ON” or set to TRUE in your config.js to enable the Gunbot support resistance strategy to start buying.

SupRes_SPREAD“: The value you’ll add here will set the percentage “above” the first support level at which Gunbot will start buying.

SupRes_MAX“: The value you’ll add here will dictate how many times you’re allowing the strategy to buy. You will set the maximum position size in the base currency.

Gunbot Support Resistance Sell Settings

These are the central values that will activate your Gunbot strategy exit points.

gunbot support and resistance sell settings on GUI

SELL_ENABLED“: Toggle to “ON” or set to TRUE in your config.js to enable the Gunbot support resistance strategy to start selling.

GAIN“: Here, you will add your desired gain, and Gunbot will sell once the price reaches your set percentage above the break-even point and your SupRes_SPREAD value is reached.

SupRes_SPREAD“: The value you’ll add here will set the percentage “below” the first resistance level at which Gunbot will start selling.

Gunbot Support Resistance Balance Settings

Your balance settings are essential for trading with Gunbot. They define how much the bot can invest per trade and can be adjusted for different trading strategies.

Follow this link for an explanation on how to set your balance in Gunbot.

Balance settings are the same for all strategies, so once you understand the main parameters, you can apply the same values to any Gunbot trading method.

Gunbot Support Resistance Indicators Settings

gunbot support and resistance indicators setting on GUI

The two leading indicators used by the Gunbot support resistance strategy are the “Period” and the “SMA Period.”

PERIOD“: Here, you will set the time frame you want to use for your strategy; all other indicators will use this same period. Remember always to use a time frame supported by your chosen exchange.

SMAPERIOD“: The value you’ll add here will designate the number of candles your strategy will use to calculate the support and resistance levels.

Bear in mind that the Gunbot Support Resistance strategy is somewhat different and uses fewer options than usual with lesser configurable options. As a result, other confirming indicators or additional trailing are disabled in this strategy.

The Gunbot support resistance strategy won’t use any other feature like Dollar-Cost Average (DCA), Reversal Trading (RT), or Trail Me, so you don’t have to worry about those settings.

Final Words

The concepts of support and resistance can indeed be complex for new investors. Still, it is possible to focus on the basics and at the same time get a good idea of how these two attributes work together to influence the prices actions.

Whether you are a day or swing trader, it is vital to master the support and resistance basics to maximize profits.

Don’t forget that, with an automated crypto trading platform, you don’t have to be actively involved in the trading process. The crypto bot will carry out the majority of your trading activities. The only thing you have to do is set your strategy values so the bot can work with it.

Gunbot is easy to use, even for those who have never participated in any form of crypto trading before. The bot has been around for years and has managed to build a strong track record and a loyal community that testifies for its profitable strategies.

If you don’t have Gunbot yet, now is an excellent time to get it so that you can trade with precision and profit with the Gunbot Support Resistance Strategy.

buy gunbot software

Grow a Balanced Crypto Portfolio for Success

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ballanced crypto portfolio

The Most Comprehensive Guide on How to Build a Crypto Portfolio for Success.

Learn How a Stable Crypto Portfolio can Help you Maximize your Potential Return without Taking too Much Risk.

Balancing your crypto portfolio is basically about managing your risk and reward ratio. These two essential concepts go hand in hand, and they are the main factors you need to consider when investing.

Redistributing your crypto portfolio can be challenging, but it’s essential. You’re just moving money around to keep things in your desired ratio or risk level.

To enjoy a rewarding ROI (Return On Investment), you need to take some risk because the risk is an integral part of the investing experience.

In general, higher rewards are associated with higher risk. Therefore, the challenge is to find the most profitable balance between greed (obtaining a significant return on your investment) and the fear of losing everything.

Considering the sensitive and unregulated nature of the crypto space, along with the standard and dramatic price swings, you need to be prepared. Keep up to date with research and analysis to secure your financial future.

Building a crypto portfolio that meets your investment goals will dramatically increase your wealth over time. You can also save money on stable coins for peace of mind, have complete control over your investment, and get a real sense of satisfaction.

Get ready for ups and downs and be prepared to sell coins to cut losses. Overall, you will do well if your core portfolio is full of altcoins with high capital growth and reasonable potential.

You can also grow your crypto portfolio exponentially by adding trading automation software to your toolbox. Still, more on that later, let’s talk about how to manage your crypto investment first.

Keep Reading so you can understand how to create a well-balanced Cryptocurrency Portfolio that will help you achieve your long-term financial goals.

What is a Crypto Portfolio?

what is a cryptocurrency portfolio

A crypto portfolio is your total investment across all cryptocurrency types. A cryptocurrency portfolio is defined as the different financial assets (crypto coins) held by an individual.

You can construct investment portfolios based on the Modern Portfolio Theory (mean-variance analysis) or the three-parameter (Low, Medium, and High Risk ) portfolio theory.

Modern portfolio theory can help investors diversify their investments to reduce risk and achieve greater returns.

According to this theory, investors should choose a higher average return over a lower return and a lower return variance over a higher return.

The primary purpose of building a crypto portfolio is to have different altcoins, thus balancing profits and losses strategically.

In other words, you should not worry about the expected return of an individual investment but rather the combined return of all your assets.

What is Effective Crypto Portfolio Management?

An effective investment plan is about building a portfolio on the premise that investors have consistent expectations. These effective investments can be determined using crypto portfolios tracking apps such as CoinStats, Blockfolio, and the likes.

Many people choose to use the services of these trackers to manage their portfolios. Some of these platforms are natural bodies that act as intermediaries between buyers and sellers.

Crypto platforms offer a range of services such as setting up an account, managing the account, and executing traders’ orders. However, it would help if you were cautious when determining your app, meaning the difference between profit and loss.

There are many apps licensed to trade on different exchanges, and choosing the right one is only a matter of chance. To select the most suitable platform, you should research online and ask other traders about their experiences with different brokers.

It would help to understand the commission charged by a trading platform in detail to determine the actual cost per trade before making the transaction.

You can also take advantage of the dollar-cost averaging strategy, which reduces the impact of volatility on your overall investment. This strategy includes dividing your contribution into periodic investments to minimize the effect of a sudden change in the market.

What are Asset Allocation and Diversifications?

It is often said in the investment world not to put all your eggs in one basket. This saying accurately describes diversification, which includes helping reduce your risk by investing in various asset classes. To maintain stability and safety, you must diversify your investments.

Asset classes most commonly used by investors are cryptocurrency, stocks, bonds, cash equivalents, etc., and diversification is basically about mitigating unexpected exposure to market loss that can zero your account.

Asset allocation is how you allocate your capital among different types of assets while minimizing unnecessary risk. The first thing to do is to develop your asset allocation strategy.

Asset allocation involves determining the percentage of your portfolio to invest in particular asset classes based on your risk tolerance, investment horizon, and personal financial goals.

For example, in your cryptocurrency investments, you can diversify your coins and tokens. You can invest a more significant percentage, let’s say 60% in Bitcoin, and then invest the remaining 40% in altcoins, meme coins, and maybe NFTs.

Proper diversification and asset allocation should eliminate your desire to try to synchronize the markets. Possible risk reduction can help limit your losses, even in a declining market.

Concentrated vs. Diversified Crypto Portfolio

Diversification preserves wealth, and concentration creates wealth. These are two different investment principles. Over time, many investors are constantly evaluating their investments based on these concepts (Concentration and diversification).

Diversification is excellent. However, the concentrated position is more of art than science.

What is a moderate amount of diversification for your portfolio? Well, it depends on quite a several things.

How much currency you are willing to invest, how much time you plan to spend reviewing your portfolio, and how many different market segments you are interested in and know about.

No set amount of diversification is suitable for everyone, but some general guidelines make sense when asking the question. “Am I diversified?” And, if I am, is my diversification appropriate for me?

The first question is. How many different areas to invest in? If your funds are limited, the best way to diversify is to take concentrated positions.

Concentrated positions exist for many reasons throughout our investment careers, and they are not wrong. Sometimes it helps you with small capital, and it is what creates wealth.

Many traders who achieve multi-million net worth have done so by having a large portion of their net worth in a single coin at some point in their careers.

I will say this; it is more of greed and lack of focused post-management than the position itself.

After all, when you hear that somebody had lost everything, they had to have won a lot hence had something to lose, so the position must have worked for a while! My point here is that a concentrated position is not always wrong. You have to have a few strategies to handle it and then do it.

However, if you have enough funds, it probably makes sense to build your own portfolio once you are ready to do your homework and monitor your portfolio.

In this case, diversification would mean investing in a minimum of 5 different market segments with a minimum of two (preferably more depending on the funds available) crypto coins in each category.

Investment segments to choose from would include holding some stable coins, NFTs, Altcoins, meme coins, and more. Then, within these categories, an investor may want to diversify further by opting for small caps, large caps, growth, income, etc.

Whichever categories you choose, the important thing is to pick individual coins that you understand and not be so diverse that you can’t keep up with your investments and to make corrections midway as the market situation changes.

Additionally, as some coins get pumped, and some get dumped, you should periodically determine if your original percentage fund allocation remains intact.

By rebalancing your assets regularly, you will ensure that you are not too concentrated in a segment and that you are making profits or reducing losses effectively as you reallocate your funds to meet your investment goals (whether on a monthly, quarterly, or yearly basis) depending on your investment style.

Different Types of Cryptocurrencies

different types of cryptocurrencies

There are different types of cryptocurrencies, ranging from Bitcoin with the most significant market cap to altcoins. Below are types of cryptocurrencies that can get you a well-balanced portfolio.

Payment Coins

In reality, everyone in crypto knew Satoshi created Bitcoin because of the inefficiencies of the financial system that initially existed. Its decentralization feature has ever been a plus.

Bitcoin and Ethereum are the leading players here as facilitators of cross-border payment systems, aiming to make transactions faster, cheaper, and more secure without the intermediaries of the existing financial system.

These coins are considered to be a counterpart digital currency alternative to real-world US dollars.

Stablecoins

Crypto developers from different financial entities created this cryptocurrency class to deal with the price volatility typically associated with Bitcoin. To provide stability, stable coins are tied to a collateral reserve asset, such as the US dollar (or other fiat currencies), gold or other precious metals, etc.

The entity behind the stablecoin will usually establish a reserve account where they keep the asset (or bag of assets) to back up the stablecoin.

In this way, this type of cryptocurrency aims to offer the best of both worlds: the speed and agility of a digital currency, as well as the price stability of a fiat currency.

The most common examples of stable coins are USDT, USDC, DAI (MAKER), PAX, and TUSD.

Governance Tokens

Governance tokens allow token holders to vote on changes to the platform’s processes related to decentralized finance. An example of a governance token is the Uniswap UNI token.

UNI offers licensees the opportunity to contribute to the development of protocols and the development of the Uniswap ecosystem in general.

In the past few years, decentralized governance has been an important trend in the crypto world. Decentralization matters to many people, and they are interested in being involved in governance.

Although many don’t care about politics in their day-to-day life, crypto people seem to really love having a say in their favorite projects.

Why are these new governance tokens so important? Because they represent the future of decentralization. There is no mining involved, and decision-making power is limited to those with a stake in a platform.

It’s like having shareholders who are rewarded for their business success.

Utility Tokens

Utility tokens are a particular type of crypto issued to fund a product or service development and can later be used to purchase goods, services, or unlock features from the issuer.

Our closest example is the Gunthy Token which we can use to upgrade our Gunbot license and gain access to addons like bitRage and Market Maker. The Gunthy token for us represents an investment.

Utility tokens have value, but you should not consider them as money or use them to speculate as you would with a regular coin. Think of them more like loyalty points or store credit.

Note that the words “coin” and “token” are often used interchangeably. However, there is an important distinction to be made. A coin is a cash that is exchanged for goods via a blockchain network. A token is anything else, such as services, membership, or company shares.

How to Build a Well-Balanced Crypto Portfolio

Before delving into cryptocurrencies, it is essential to develop a framework for evaluating potential exchanges. Evaluating core value propositions, functionality, community size, uniqueness, and market opportunities are some of the many areas you can explore in detail.

Due to the high volatility of cryptocurrencies, profitable trading opportunities present themselves every day, but not without risks.

So how do you structure a portfolio of coins to maximize your wealth, ensure peace of mind, give you full control over your investments, be easy to manage, and be satisfying?

Conduct High-level Research

If you are new to cryptocurrency, you have probably heard of Bitcoin, Ripple, Ethereum, and maybe Litecoin.

However, this knowledge base only scratches the surface of what can be as complex as you decide to be familiarizing yourself with the market and learning about leading. Emerging cryptocurrencies and their different market sectors can help you build a resilient portfolio to weather the inevitable storms to come.

Once you have refined your crypto outlook, start by checking online to see if the project has published a whitepaper. These typically provide a roadmap for the cryptocurrency and details about the team that develops it. They also describe how cryptocurrency works and break down unique value propositions.

Here are some reasonable questions to ask yourself before your next crypto purchase to gauge its quality briefly in your research process:

  • What did it take you to find this altcoin? Do they have a strong online presence?
  • Are you passionate about the team and the user base? Have they ever succeeded?
  • Are they involved in the crypto community on Twitter, or do they appear at technical conferences?
  • Does this coin have a strong community that believes in it, or is the support base mostly based on speculation?
  • While reading the white paper, did you get the impression that the team dreams their coin ability to do it all?

The coins that promise the moon will run out of funds normally have technology that is not reliable and likely does not understand the tradeoffs between specific algorithms and protocols.

Once you have decided on that…

Keep your Investments Diversified.

keep your investments diversified

Split it between high, medium, and low risks investments accordingly. An allocation across the entire risk spectrum should be considered for cryptocurrencies, from a conservative low-risk portfolio to an aggressive high-risk portfolio.

This will determine the relevance of cryptocurrencies in your portfolio construction and the sensitive percentage of exposure.

Select the asset classes that suit you.

Fill your investment basket with the right mix of coins.

The key to meeting your financial goals and investing successfully is choosing the best possible moderate-risk and average return combination. Periodically rebalance your well-diversified portfolio to maintain the desired mix of poorly correlated assets.

Over time, your asset allocation can vary significantly from what you originally planned. This change is subject to market volatility. Some investments increase or decrease more or less in value compared to others in your portfolio.

When this happens, you must rebalance your portfolio by selling the overweighed assets and using the proceeds to buy underweight assets. Rebalancing helps you bring your portfolio back to your original target strategy by reinvesting in coins that should generate higher returns.

Take note of this fantastic opportunity for increased profitability and return on your investment. Crypto portfolio rebalancing allows you to sell a high-performing asset and buy a low-performing asset. This will enable you to practice the good-old strategy of buy low and sell high.

Stick with your investment plan. Of course, you’ll experience a range of emotions, but with planned and predetermined rules for rebalancing your portfolio, in no time, you’ll be able to maintain focus on your goals. This means you’ll be able to stay centered on your investment plan.

An essential strategy is to rebalance at predetermined intervals. When you stick to your predetermined rules, it’s less likely you’ll make emotional decisions. With this plan, you won’t make financially-driven decisions when an asset crashes or experience FOMO when an asset rises in price.

And lastly, only invest what you can lose.

How to Rebalance Your Crypto Portfolio in 3 Easy Steps

  1. Keep track of your initial crypto portfolio: When you decide on a rebalancing strategy and buy what you like, record the total amount of money invested and the total value of your portfolio. With that information, you’ll have a good idea of where you stand as your crypto account grows.
  2. Analyze and Define Your Asset Allocation: On your designated date, review your portfolio and decide which assets are more critical. Make sure you’re on track with the desired allocation. Compare the current distribution to your starting point (or desired budget) to see if your portfolio’s changed significantly. If so, you need to rebalance by buying and selling the relevant assets.
  3. Re-examine Your Risk Acceptance: The market’s movement or changes in your life may affect your risk appetite. Wouldn’t you like to know how your asset allocation changes since your risk tolerance have changed? If you just felt like the markets have been moving in a bullish trend, you should probably change your asset allocation to more aggressive investments, thus maximizing your profits.

You can do those 3 simple steps manually or take advantage of a portfolio manager platform. Let’s check out some of them!

Crypto Portfolio Trackers

Portfolio trackers will help you monitor price changes in cryptocurrencies. These platforms allow you to track the movement of your positions.

Some crypto portfolio trackers are also trading platforms, so you can use these platforms to buy and sell the supported altcoins.

Keep in mind that different portfolio trackers have additional features. Some are good for buying and selling but don’t have every coin you need. Some are good at cataloging all the coins in the world but won’t let you buy and sell currencies.

Each portfolio tracker has its pros and cons. You’ll need to compare these to find which one is best for you.

Regardless of your taste, when you choose your tracker, make sure it offers good security features, a simple and easy-to-understand User Interface, and a good mix of coins and exchanges for you to use.

Here’s a list of the Best 3 Crypto Portfolio Trackers.

Blockfolio, now FTX.

blockfolio ftx

Blockfolio and FTX joined forces to create the easiest, most powerful mobile trading experience for digital assets.

Blockfolio is the most popular crypto portfolio tracking app on the market. With over 6 million users and founded in 2014, it’s a heavyweight champion of digital money management. No wonder why FTX acquired them!

The FTX mobile app (Blockfolio) utilizes a sleek, mobile-first design. The design and user experience of this app have always been one of its main driving forces. This app supports thousands of cryptocurrencies and has connections with at least 15 crypto exchanges.

Blockfolio (FTX app) has a helpful project intelligence tool called Signal. It combines news and other data on the projects you love. You can set up alerts to be notified when the Bitcoin price changes or any other altcoin they support. Blockfolio is free to use and perfect for your cryptocurrency needs.

Remember: Blockfolio is now “The FTX Mobile App” or “FTX App” so, don’t get confused when you see the new branding.

Delta

delta investment tracker

Delta is a popular crypto portfolio tracker app that lets you follow your performance. Users can see live price and market-based data, track specific coins, and keep up with the latest trends in the industry.

Delta offers the ability to track every trade, every market movement, and asset in a diversified portfolio. The mobile app has millions of signups and hundreds of thousands of active users. The reason for its success is its gorgeous design and its high functionality.

Delta is a complete portfolio tracking solution. Every entry and exit can be carefully designed to ensure that your assets are tracked every step of the way.

This app is perfect if you’re trying to keep up with all the changes in the crypto sphere. It has a vast inventory of assets, detailed information on projects and news, and is exceptionally well-designed.

Delta has 24 exchanges and 14 wallets (so far) on its supported list and also has a project intelligence tool called Delta Direct that will send you news and updates from your favorite crypto projects.

As expected, Delta allows you to set up Bitcoin and any other altcoin they support, and its basic features are Free.

Delta was acquired by eToro in 2019, so that’s another trusted brand you may be able to recognize.

CoinStats

coinstats crypto portfolio tracker

CoinStats is one of the leading platforms for tracking crypto coins. With over 500,000 users and $5 billion in currencies tracked, they have a lot to offer. The strategy of CoinStats has been to make it available on as many platforms as possible, and they have succeeded.

It has all the automated exchange wallet import features you would expect, along with a diverse news aggregator that crawls a wide range of sources, including Reddit and Twitter for every coin, and a lot more.

CoinStats is a cross-platform product. It supports iOS, Android, web, and Mac desktops. It also has versions for iWatch and Google Chrome extension. CoinStats provides you with the opportunity to manage your cryptocurrency accounts through 26 exchanges and 34 wallets as of this writing.

CoinStats is a company that creates fresh and relevant features and improvements. These new features are released regularly to make the app as helpful as possible. CoinStats is also free to use on a basic level.

While the platforms listed above do a great job of giving you insights into the value of your crypto portfolio, they do not provide automated crypto trading services. Which is the logical step to grow your profits to the next level…

How to Grow Your Crypto Portfolio Exponentially

Don’t fall into the trap of trying to trade using your “gut feeling” or emotions because this is the number one reason why many crypto traders keep failing. They let their emotions get the better of them and end up self-sabotaging themselves.

Enter Gunbot: Apply a Strategy-Based and Structured approach to the crypto markets, and your trading experience will change overnight.

Gunbot is a High Probability Automated Crypto Trading System that applies Rule-Based strategies with easy to trade setups for crypto exchanges in virtually any time frame.

Best of all, Gunbot eliminates the guessing game by providing you ready-made strategies included with your license. All you got to do is fine-tune the strategy values to fit your trading style. You’ll be on your way to growing your crypto portfolio exponentially.

You will not only be able to use strategies, but you’ll also learn to develop your own and become a fully confident trader. Keep reading blogs like this one to understand the techniques and ways of thinking that you can also eventually adapt to your trading in the future.

Instead of hopping from strategy to strategy, learn how to use one methodology and continuously adapt and improve it to fit yourself and the ever-changing market conditions.

Transform yourself from an average crypto trader to a consistently profitable pro trader.

Get Gunbot Now and become a self-reliant trader who doesn’t need to rely on anyone else to trade!

profit with gunbot

Closing Thoughts

Developing a strategy for your crypto portfolio is not complicated, but it is essential to understand where you want to invest and what kind of investment you want to make.

Planning your strategy for both short-term and long-term growth is essential. Having clarity about your thoughts helps you make some profits, but you should also consider the balance and diversification of your crypto investments.

If you’re thinking about investing in cryptocurrencies, you should know there are tools to help you. A crypto portfolio tracker will let you see the daily price of an asset, its volume, and the size of its market cap.

If you don’t want to put all your savings into it at once, you can regularly use Dollar-Cost Averaging by investing a set amount of money. Just be careful about which tokens and coins you invest in. Do your research!

And last but not least, take advantage of Gunbot, so you can trade those altcoins on automatic and grow your profits exponentially!

Disclaimer: CryptoDROI is NOT a Financial Advisor.

You should always consult a financial advisor before engaging in any trading. If the risks are unclear to you, it is your responsibility to get the information you need, either from a professional advisor or from some other source. All trading strategies carry risk, and you must understand what that looks like before going into it.

RSI Indicator Explained Crypto Trading Guide

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rsi indicator guide

Look Into the RSI Indicator Ultimate Guide.

Learn How to successfully use the RSI Indicator and Discover what RSI Divergence is. Get on the right side of trades that deliver you high returns at low risk. Use real-time RSI analysis to help you decide when to buy or sell.

The Relative Strength Index (RSI) is one of the most popular technical indicators in use. This oscillator measures the velocity and magnitude of directional price movements and helps traders determine when a market has reached overbought or oversold levels.

The RSI is an essential tool for cryptocurrency traders because it helps you find signals in the noise. You can find this indicator in a variety of markets, including the cryptocurrency market.

As a straightforward indicator, it is easy to understand and suited for beginners. That’s why you can see it integrated on every trading platform chart and in any crypto trading system.

The importance of technical analysis cannot be overemphasized in crypto trading. Anyone who wants to learn technical analysis will first learn two indicators: The Moving Average (MA) and the Relative Strength Index (RSI).

And one of the essential trading indicators used when analyzing a trade is the relative strength index. You can use the RSI indicator to measure the magnitude and duration of trends and identify potential reversal areas. Let’s find out more about it!

The relative strength index is typically used over 14 days and measures the speed and magnitude of directional price movements as the ratio of higher close to lower close.

This article explains how the RSI strategy works. As you read, you will understand how RSI divergence work, learn about the RSI signal, how to calculate it, and the benefits it offers.

What is the RSI Indicator?

what is the rsi indicator

The RSI is a technical indicator used in stock, futures, cryptocurrency, and commodity trading. J Welles Wilder developed the RSI indicator for the commodities market in the late 1970s. But over the years, it has proven to work very well for the crypto market too.

The Relative Strength Index (RSI) is a momentum oscillator that measures recent price changes’ magnitude (both speed and shift).

The RSI ranges from 0 and 100, and conventionally, people consider the price to be overbought when the RSI is above 70 and oversold when the RSI is below 30. Many systems generate trading ideas by looking for divergences and fluctuations in failures.

Below are the two RSI features that many traders use to trade:

  1. Bullish and Bearish Divergences.
  2. Overbought and Oversold Conditions (rules 30 and 70)

What is an RSI Divergence?

rsi divergence

In simple words, divergence is a difference between indicators and price. The RSI divergence gives you the crypto trading edge you need to stay ahead of the crowd.

Divergences are essential trend reversal signals that result in a high probability of trade setups when combined with other indicators. A divergence pattern develops on the chart when the price action moves in one direction and the signal moves in the other.

Crypto traders widely use the RSI indicator to identify divergence patterns.

For example, when you see the price action on the chart going up in an upward slope, while the RSI is going down in a downward slope. This structure is a negative divergence pattern or a bearish divergence pattern and indicates a possible trend reversal from top to bottom.

Likewise, when the price action goes down while the RSI indicator goes up, it shows the bullish divergence pattern.

Types of RSI Divergence

  • RSI bearish divergence: Going with the general definition, when the price hits a higher high and the RSI hits a lower high, this condition is known as a bearish divergence, and it is good to be short (or exit if you are long) at this point.
  • RSI bullish divergence: When the price hits a lower high, but the RSI is printing higher lows, this condition is known as a bullish divergence. It is advisable to take long positions (or close if you are short) at this time.

Overbought and Oversold RSI

The RSI is also known as the overbought and oversold indicator. The RSI is plotted at an index of 0 to 100, and 50 is the centerline. Readings above 70 are deemed overbought, while readings below 30 are considered to be oversold.

Despite that, these variables, oversold and overbought, would need to be confirmed with other indicators. Therefore, it is advisable to exit your old long positions (SELL) or look for short trades when the indicator shows you an overbought condition.

Conversely, any RSI movement below 30 is considered an oversold condition. Thus, it is advisable to exit your old short positions (if any) and look for long trades when the indicator shows you an oversold condition.

Importance of RSI Divergence

Why is RSI divergence is essential, and how to trade it?

The importance is usually noted by the big moves that occur after a fundamental divergence in price and the leading indicator. The most talked-about RSI Divergence, but there are many forms such as MACD Divergence, Price Volume Divergence, and just about any divergence between price and indicators.

When the prices move relative to an indicator, they can only be short-term and change depending on how the market moves. In a downtrend, the RSI divergence could mean that a breakout is coming and an uptrend will begin, but it would be easy for indicators to realign as the market moves forward, which would cost you time, profit, and a missed opportunity.

Divergence doesn’t happen very often, especially in chart frames for a few minutes. On a 30 minute chart, a reliable deviation can only occur once every few days.

The likelihood of a divergence occurring is greater at the end of the uptrend and downtrend, and they rarely happen in a sideways trend. It is best to find a peak or valley and look for divergences, indicating a market entry.

Even professional traders work hard to find a way to trade divergences with overwhelming precision. The best strategies only take positions at the top and bottom of the charts and follow candles for buy and sell signals.

Anytime you limit an indicator and strategize around it, you limit the number of trades you can make, but with the hope of securing a greater precision.

Acquiring discipline is essential for you to succeed at trading a divergence signal because it’s easy to get distracted in trading before complete divergence arises.

You should always let the trade go ahead before taking a position, but it can often be difficult to tell if the charts are truly diverging or just a short-term difference.

Differences Between Divergence and Reversal

A positive divergence is indicated when the RSI is higher on the chart but the price is lower. However, a positive reversal is displayed when the RSI shows a lower low and printing a higher low.

Suppose you were to locate situations like this and analyze them. In that case, you might make the observation that positive discrepancies do not occur under the same circumstances, and you would be right.

The same would happen with negative divergence and negative reversals.

Reversals are signaled when the trend is ready to resume. Divergences are reported when trends fade.

Statistical data shows that the intelligent trader knows how to look for negative reversals in a downtrend market and in an uptrend market to look for positive reversals.

Reversals are best traded because momentum matches the trend. Momentum creates trends. Then there are divergences in the countertrend, which makes them riskier to trade.

So, what exactly are reversals? Positive and negative reversals are signals that appear when price outperforms momentum, and you can use them to confirm the existing trend.

Being on the safe side of the trade is knowing when to join the trend, and that is what a reversal signal will tell you.

RSI Indicator Signals

If you knew where the market momentum would be, when it would happen and what direction it was heading, you would make a lot of profit. RSI locates momentum, using the 4 RSI signals,

The RSI indicator is a bit confusing for many crypto traders. Some do not understand the difference between divergence and a reversal of the Relative Strength Index indicator but don’t worry, keep reading, and it will become easy for you.

The relative strength index signals are often referred to as bullish or bearish reversals. They are the signals that generate momentum for all trades.

Even experienced traders using the RSI are unaware that there are reversals. If so, they don’t know which divergence pattern or inversion pattern is better.

Most of the indicators used in trading serve to determine if prices are overbought or oversold. This myth will lead to losing money or cause you to abuse the RSI or other momentum indicators.

Overbought and oversold are relative terms that make no sense with momentum. You will often read that you should sell when the RSI hits 70 on the scale and buy when it hits 30; this is not accurate in most cases and often is the complete opposite of what happens, so you should avoid it.

Reversals and divergences are the key signals to watch on the RSI indicator, and every trader should know what they are and when they form.

Below are the four RSI signals:

  1. Negative divergence (Bearish)
  2. Positive divergence (Bullish)
  3. Negative reversal (Only shows up in bearish trends)
  4. Positive reversal (Only shows up in bullish trends)

RSI Momentum

Gathering experience in trading over the years, I have realized about three types of RSI momentums. Anyone can identify two on the RSI charts, the third is more complex, but we can identify areas where the possibility and likelihood of this happening are higher.

Momentum Type 1

There are 4 RSI trading signals. Two of these signals are divergences. Today, many traders use divergence to confirm that a reversal is taking place on a price chart.

However, a trader who knows and understands where divergences occur knows that they appear when a trend has lost strength and prices begin to retreat. Divergences are a signal to the trader in many cases that a trend is slowing down.

Momentum Type 2

RSI trading signals indicating Momentum Type 2 are reversals. There are also two. This type of momentum shows that momentum type 1 is running out, and prices are ready to try and continue the trend they were in before.

Therefore, reversals are a Type 2 Momentum signal used to search for entries to re-enter the trend.

Momentum Type 3

Type 3 is the momentum that traders try to capture when looking for chart patterns or price patterns.

It would be like cornering a wild bull, knowing all the time that when it decides to break free, it will do so with some force. Experienced cowboys are pretty good at knowing when this is happening.

Momentum Type 3 is the momentum that generates profit. But to do that, you have to be in position, and Momentum Type 1 and 2 help determine that.

The 4 RSI trading signals can allow you to profit from Momentum Type 3. To do this, you will need to educate yourself about the four signals and how they work.

Once you’ve done that, you can start choosing your Momentum Type 3 spots that generate substantial income.

Reading RSI Charts

Many traders, especially new ones, look at the charts and start to draw trend lines. Why? Because they learned how to do it through books, seminars, and websites. Without going into that, it is wrong.

Trendlines have no value except to tell you where the trend is coming from, not where it is going. You need methods of determining momentum because momentum is what makes a successful trade.

The RSI indicator using the four signals presents a clear picture of what is happening on any trading chart. You can do it manually or algorithmically using the paint indicator explicitly designed for TradingView so that you do not have to do this.

How to Calculate RSI

Popular trading platforms like TradingView have the RSI automatically incorporated, but we need to know the formula behind the calculation to understand how the indicator works.

Calculating the RSI is a two-step process, which includes measuring the relative strength of the price trend (RS) by comparing the average value of the price increase (gain) with the average value of the price fall (loss) for the chosen period.

The Relative Strength Index is a dynamic oscillator commonly used to predict an oversold or overbought business. The calculation process is simple:

  • Look at the last 14 closing prices for a stock.
  • Determine if the current day’s closing price is higher or lower than the day before.
  • Calculate the average profit and loss for the last 14 days.
  • Calculate the Relative Strength Index (RSI): (100โ€“100 / (1 + RS))
  • Calculate the relative strength (RS): (AvgGain/AvgLoss)

The basic RSI formula is below:

RSI = 100 – [100 / (1 + (average profit / average loss))]

The average profit or loss used in the above formula is the average gain or loss percentage over a retrospective period. RSI uses 14 days as the standard period to calculate its value. Anyone can change this setting.

The RSI will then be a value between 0 and 100. It’s widely believed that when the RSI is 30 or less, the stock is undervalued, and when it is 70 or more, it’s overvalued.

Benefits of using the RSI Indicator

The RSI indicator is one of the main tools for measuring the strength of the trend. This indicator can signal a trend reversal even before the price of an asset moves.

That is why it is better to use the RSI in a different trend. When the price moves in a horizontal channel, the RSI indicator is not helpful and often provides false signals.

The RSI can also help determine the trend. To take advantage of this feature, we need to enter an average value of 50 in the indicator. If the indicator readings fluctuate below the central value, we are in an ongoing downtrend, and if the renderings are above the main, we are dealing with an uptrend.

For example, here is a Bitcoin 4H chart from January 28 to February 22. Meanwhile, the cryptocurrency price has risen from around $ 31,000 to $ 57,000, and the RSI indicator has fluctuated above its average values.

btc january rsi

An example of a downtrend can be seen between February 22 and March 1 when Bitcoin went from $56,000 to $43,000:

btc february rsi

The RSI indicator also helps determine the trend or short-term reversal by using the overbought and oversold areas.

It’s pretty simple! If RSI falls on the 30 marks or below, there is a high probability that the asset will rise, and vice versa, the rise to the 70 marks or above indicates a possible decline in prices.

The hidden bullish divergence is also worth mentioning; it occurs when the price forms higher local lows, but the indicator continues to hit lower lows.

Sometimes a hidden bullish divergence forms against the backdrop of continued price growth; this means that it doesn’t even need to be preceded by a downtrend.

The RSI Indicator Restrictions

The RSI can move without showing a clear trend for an extended period.

False alarms have been a problem for technical analysts. Unique reversal signals are challenging to identify, and many false positives can confuse the trader.

The RSI reliability is higher when it follows a long-term trend. Like many other technical indicators, its signals are most reliable when they correspond to the general price trend.

The RSI indicator can stay overbought or oversold for a long time when the directional momentum is strong. As a result, the RSI is best used in a market that goes back and forth between bullish and bearish waves.

How to Apply the RSI Indicator to Your Gunbot Strategy

With Gunbot, it is easy to place fully automated trades based on the relative strength index oscillator. You can use it as a confirming indicator, but you can also define your entry and exit strategies based on the RSI.

The online crypto trading bot automates trading strategies for you and efficiently empowers investors of all experience levels with algorithmic trading strategies.

The RSI is part of the Gunbot arsenal of confirming indicators which you can use as extra confirmation for your trading setups. Do you know you can use the RSI oscillator as a BUY signal too?

Here’s how to do it! Click on the “strategies” tab on Gunbot GUI and create a simple strategy using “GAIN” as your buy and sell method. After that, go to your newly created plan “Buy Settings” and set a negative value in the “Buy Level” box, for example, -100.

Set your desired gain percentage on the “Sell Settings” and go to the “Indicator” tab, there activate the RSI buy and sell boxes, define your buy and sell levels, and choose between “oscillator” or “cross” as your execution trigger under RSI method.

gunbot gui rsi buy and sell

That’s it! Now, every time your conditions touch the charts, Gunbot will execute your commands.

Don’t forget to choose your risk management strategy to go along with this trading setup. Here are two articles to read if you need to decide between DCA or StopLoss with a sound risk vs. reward ratio.

Read: Gunbot Dollar-Cost Average Overview and Risk vs. Reward Explained for more info.

Gunbot is one of the top cryptocurrency trading bots that you can find in the market today. You can use it to start trading or to help optimize your trading strategies.

Besides the basic features of automatic trading, users can also access backtesting, Tradingview alerts, arbitrage, a market maker for margin and futures trading, and more…

Conclusion

As the name suggests, any indicator “INDICATES” the price and does not dictate the price. RSI is no exception. Price changes will cause the RSI levels to move and not the other way around.

Indicators are undoubtedly helpful for beginners and algorithm traders. For beginners, indicators help avoid unnecessary trading, and algorithm traders use them to develop sound trading systems.

Once you know how to plot divergences and reversals and trade using statistical data highlighting the best RSI levels, the best times to trade, and when each signal needs to be dealt, you will begin to elevate your trading skills to a whole new level.

But, if you want to cut the learning curve and start using professionally developed crypto trading strategies based on technical indicators signals such as the RSI Indicator, you have to catch Gunbot now!

gunbot gui btc chart

Backtesting Crypto Trading Strategies Ultimate Guide

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backtesting crypto trading strategies

Backtesting Crypto Trading Strategies Insights.

Discover how to backtest a crypto trading strategy and why backtesting crypto trading strategies can help you succeed and prosper in the crypto trading space.

Ask any trader behind a successful business if backtesting their crypto trading strategies is an essential part of its development, and the answer will undoubtedly be a Yes.

Backtesting is an essential tool to demonstrate an algorithmic strategy’s minimum viability (or not). A backtest is usually the first step after the trading design has been programmed and formed.

Think of it this way: Before you buy anything, you check its history. You look into the product, how it works, and if it’s worth your money. This same principle applies to trading. Backtesting can help discover its history.

Without backtesting strategies, traders would be taking an insanely high risk while trading cryptocurrency. Backtesting is an essential tool in the trader’s toolbox because, without it, there would be no way to know if a trade would be profitable.

However, many developers cannot help but bring their strategies to the market after completing this first step rather than continuing with more advanced test runs.

For you (the end-user), this move doesn’t have a happy ending. It is almost always disappointing and generally costly.

Luckily for you, we can take advantage of the complementary backtesting tool of the ultimate trading software and test before buying and selling our hard-earned coins.

That’s right, the Gunbot Pro and the Ultimate Edition Include the backtesting module. Otherwise, you can purchase the addon separately or even try a free option…

But let’s find out all about backtesting before. Read on!

Backtesting, What Is It?

backtesting your trading strategies ultimate guide strategies

Backtesting consists of simulating past transactions using historical data and the programmed trading strategy model, the first hurdle in determining whether the execution of the automated strategy is market-ready.

Backtesting is a vital function in developing a sound trading system. You can always complete the process by taking past data and building past trades that used the rules of a strategy you may be considering yourself.

By comparing the statistics that shine as you build past assumptions, you can determine the strategy’s effectiveness, discover ways to refine your trading method, and spot flaws in the plan before making any solid investments or transactions strategy.

Crypto backtesting is the basic process of fabricating a trading method using historical prices to test how well your strategy would have worked in the past.

Backtesting Crypto Trading Strategies assumes that if a strategy has worked against data and trading scenarios, it will continue to work in the future and vice versa; if the trading plan were not up to par in the past, it would fail attempted in the future.

For your backtest to be successful and get the best possible results in forming your technical crypto trading strategy, you need to collect plenty of data.

More importantly, if you consider a significant investment, taking the time to do a well-thought-out backtest can pay off in the long run. Because if your backtest is successful, your future investment can (and will) be successful as well.

Why is Backtesting Important for a Crypto Trader?

Because backtesting crypto trading strategies allows you to analyze the historical behavior of an investment strategy and determine the profitability of your chosen trading method, if the backtest results show that your plan has high returns and low risk, you will have more confidence in implementing those trading rules.

The main idea is that any trading strategy that has worked well in the past is likely to do so in the future. Conversely, suppose a backtest of a particular trading strategy shows poor performance. In that case, you should reject the strategy because it is unlikely to perform well in the future if it has underperformed in the past.

Backtesting also helps traders understand the behavior of their trading plan during different vital periods of past data, for example, in the 2020 global recession and pandemic. You get to know how much money you expect to lose in these Black Swan events.

For older traders, taking too much risk could significantly delay retirement. A significant drawdown could be a big problem for young traders who invest on margin (borrowed money). Therefore, by backtesting your trading strategy, you can know exactly how much money you will lose during these challenging times, so you can always determine the risk you can afford to take before trading.

If you are considering a significant investment, it may be worthwhile to take the time to do a full backtest, as the backtest results can determine whether or not you are making the right decision.

Do you know why most traders in the crypto market lose money?

It is not only because they don’t understand the market. It is mainly because their trading decisions are not based on sound research and tested trading methods.

Never make your trading decisions based on emotions, or take excessive risks with the hope of getting rich quickly. If you remove your feelings from trading and backtest your ideas before trading, then your chance to trade profitably in the crypto market will be increased.

Benefits of Backtesting Crypto Trading Strategies

backtesting crypto trading 101

The result of your backtest will give you the crucial information you can apply to your trading plan.

Here are four benefits of backtesting

  1. Find out the best trading setup based on your needs and goals.
  2. Become aware of your optimal risk per trade.
  3. Discover on what crypto markets your strategy will work best.
  4. Gain the ability to fine-tune your entry and exit triggers.

All this information can help you build an accurate trading strategy. Without data from fundamental markets, you cannot understand how your plan will perform in the future and whether it is viable as the market changes.

Do you want an accurate and sound trading strategy?

You won’t have it unless you start incorporating precise market data. Without it, you’re not able to tell if your trading strategy will work in the future.

Crypto Trading Strategies you can Backtest

Generally, any strategy that you can rule you can backtest, ranging from systematic to algorithmic trading.

For example, a trader may be drawn to a strategy that selects ten coins with the lowest price ratio each year. Likewise, a trader who relies on technical analysis may consider buying a cryptocurrency when its fast-moving average exceeds its slow-moving average.

All of these crypto strategies follow a consistent set of rules that you can simulate using historical data. The advantage of rule-based investing is that it removes emotions from the picture.

Every decision to buy or sell a coin is based entirely on logic. This choice prevents traders from making behavioral mistakes, such as panic selling for uncertainty and doubt or buying for fear of missing something.

Backtesting a Systematic Trading Strategy

Moving Averages (MA) is a common indicator-based strategy used by many technical and non-technical traders. The aim is to identify a trend in the price of a coin and capitalize on the direction of that trend. Some traders believe that certain behaviors of moving averages indicate fluctuations or possible movements in the price of altcoins.

For example, a short-term moving average that goes over a long-term moving average is a buy signal. In contrast, a short-term moving average under a long-term moving average can be considered a sell signal.

sma cross chart death cross and golden cross

A pattern widely followed by traders and financial analysts are the 50 and 200-day moving average, known as the golden cross. It occurs when the 50-day moving average exceeds its 200-day moving average. It is considered the sweet spot of moving averages among a huge crowd of investors.

Short moving averages are used chiefly for short-term trading. However, most of the market players use it blindly and without prior backtesting.

Therefore, most traders are unsure whether it works or not, except for those who have been using it for a long time and have done their homework and tried various moving average setups.

As an informed trader, you should generally avoid relying on a single technical indicator when deciding whether or not to enter a trade. However, there is also the phenomenon of self-fulfilling prophecy. If enough market players believe that the golden cross marks a turnaround, it might come true.

Death cross, which is the reverse of the Golden cross, occurs when the 50-day moving average of an asset exceeds the 200-day moving average. This indicator’s name comes from its supposed strength as an indication of a bear market.

Here’s the creation of a death cross in three stages:

  1. Coin’s uptrend peaks, and momentum begins to weaken.
  2. A case where the price of the 50-day moving average drops down the 200-day moving average.
  3. The last phase is a continuation of the downtrend. If the downtrend is short-lived, the death cross is considered a false sign.

Professionals consider the death cross a more reliable indicator if a high volume of operations confirms it.

Backtesting Crypto Trading Strategies

Since the purpose of the backtest is to determine the effectiveness of a trading strategy, it is essential to ensure that your backtest is as realistic as possible. This avoids creating backtests that look very appealing on paper but still perform poorly when you’re live trading on the exchange.

There are several ways to do a more realistic backtest. Identify the situation and retrieve similar cases from the history. Take an economic event or a sudden change in price or volatility and compare past conditions.

Create and execute a strategy

Execute your trading strategy through all the past historical data past while manipulating various variables. These options include entering the market, first and second profit targets, stop loss and risk/reward ratio, etc.

Creating your backtester: You can start from scratch and build your own backtest, and it is up to you to decide the programming language you will use to backtest your trading strategy.

Pine Script (Developed by TradingView) is the most widely used backtesting program. Still, It is not easy to create your own backtest due to learning the program.

Thanks to the Gunbot developers for the integration and our member Allanster you can benefit from ready-made backtesting scripts when you purchase the Gunbot Backtesting addon either separately or when it comes included in your license.

Don’t worry. If you’re not comfortable with the programming language used by TradingView for backtesting crypto trading strategies, you won’t have to program anything or write any code once you own the module. It’s all done and included in the Gunbot Deluxe Tuners for you to use.

Alternatively, you can also try Allanste’s free tuners for backtesting crypto trading strategies like BB, BB with RSI, BB/StepGain, PingPong, StepGain, and the TSSL strategies TradingView to help you visualize and optimize them in Gunbot.

allansters backtesting free tuners

You will not need the TradingView plugin, and it will work with a free account on TradingView. These basic scripts will help you learn and optimize your settings for the built-in strategies included with Gunbot.

Backtesting Crypto Trading Strategies with Gunbot

When you buy your backtesting addon or your Gunbot Pro/Ultimate from CryptoDROI.com, you can open a ticket through Zendesk support, and the Gunthy team will take care of activating it for you and give you access to the Gunbot TradingView Scripts.

After that, all you have to do is head over to Tradingview, open a chart, and search in the Indicators section for “Tuners,” choose by clicking on it and apply it to your chart.

backtesting tuners

The scripts are programmed with Gunbot strategies, so all you have to do is edit the values to match your rules.

If you bought the premium edition, you would have the facility mix BUY and SELL methods, including ADX, ATRTS, BB, BBTA, EMASpread, Ichimoku, MACD, MACDH, Gain, PingPong, SMACROSS, StepGain, & TSSL.

These strategies also include different confirming indicators like ADX, BTC_PND, EMASPREAD, MFI, RSI, STOCH, STOCH-RSI, TrailMe, TakeBuy, and TakeProfit all inside one suitable script.

Read the Backtesting Add-on Frequently Asked Questions article to learn more about this Gunbot excellent feature.

Evaluating Your Backtesting Results

Many strategies can be utilized when it comes to backtesting, and you can also achieve a lot of results if you properly learn what data to interpret and what to extract from the data being compiled.

Below are few tips to help you backtest and choose an effective trading strategy.

The first thing you need to know before backtesting crypto trading strategies to help you improve your crypto trading techniques is the universal statistics behind backtesting that can be used and converted into feedback.

Some of the most important are the timing of the test, the actions that are part of the backtest, which is commonly referred to as the universe, and the net profit or loss, which, of course, is your percentage of profit or loss.

This last part is the real definition of how effective your long-term strategy is when choosing to model your investments around it.

Backtesting crypto trading strategies statistics are what a savvy investor will review and compare various investment strategies. They might help you discover potentially problematic situations with the strategy.

Here’s some information you can collect from your backtesting statistics:

  • Annualized returns: The standard deviation of the model’s daily returns over a year.
  • Annualized profitability: Percentage of the average annual profit (or loss) of your trading strategy.
  • Test time: Backtesting over a long time gives you a better idea of different market conditions.
  • Exposure: The percentage of capital you invested. Keep in mind that a higher exposure can lead you to higher profits or higher losses.
  • Averages: The percentage of your average gains and average losses.
  • Volatility measures: Keeping the volatility low may help you to reduce risk.

Understanding these aspects of statistics can really help your technical crypto trading strategy. Once these are fully understood, defining what you can use on your trading systems for backtesting.

The truth is, any trading system that you can quantify can be used because the calculation will not change. However, qualitative systems that include judgments on human decision-making cannot be used because the results will vary each time.

Cumulative Returns

Your cumulative or absolute return is the total amount of money that your investment has gained or lost over time, independent of the time involved.

To calculate your cumulative return, you will subtract the Final value of your investment from the initial value of your investment, then divide the result by the Initial value of your investment.

Here’s an example: Imagine you invested $10,000 on Bitcoin, then after some months of trading, your investment grows to $15,000. In this example, the cumulative return of your investment is 50%.

You would calculate your Cumulative Return in this example like this: (15000 – 10000) / 10000, and it will give you a cumulative return of 50%

But don’t break your brain yet :). If you’re a Gunbot user, you won’t need to do any manual calculation because your bot PnL (Profit n’ Loss) tab will give you the numbers you need.

All you need to do is click the PNL tab from your Dashboard in your Gunbot GUI and check it out.

gunbot pnl on GUI

Optimization

Optimization allows the computer to calculate the best combination of the variables mentioned above in a function.

Be careful because optimizing your backtests can lead to overconfidence, and the best combination of inputs for past situations does not guarantee you are making a profit in actual trading.

Overfitting – One problem that can arise with algo trading is overfitting. Overfitting represents a model over-correlated with a particular set of data and contains more parameters than the data itself can justify.

In other words, you’ve designed a trading system that is so closely adapted to historical data that it will become inefficient in the future. Algorithmic trading tends to maximize its results on a set of data and ignore fit for future data.

It would be best if you considered the possibility of overfitting when testing back. Collect more data; the more a model reoccur after the test, the more you tend to predict the situation in the future.

Use set methods – You can use set methods to query and average several different models, as this is much more likely to produce optimal results for actual trading. Also, it would help if you made the model clear and simple while trying to fit in many metrics.

Conclusion

This article shows a simple implementation to backtest your trading strategy. Backtesting Crypto Trading Strategies is an essential step in the development of successful trading plans. The main point here is to develop a strategy that you can use in your daily trading activities.

You want this idea to be implemented as long as the conditions for the strategy are met. Sometimes this only applies to a single pair, but other strategies may apply to the entire crypto industry, altcoins, etc.

Backtesting consists of testing the viability of your plan. You can test the strategy with the actions you want for the desired time. Of course, it’s not 100 percent guaranteed, but it is a step towards verifying the credibility of your idea.

When you backtest your ideas before trading, you will have a better chance of creating profitable trades in the crypto markets.

If it’s done right, Backtesting Crypto Trading Strategies can improve your strategy and strengthen your confidence in it before you put it into practice. With the right data and careful interpretation, you can ensure that your trading system is perfect before applying your strategy to real-world cryptocurrency exchanges.

If you like automation, give Gunbot a try and take advantage of its ability to backtest your crypto trading strategies.

gunbot trading chart

Crypto Trading 101 Risk vs. Reward Explained

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risk vs. reward explained

Understand the Risk vs. Reward Ratio You Should Apply to Effectively Manage Your Trades.

Discover the formula to trade efficiently and protect your capital by properly managing your risk. Risk vs. Reward Ultimate Guide, Learn How to benefit from stopping your losses.

Trading on the crypto markets can be risky, so you should understand the types of risks. Fundamentals like understanding and recognizing market trends and risk management are vital to your trading activity. If you don’t know the basics, you’ll end up hurting your account.

Without these basic concepts (your day trading or swing trading, either manual or with a bot), it will be too hard to protect or grow your trading account. Understanding market fundamentals such as those mentioned above will impact your investment and trading decisions.

The truth is that every trading system will have winners and losers, but what makes the difference between traders that make money and those who won’t is that winning traders are willing to be wrong quickly but willing to be well for longer.

This article aims to explain in detail what risk management is in the crypto market. The objective is also to explain what the risk vs. reward ratio is. Both of these objectives are important in controlling your trading risk.

What is Risk Management?

Risk management is the rule used in controlling risk. An example of risk management is setting a stop loss/take profit. You must know that a trader should never enter a trade with a risk/reward below 1:2, and for beginners, I would recommend 1:3.

Trading cryptocurrency has excellent potential for reward but also great potential for risk. You must be aware of the risk and accept it. The best way to control risk is to establish your business rules.

A trading rule could be that you only want to trade at certain times of the day. The argument for this trading rule could be that you only want to be in the market when the market has volume.

Another rule of trading could be that you have a strategy that reduces losses. The method could cancel a trade if the loss is more than 5% of your account. If you have $3000 worth of BTC in your account and set the trading rule at 5% of your account, the stop/loss would be $150.

Setting up a stop-loss should limit the risk of a trade. It must reasonably limit the risks and be meaningful to you.

It is also essential that you stick to the stop/loss rule and not start adjusting the stop-loss further because you think the exchange rate will rise soon after breaking the stop/loss fixed.

What is a Risk vs. Reward Ratio?

risk vs. reward ratio

The risk-reward ratio is also part of risk management. The emphasis is on how the reward relates to the risk in a trade.

Risk is the amount that you invest in a single transaction. The reward is the profit you expect to make from that trade.

If you risk $200 worth of BTC in a trade and the reward is $400 in BTC, the risk-reward ratio is 200: 400, the same as 1:2. Likewise, if you risk $300 worth of BTC in a trade and the reward is $900, the risk-reward ratio is 300:900 and the same as 1:3.

The risk vs. reward ratio determines whether you should accept trade or wait for the next trade opportunity. The minimum risk vs. reward ratio is 1:2. In other words, if the risk is $20, the reward should be $40.

A risk/reward ratio of 1:3 would be $20 and a reward of $60. A good risk/reward ratio will allow you to get it wrong 50% of the time and stay profitable.

Let’s look at an example of ETH/USDT trading that follows sound risk management. We have determined that the overall trend is up, so we are looking for a long (buy) position.

We decide that we want to buy at $1838 in this example. The latest low was in a support area at $1858, which is $20 lower. We can see that the next resistance zone is $40 above 1878, serving as our target.

We have an account balance of $10,000, and we use the leverage of 50:1, which would allow a trade of 5 regular lots or a position size of $500,000. However, we want to employ strong risk management, so we only want to risk 2% of our trading account for this trade – 2% of $10,000 equals $200.

With a stop loss of $20, that would mean that we could trade a position of $5,000 – $5 x $20 stop = $100. We place a limit order to hit our target of $1878. $40 x $5 = $200 or a risk/reward ratio of $100/$200 or 1:2.

Crypto trading involves a high level of risk, but it doesn’t necessarily have to be ‘risky’ as long as you use a reliable cryptocurrency risk management method.

Make protecting your account balance a priority over profit, and you will see your account balance steadily increase, even with a series of losses.

How to Calculate the Risk vs. Reward Ratio

Risk, in this context, is simply the difference between your entry price and your stop-loss price. So if your buy-in was $20 and your stop-loss is $19, you have a total of $1 at risk.

Your reward is the difference between your entry price and your target price.

Again, if the buy-in was $20 and the goal was $25, your potential reward would be $5. In this case, we have a 5:1 for the risk multiples.

You don’t just set your goal applying multiple times your risk, as this will put an unrealistic target price. It’s a way of doing things backward. The correct way to define your goal is to use the previous areas of support and resistance.

If there is no support or resistance on the chart, the next logical choice is to use more significant whole numbers. These areas are good target attachment areas because they act as points of natural resistance.

Many people use their stop loss and targets in the same areas, so those areas are solid.

If you have more than one goal, the best method is to average it. If Goal A was $6 and Goal B was $3, Goal C was $1, you can add them up and divide by 3, which will give you a goal of $3.

As long as your risk is one or less, you have the necessary 3:1 ratio that you need.

What else should you consider when calculating your risk vs. reward? Below are few things to put in place

Know your numbers

What is the actual average winner versus the real average loser?

If you add up your winning results and divide it by the number of winning trades you have, that will tell you how much you are earning on average.

It is effortless. If you win $500, $600, $1,000, and $1500, add the total and divide by the number of winners, and you will know how much you win on average.

The same goes for average losers. Add up the totals of how much you are losing on all of your trades and divide by the number of losing transactions you have, and you will know exactly how much you are losing on average.

These numbers are significant because now you should know how they compare to your expected reward for the risk. Revising this, if you only earn $1.5 instead of the $3 you expected, you are mistaken in thinking that you have a good reward/risk ratio.

Another example that we see here, if you have $4.25 and risk of $2.35, you now have a reward/risk ratio of 3.15, and then you have to ask yourself if this fits into your trading plan.

Balance a High RR Multiple with a High Percentage Gain

balance your risk to reap higher rewards

Here, can you maintain a high reward for multiple risks and a high percentage of profit?

It is a balance between the two. I would recommend three or more for a bonus numerous and a 40% success rate. If you can maintain these numbers, you will be very successful.

While this can work occasionally, it is not an ideal way to trade. It is usually best to trade trades with lower risk vs. reward ratios, as this means that the profit potential outweighs the risk.

However, the risk/reward does not have to be very low to be effective; anything less than 1.0 is likely to produce better results than trading with a risk/reward ratio greater than 1.0.

The Risk vs. Reward Ratio Explained.

A risk/reward ratio compares the potential for the reward with the potential for loss. You calculate the risk by counting the ‘units’ between the predicted entry price and the predicted price at which you want to exit the market in the event of a losing trade.

You calculate the reward by the ‘units’ between the predicted entry price and the predicted price at which you want to exit the market in the event of a winning trade.

The reward is the expected amount of profit you want to generate on a winning deal.

It would be best to look for high probability trades with a risk/reward ratio of 1:2 or more to manage risk correctly. It depends on how long you want to trade.

For example, if you are a scalp trader looking to make only $30 on a trade, a stop loss of $15 is sufficient for a risk/reward ratio of 1: 2.

However, your profit potential will be higher if you are a swing trader or a position trader with a more extended period. If you choose $200 as your expected profit, you must set your stop loss at $100.

You need to set a higher-stop loss because small trends occur in the more significant movement over a more extended period.

Withdrawals over a shorter period remain much lower compared to a more extended time. You will recycle your business. So that you don’t stop, you need to calculate your risk/reward ratio appropriately.

The second most important thing for traders is to minimize losses, in addition to maximizing profits. A crypto trader that only wins on average 50% of the time can be profitable.

Most traders want to earn money. But they don’t know how to protect what they currently have.

You have a 50/50 chance that the crypto market will go in your favor. It’s like flipping a coin. If the trade is not going in your favor and the market is against you, you should cut your losses using the stop loss.

Simply put, you cut your losses and let your winners run.

This simple 50/50 trading strategy generates profits even when a novice trader may suffer a loss.

Consider different risk-reward ratios. How much do you need to earn to cover the expenses of each proportion? For a 2:1 risk/reward ratio, you need 67% winners to be profitable.

For a 1:1 risk/reward ratio, that means only 50% of winners become profitable. The 1:2 ratio means that only 33.5% gain in profitability. Never trade when the risk vs. reward ratio is more significant than 1:2.

Risk vs. Reward Analysis

risk reward analysis

On its own, it seems that low-risk ratios of 0.1 or 0.2 are better, but that is not necessarily the case. It would be best to consider the odds of reaching your profit target before your stop loss.

You can make any trade attractive by setting your profit target far from the entry point, but how often will the market hit that high target before hitting the much closer stop loss level?

So there is a balance between taking trades that offer more profit than the risk but where the transaction still has a reasonable chance of hitting the target before the stop loss.

For most scalp traders, risk/reward ratios are generally between 1.0 and 0.25, although there are exceptions.

Scalp traders, swing traders, and investors should avoid trades with less profit potential than the stake, for example, a risk/reward ratio greater than 1.0. There are enough favorable opportunities that there is little reason to take more risk for less profit.

When setting the risk vs. reward for a trade, place the stop loss logically on the chart based on your strategy, and then place a logical profit target based on your strategy analysis. It would be best if you did not choose these levels at random.

First, you set the stop loss and profit target locations; only then do you assess the risk/reward of the trade and decide if the position is worth taking.

A common misconception is that traders have a particular risk/reward ratio in mind.

For example, they may only want to risk $0.05 to win $0.20, and so they enter the trade anywhere and place a stop loss at $0.05 and a profit target at $ 0.20.

Benefits of the Risk vs. Reward Ratio

As you can see, the risk/reward ratio benefits are numerous, so let me give you 6 of the top advantages you will get from it.

  1. Effective Stop Loss

The most significant advantage of using the risk/reward ratio in your trade is that it helps you activate stop-loss orders. With this, you don’t have to monitor the performance of your transactions regularly.

Stop-loss is especially handy when you are on tour or in a situation where you have not been able to control your position for a long time.

2. Preserves your Capital

If this is an apparent bull season, you can be more relaxed about risk/reward ratio and position sizes, and if you are confident, you can adopt a somewhat aggressive trading style.

If the overall trend is bearish, then you shouldn’t be looking for trade opportunities. It would help if you let them appear.

3. Control Small Losses

It helps you control your small losses so that they won’t turn into big destructive ones. Also, it protects you against excessive loss.

4. Prevents Zero Balance

Risk vs. reward saves you from a ‘negative balance’; this prevents your account from going negative even if the market moves fast against your trades.

5. Emotional Stability

This strategy provides emotional support to you when market situations turn negative.

Controlling emotions involves identifying whether the principals in your predefined plan are practicing good risk management or are on the edge of the game.

The risk vs. reward ratio makes you feel more confident when executing a predefined plan that doesn’t consider the real-time excitement you might feel in the market.

Poor emotional control will often lead to FOMO (fear of missing out), chasing losses, buying without developing a basic understanding of coin fundamentals, stupid position sizes (all-inclusive)

6. Accountability

Recognition of responsibility and accountability: Once you identify the potential risks, you can always rest assured. A solid risk to reward strategy will ensure that once assigned.

You can track your risk to ensure that it is dealt with quickly and efficiently.

Gunbot Risk vs. Reward

How to apply the risk vs. reward logic to Gunbot?

First, let’s be clear, you need to do your math and set the risk/reward ratio according to your preferences and what this article explains.

Remember, as long as your risk is lower than your reward. You should be fine, even if you have a few consecutive losses.

Once you get your number and after verifying your chosen pair on the chart, head over the “Miscellaneous” tab of your strategy settings on the GUI.

Here’s a Gunbot GUI Miscellaneous tab example:

gunbot gui stop limit

Notice the numbers on the example are the “default” values. You need to add the number at which you want the bot to execute your Stop-Loss strategy.

Stop Limit: 9999 is the default value, and that high number means your Stop Loss is disabled. The number you’ll add here will represent a percentage amount you want to sell if the price goes down below your breakeven target.

For example, if you set your Stop Limit at 2, this number will signal Gunbot to sell your quote coin when the price drops 2% below your average bought price.

You can also set “SL Disable Buy” to true, which will tell the bot to “Do Not Buy when it Reach Stop Loss.”

Count Sell and Panic Sell are two other miscellaneous Gunbot parameters you can use if you want to limit your sell orders in the case of “Count Sell” and the panic sell, of course, if you’re going to sell fast at market price (beware of this setting because you may trade at a loss)

Risk vs. Reward Conclusion

This article discussed the concept of the Risk vs. Reward ratio and how to calculate it.

This trading plan is effective because it teaches you exactly when and where to enter a trade and place your stop loss levels and targets in various market conditions.

Then have a rule that tells you only trade produces a risk/reward ratio of a particular number or less.

You can use the risk vs. reward ratio combined with other risk management techniques, such as the profit/loss ratio. The profit loss ratio compares the number of winning and losing trades and your balance percentage.

Which gives the number of winning transactions that you need to execute to reach the breakeven point. But that’s content for a future article ๐Ÿ™‚ Keep coming back for more!

Remember: Your trading strategy is only as good as your risk management.

The crypto trading game is all about probabilities, and there’s no way you can win all the time, which is why some losses are inevitable. The faster you understand and embrace this reality, the sooner you will start profiting.

Think of it this way: The earlier you cut your losses will determine how small your losses will be.

It’s crucial to cut losses before they become unmanageable and stop them before they become significant problems.

To manage risk, we must never invest more than we can afford to lose in any single trade. Most successful traders who risk less than 1% or 2% of their trading budget can keep themselves in the game.

Setting your risk limit and then sticking to it is a step in the right direction for managing risk. Doing so ensures you won’t risk more than you have and gives you a safety net for trades that don’t go as planned.

The bottom line is that investment management is vital to stay on top of your game, set time aside to keep learning, and understand that you need to be patient before starting seen results.

Finally, accept that taking some losses is the cost of doing business.

Gunbot Helps You Profit

Gunbot helps you maximize your profits and minimize your risk by using advanced trading strategies on which you can define your risk/reward desired ratio, cut your losses or average down your total cost.

Gunbot is a crypto trading system. A trading system increases the probability of your trade working out and making you money against a randomly placed trading order.

A cryptocurrency trading system is not a license to print money but simply a way to help you identify patterns or situations which have a higher percentage chance of making you money than a random guess.

Users love Gunbot because it is not a platform only for highly experienced traders to do complex things. On the contrary, our easy-to-use crypto trading bot is built to service 98% of crypto investors who don’t have the skill or the time but desire to trade more actively.

And if you’re a part of the 2% that loves day-trading, and you’re already a successful manual trader, Gunbot it’s the perfect complement to your existing strategy.

Gunbot is the Automated Trading Software that all crypto traders are looking for! And now you know why. What are you waiting for? Seize Gunbot Now.

trade like a pro, get gunbot

Gunbot DCA Dollar-Cost Averaging Overview

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gunbot dca strategy

Gunbot DCA Strategy a Smart Way to Trade Bitcoin.

Learn the Logic behind Dollar-Cost Average and How You can apply the Gunbot DCA Feature to every one of your strategies.

Watch How you can Buy Bitcoin Cheap by Averaging Down your Bought Price. Cryptocurrency Dollar-Cost Averaging, BTFD for Fast Returns!

The cryptocurrency market is always volatile and suffers from a significant fluctuation in price. Often in such a market, it isn’t easy to enter or exit a position.

If the coin price is high, it takes considerable time for the investor to accumulate good crypto to execute the trade.

It becomes difficult for a trader or investor to hold for a long time when the price is moving down. Because of that, the dollar-cost average (DCA) method comes into play.

In crypto trading , either manual or automated, the truth is, no one can accurately predict the result, or if they do, it will be as much luck as it is technique.

What you can do, however, is make sure you’re ready for the worst without even having to watch the market or notice when the bottom is happening.

The technique is in Dollar-cost averaging (DCA), and it works by setting a monthly investment of a fixed dollar amount. The idea is that each month the money is used to buy coins.

Most brokerages will help set up a direct debit on brokerage accounts, and it is ideal for anyone, especially those with limited capital, to invest early.

The concept is straightforward since the amount of money to invest is fixed, but what you can buy for that money will increase as the market goes down.

That is to say, the lower the market, the more profit you make. Therefore, as the market goes down, you are regularly ready to buy the coins of your choice.

When the market hits a low, you can be sure you’ll be there because you have a fixed certain commitment period.

In general, what will happen is that the average price of your coins matches the price movement instead of buying in one order.

If you manage to synchronize the one-time call down the market, long term, as the market goes up, you are technically better off.

However, be honest, how likely is it that you will be able to invest at that time or know what that time is, rather than when you were?

Reducing the average cost per share of the monthly investment plan will be a better profit in the long run as the lower purchase prices will balance out with the higher cost months.

Gunbot Double Up feature is well known and widely used by automated crypto traders, and you can use it to lower your risk. Read more about How to use Gunbot DCA Strategy for managing your risk Here.

Although DCA is primarily a long-term investors strategy, my focus in this article is to show you first the basic DCA logic to use it later on Gunbot to your advantage. Let’s begin!

Gunbot DCA Why Dollar-Cost Averaging?

gunbot dollar-cost average

Suppose you have money, have decided to invest it, and already know what you want to invest. It can be anything, but let’s say it is bitcoin.

What’s the smart way to do it? Do you place the total amount upfront or spread the purchase over several days, weeks, or months to benefit from what is known as the average dollar cost?

The average dollar cost is often presented as an excellent solution to the dilemma that if you buy now, you could purchase everything “at a high price.” What if the market goes down right after the purchase?

In this scenario, the average dollar cost allows you to buy some from time to time at the new lower price, which leads to a better average price.

If the price doesn’t drop, buy it now and later at the highest price. Your average cost is higher, but you are still happy because the price has gone up, and you have made money.

Maybe the average dollar cost is to minimize pain and regret rather than maximize performance. If the price goes up afterward, you’re happy to have at least gotten in early with a partial buy before the price goes up.

If the price drops later, you’re so glad that you can buy more than you wanted anyway, but now at a lower price. Either way, you are happy, or at least you have a way of rationalizing that you did the right thing.

What Is Dollar-Cost Averaging?

DCA (Dollar Cost Average) is a strategy used by investors to mitigate volatility when buying assets. The essence of the DCA strategy is to buy a certain amount of an investment uniformly at a regular frequency.

The DCA strategy, if performed correctly, reduces the trader’s risk if he made a bet at the wrong time. As you know, determining the right time to trade is an essential link in the chain of success, and this is especially evident in an environment as volatile as cryptocurrencies.

By betting on the total amount, an investor can expect a good return, but he runs the risk of losing all of his funds if he entered the market at the wrong time.

But by dividing your starting amount evenly and buying the asset stably over some time, the average price softens. Hence, we get a good strategy for long-term trading.

For this reason, many traders choose Dollar-Cost Average as their strategy and avoid unwanted results.

You should note that this strategy structures your assets, but it does not eliminate the risk of losing investments, as the market gets influenced by other factors that you should watch out for when trading.

How to Create a DCA Strategy?

average down bitcoin, buy the dip

Determining the right time for a deal is a difficult task, even for professionals. In addition to determining the average dollar cost of the asset you have chosen, you should also consider your exit plan.

  • Determine your price range
  • Divide your investment evenly.
  • Sell these coins as the market gets closer to the target.

This short guide will help you avoid losing all of your funds by building your trade on a timing system.

How does it work in practice?

The best way to demonstrate the benefits is to use an example:

For example, you want to invest $10,000 in BTC. At the start of 2018, you could purchase 0.724 BTC for this amount.

According to the DCA strategy, you don’t buy an asset for the total amount but divide your investments evenly.

Let’s say you decide to buy $1000 worth of Bitcoin in 10 months. Therefore, by the end of the year, you will have acquired 1.22 BTC.

Even a new market participant understands that it is much more profitable than a one-time investment.

Here’s another scenario:

You choose to invest US $120,000 in Bitcoin (BTC) after learning that some friends have made a significant profit since the March 2020 crisis.

As you were aware of what happened during the 2017 crash, you’re skeptical and allows six months to award the position.

By averaging the dollar cost in Bitcoin regardless of news or emotions, you profited 72% and got 0.5178 more from Bitcoin than if you had speculated.

Here is a very realistic example of how someone could have allocated their $ 120,000 investment based on speculation.

Tom (made up name) put in $10,000 to test the waters at the end of November 2020.

At the end of December, he took advantage of his investment and decided to add a more significant position of US $30,000.

After a solid performance at the beginning of January, he prepares to bring more capital to the investment.

Then around the middle of the month, the asset fell, causing many investors to fear the end of the Bull Run.

As fear is rampant, Tesla has announced that it has placed BTC on its balance sheet. As such, he adds a slight increase to his position of $10,000.

February sees a similar move, and Tom fears this may have been the last push. As such, he withdraws half of his base invested capital ($25,000) and leaves the rest, hoping this is not the end of the race.

BTC spends March 2021 recovering, and new support found increasing confidence. Tom feels like he knows the market well right now.

We’ve heard of the BTC halving cycle, and he sees big names like Bloomberg claiming 6-digit Bitcoin by the end of 2021. Tom deposited $50,000 with great conviction.

Last April, BTC hit new highs before dropping below Tom’s buy-in in March. At the end of April, he saw an opportunity to take advantage of the continued rise while lowering his average investment cost.

He placed the remainder of his allocated investment ($45,000) in BTC to anticipate new highs.

While Tom successfully allocated his entire planned investment and made a profit of +46% at a BTCUSD price of $60,000, several errors were due to psychological factors and his inability to time the market.

It’s not his fault; Timing the market is a tricky thing to do, even for the world’s best active managers.

Gunbot DCA Automating Dollar-Cost Average Strategy

Gunbot is a user-friendly robot that can average down your crypto cost while trading on your chosen cryptocurrency exchange.

You can automate the process by activating the Gunbot DCA feature on your strategy settings.

gunbot dca gui settings

The basic Gunbot DCA settings are:

  • Double up enabled: To enable Dollar Cost Averaging on Gunbot.
  • Double Up Cap: For the exact amount of Quote Coins you want to buy.
  • DoubleUp Cap Count: To tell the bot how many DCA Orders you want.
  • DU Method: How do you want to trigger the order? Choose from RSI, High Bollinger Band, or use a percentage number.
  • DU Buy Down: To set the minimum price drop, you accept to start Averaging Down your bought price.

You can also trail your Gunbot DCA strategy by going to the “Trail Me” tab on your Gunbot GUI and Enable the “Trail Me DU” setting.

Note: By taking down the average price of an altcoin, you can afford to buy more of it. However, the apparent risk is that you are using more of your total capital, and if the price keeps dropping, it could eat all your funds before it recoups.

Be careful when using the Gunbot DCA feature, and do not use it with a coin you’re comfortable holding for a while or are in danger of losing its value.

Alternatively, you can use the latest Gunbot stepGrid strategy and calculate your trading limit beforehand, so if the coin drops, you’re still covered.

Gunbot DCA Dollar-Cost Averaging Calculator

An excellent assistant in this trading strategy is the bitcoin average dollar cost calculator. With this tool, you get visual confirmation or rebuttal of your predictions.

Note that this strategy shows excellent results in the case of Bitcoin, which displays a constant uptrend.

If you use our automated crypto trading platform, check out the Gunbot Double-Up Guestimator to better understand how your DCA will look.

Dollar-Cost Averaging Benefits

stockpile bitcoin

Market absolutes are impossible to predict, even for experts, as they more often hold surprises in store and can be sensitive to things no one could have predicted.

With the costs averaging in dollars, you give yourself the best chance of catching the minimum when that happens without investing all of your money at one point.

In the process, you protect yourself from many of the market fluctuations that can affect many portfolios.

Elimination of the need to guess when the market is bottoming out:

Professionals don’t do things right, so why should there be the added stress of trying to enter the market at the right time?

The proof of the strategy is that many professionals apply it themselves as part of their risk management because it evens out the vagaries of the market.

Also, Dollar-cost averaging helps you stay on track for the long term. By maintaining a long-term focus, you reduce the probability of taking unnecessary risks when investing.

There will be times when the market is going up or down, influencing how you think about your investment strategy.

By maintaining an average dollar cost approach, you prevent your emotions from leading you down a path you don’t need to follow.

For example, if we are in a bull market and you see that all of these altcoins are working, you will not try to invest your money in it with the hope of making more profit.

Other benefits of averaging dollar costs in Bitcoin:

  • Avoid excessive exhaustion from taller and fuller positions.
  • Take the stress out of betting on market time.
  • Temper your emotions so that the FOMO impulses (fear of missing something), the panic of buying and selling get minimized.
  • It helps you gradually build your portfolio, which will motivate you to maintain interest, especially in bear markets.
  • The impact of short-term volatility diminishes, as historical performance shows the gains you can make over the long term.
  • Most of the positive price action is usually contained within ten days of the year, ensuring that you flip over during major upward moves.

An Example Against Dollar-Cost Averaging

As with any approach, the dollar cost average strategy has drawbacks, and many skeptics insist that DCA is ineffective. Of course, this strategy will bring the best results with high market volatility.

Some are sure that this will deprive the trader of profit when the weather is stable. But you should note that investors often do not have a large amount available at a time.

Therefore, investments in small parts are great for long-term investments. Since a DCA investor buys more security assets as the price drops, there is some downside protection in a falling market.

As the market recovers, the DCA investor will recover faster than their lump-sum investor because the DCA investor owns more shares at a lower average price than the lump sum investor who invested before the market begins to negotiate.

Which one makes the most sense to you?

Among other factors, it depends on your goal and how much time you have to invest. It also depends on your risk tolerance and how comfortable you are when investing in the market.

Either way, the key is to stay invested and avoid entering and exiting the market without a proper strategy.

Gunbot DCA Conclusion

automate your trading strategies

Market absolutes are impossible to predict; even for experts, many investors fall into the “buy high and sell low” trap.

As a result, their losses may be more severe than those of the DCA investor who buys smaller amounts when the market is high.

With the dollar-cost averaging, you give yourself the best chance of catching the minimum when that happens without investing all of your money at one point.

In the process, you protect yourself from many of the market fluctuations that can affect many portfolios.

Despite that, some skeptics believe that Dollar-cost averaging is limited; it makes investors lose out on significant market opportunities like the bull run; I think this is precisely what Dollar-cost averaging does.

It kills the common challenge of investors (FOMO). Losing out isn’t the end of the world. Embrace the reliable dollar-cost averaging.

By averaging down, you’re reducing the risk of trading or investing in underperforming coins.

However, there is a risk of averaging too much into an investment that has already dropped in price.

Always use this strategy carefully, and if you want to do it on automatic, you already know about the Gunbot DCA strategy, so don’t forget to grab the best tool for the job now.

Crypto Swing Trading 101 Trading Style Insight

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crypto swing trading

Uncover the Crypto Swing Trading Secrets that will Help You Succeed with this Trading Method.

Crypto Swing Trading, Understanding a Trading Style.

Crypto Trading Secrets You Want to Keep on your Arsenal. Find out how you can use this trading technique to accumulate more profits with less stress. Discover a new way to thrive in today’s market regardless of the stiff competition.

Investing in Crypto is exciting, but it’s a new world, and it’s hard to get past the hype and find an effective trading style that works for you. One of the most standard ways to invest in a cryptocurrency is swing trading, which is very different from day trading. Crypto swing trading can be a great way to make stable gains in the crypto market.

You don’t need a bot to apply this technique, but you definitely can swing trade with Gunbot ๐Ÿ™‚

Anyways, my goal with this article is for you to look at crypto swing trading, not as a better or worse than any other trading style but as another money-making strategy. You can add it to your trading toolbox or even use it as a way to diversify your existing trading strategies.

Look at it from this point of view: You can find long-distance runners and sprinters in sports. Similarly, you can compare a scalper with a sprinter, and in this example, the swing trader would be the long-distance runner.

And the same way, they both need a different physical preparation; you too need a mindset to become a strong crypto swing trader; keep reading…

Crypto Swing Trader Mindset

Swing trading is a lucrative strategy that takes time and patience to learn. It requires sound risk management techniques, excellent market analysis skills, a long-term commitment, and time to develop a strategy that works for you.

You need to be patient enough to follow through with your strategy. Because the more time you spend perfecting your techniques and adding more rules to them, the longer it will take you to develop a winning strategy.

You need to avoid doing anything based on emotion, primarily when investing in the cryptocurrency market. It would help if you were calm and collected and did not go to trade with your feelings.

In the volatile crypto market, you must stay focused on the market’s trends so you can act accordingly. Using technical analysis requires you to practice and hone these skills, then work based on the data you can see on the charts.

The reality is that trading is a risky business, and you will likely experience losses along the way. The key tho is to be prepared financially and mentally for when that time comes.

If you’re losing money but have a solid money management strategy in place, remember that your profits will override your total losses when your trading becomes profitable again.

What is Crypto Swing Trading?

swing trading chart example

The swing trading process has become a prevalent crypto trading strategy used by many traders in the market. This trading style has proven to be very effective for many trading various coin pairs.

Conventionally, swing trading has been defined as a more speculative strategy, as positions are generally bought and held for a predetermined time by traders. These times can vary from two days to a few months.

The main aim of the swing trader is to identify the upward or downward trend and place your trades in the most advantageous position. From there, you will follow the direction until he determines the exhaustion point and sells at a profit.

Swing traders will often use many different technical indicators, which will allow them to have a more favorable probability when placing their trades.

Crypto Swing Trading involves shorter time frames than daily charts; this usually means trading from the 240, 60, and 15-minute charts. The length of time you could be in a swing trade can vary from a few hours to a few days, and the trade can be a trend trade or a counter-trend trade.

Swing trades are often counter-trend because they take advantage of side moves that usually follow prolonged impulsive (trend) moves.

The term swing trading comes from the trader’s action to swing in the long or short term.
Crypto swing traders, in general, are less concerned with long-term trends than with waiting for patterns or patterns on the chart they recognize.

Some cryptocurrency swing traders are in the market all the time because they take the entire buy and sell signals in their trading plan. They know that you will capture the most significant moves when you capitalize correctly and use good money management even if they have drawdowns.

Swing traders should always have stops based on a percentage of account size or venture capital and structure on the chart like all technical traders.

Like position traders, swing traders must keep their stops far enough away from price to avoid losing positions prematurely due to day-to-day volatility and must be willing to maintain their trades through scheduled fundamental press releases.

Crypto Swing Trading Strategies

There are probably almost as many swing trading strategies used in the crypto markets as traders successfully use them. The main thing they have in common is that they trade more extended time frames than daily traders, and you don’t care if you are long or short or whether you go for or against the long-term trend.

Because they only need to check their positions periodically, they don’t need to be onscreen when in the market. However, they should monitor their positions and view charts from time to time to evaluate their strategies.

These traders can make trading decisions by glancing at a chart on a portable device or cell phone. Also, instructing the computer to send an alert or text message to their cell phones when the price reaches a certain level or technical indicator signifies that they trust.

They are also follow-up and OCO (Order Cancel Order) orders and other automated functions on current trading platforms.

Below are three of the best swings trading strategies

  1. Use a swing trading algorithm.

Trading algorithms are tremendous and instrumental in this bearish volatile crypto market, although it seems erratic. A bit risky, there is often a pattern. Some brokers spend millions every year researching swing trading algorithms in the hopes of gaining an edge.

Gunbot is one great bot to use when it comes to this.

2. Measure the price trend.

To use this swing trading strategy, you need to measure three different trading prices at the close of play in one of the markets. You trade long when all three averages are going up and short when all three are going down.

It is so easy to look closely at the price curves. The most straightforward strategy is to use your eyes, watch the curves, buy low, and sell high. You don’t need expert time here; you only buy when the currency pair goes up and sells at a higher amount.

Note that you don’t have to buy and sell on the same day. A long-term coin buy may be necessary to make a profit.

3. Use support and resistance.

Whenever you trade, you will need to find the support and resistance areas on the daily crypto chart via TradingView. Those with high volatility are good because they tend not to last long. To do this, you will need to use the Bollinger Band and Trend lines.

Read the momentum: If you are about to trade the cryptocurrency market or any other financial equipment, it supports trading indication.

There is no additional space to tighten the individual indicators. That’s why you should start with the Stochastic Relative Strength Index (RSI). You are now on the way to trade.

Crypto Swing Trading Indicators

do not chase the price, follow the trend

Moving Average Indicators: These indicators are the most widely used indicator in crypto technical analysis.

A moving average is the average of a changing block of data. For example, a 10-day moving average is calculated by adding the closing prices of the last ten periods and dividing by 10. The term “moving” indicates the prices of the previous ten days that are measured.

The moving average line is usually placed prominently on a price change chart, and a predefined period will measure it. This indicator is usually an accurate indicator of the primary trend of the crypto market.

There are four types of Moving Averages:

  1. Simple (SMA)
  2. Exponential (EMA)
  3. Smoothed (SMMA)
  4. Weighted (LWMA)

To interpret a moving average, you need to compare the links on the price change graph between the moving average of a coin’s price and the price of the altcoin itself. If the moving average is higher, you should sell, otherwise buy.

Momentum-based Trading Indicators

Momentum-based indicators show the speed of movement, which identifies the speed or strength of a price movement. The momentum indicator is displayed on a separate indicator of the price change chart.

There are several variations of momentum-based indicators, and they are a comparison of the current closing price and the relative duration of previous closing prices. If M is the momentum indicator, CP is the current closing price, and CPn is the length, M is defined as M = (CP / CPn) * 100.

The momentum indicator identifies whether the price is going up or down and how much the price is moving. When the momentum indicator is above 0, the price has bullish momentum. When the acceleration is less than 0, the price has a bearish momentum. Dynamics-based indicators are an integral part of swing trading.

The Stochastic Indicator

The stochastic indicator is something like a thermometer used for your body. It leaves you with a rough idea of the current market status, but you have to find out the market’s future.

Sometimes it can be overbought or oversold. If the indicator shows a reading above 80, it means the overbought condition. If the indicator shows a reading below 20, an oversold has occurred. Signals are not the way to show price action or support and resistance levels.

How to Crypto Swing Trade

It sounds excellent when you think of cryptocurrency swing trading, but most traders are unfamiliar with the trading method. In swing trading, the trader is generally happy to buy stocks in the direction that the trend is strong.

Simply put, the swing trader will never trade in a smooth direction and does not match the trend. These trades are held for a few days and usually keep track of the charts of the highest period, which is around 1 hour and above, while you monitor and make your trades.

There are several distinct ways swing traders can easily place their trades and the direction of the popular trend. The standard and good practice are to wait for the price level to recover earlier, and you’ll need to enter your trade before it propagates into the feed.

Entry is usually made based on the price, which reflects in support or resistance levels, trend lines, or may require indicator checking in many situations.

Learn to Swing Trading

To learn how to swing trading, you need to master the fundamentals of trading. The details discussed below form the building blocks of crypto swing trading and are why extreme professional investors are genuinely productive.

This domain includes the following:

  • Trading psychology: You need to develop balanced psychology to be able to function successfully.
  • Money management: This management allows the trader to minimize risk and increase the return value of his profits.
  • Market analysis: Do the market review; there are two technical analysis and fundamental analysis methods.
  • Japanese candlestick charts: This is the main element of examining the stock market and its emotions. You must be able to read and understand Japanese candlestick formations.
  • Identification of trends: Swing traders increase their odds by trading in the direction of the movement. You have to find the right trend.
  • Support and resistance levels: These two levels allow the trader to find the crucial ranks in the crypto market where the trends are in his favor.
  • Fibonacci retracement levels: Like support and resistance, Fibonacci retracement levels allow you to have a good market entry.
  • Commercial indicators: Beginners should look at the technical indicators used by banks and professional investors in swing trading.
  • Stop loss: Stop loss results in nothing more than minor damage; therefore, most newcomers to this business ignore it.
  • Trading hours: Always do good research and find your times suitable for opening and closing trades. Yes, even in crypto 24/7 markets!

Scalping vs. Crypto Swing Trading

crypto swing trading vs. scalping

Scalp trading means you open and close many trades on the same day. The leading consideration during day trading is the fact of support and resistance. The occurrence of daily trends plays a decisive role in day trading activities.

Scalp trading relies primarily on the fleeting emotions of buyers and sellers. The link between the feelings of the bubble (i.e., greed, fear, etc.) and the state of mind of investors (i.e., bullish, bearish, etc.) creates capital gain or loss situations.

The price movement of a coin usually exhibits trends with repetitive oscillations. The phenomenon of swings creates an opportunity for capital gain from time to time.

Swing trading is trading activity in the financial markets where a tradable coin is held for between one and several days to profit from price changes or “swings.” A swing trader does not trade daily.

Swing trading offers much greater profit potential than day trading. Swing trading demands more patience and understanding of the crypto market. The trader can maintain the transaction for a few days or weeks. It depends on the quality of the trends/fluctuations in the crypto market.

Usually, a swing trader sets a level of satisfaction throughout the swing. Still, unexpected longevity or trend shortening can increase their anxiety level or disrupt their comfort zone. These times are critical for a newbie trader who might be making impatient decisions.

Swing trading requires balanced behavior and in-depth fundamental and technical research of a coin.

An experienced swing trader buys when people sell and sells when people buy through a better understanding of future trends. You like to follow a trend until there are signs of a reversal or retracement.

Market experts define and suggest to Swing traders: Setbacks are temporary price reversals that occur as part of a significant trend.

The key here is that these price reversals are temporary and do not indicate a significant trend. The trend without retracement is an Unhealthy or Dangerous Trend.

Since the definition of an up-trend is “a series of higher highs and lows,” then logically, the trend should end when the asset fails to establish a higher high.

High is unhealthy, but that’s not the end of the trend. After setting a higher low, the price may fall back again, never forming a lower low, and then push above the previous high to reach a higher high.

The coffin of an uptrend is setting the lowest low. Instead, the trend usually ends in a reversal.

In scalp trading, the investor has small profit targets. In swing trading, the investor has pretty ambitious goals to make a profit.

Achieving goals depends on a better understanding of trends and the strength of trader behavior in the face of market trends.

An impatient/non-strategist loses money while the patient and strategist earn cash.

A compromised situation arises when the daily trading goal is attainable, but the swing trading goal is uncertain. The selection of one goal is carried out at the expense of another, i.e., the opportunity cost of daily trading profit is swinging trading profit or vice versa.

A swing trader prefers to earn dividends, so he acts proactively when a business is closed.

Benefits of Crypto Swing Trading

simple swing trading strategies

The distinction of swing trading is a vast topic as it has many different influences from many different trading strategies. All of these trading strategies are unique and have their respective risk profiles.

Swing trading can be an excellent way for market players to improve their technical analysis skills further while also paying more attention to the fundamentals of trading.

Many successful swing traders are known to use a Bollinger Band strategy as a tool to help them enter and exit positions. Of course, for a swing trader to succeed in his strategy, he will have a remarkable ability to determine the market’s current trend and place his positions according to this trend.

It is a good note for a swing trader to place a short position to hold it for an extended period in a market that is clearly on the rise.

The general theme here is that the goal of traders should be to increase their chances of success while limiting or eliminating risk.

The swing trader’s worst enemy is a sideways or active market. Sideways price action will stop a swing trader in its tracks, as there is no dominant trend from which to disconnect.

Top 3 Crypto Swing Trading Advantages

We want to show you what we believe are three of the most significant benefits of crypto swing trading. After reading this, I’m sure you’ll agree that swing trading is one of the best crypto trading styles.

  1. You Don’t Need to be a Full-Time Trader.

Similar to Gunbot trading, you don’t need to be glued to a computer screen all day. After finding a trading strategy, all it takes is a few minutes to scan the exchange for buy signals. Because of that, crypto swing trading is an excellent trading method for beginners and those short on time.

So if you lack the time because of your full-time job or if you’re starting to learn how to trade, you can try swing trading in your spare time without having to break the sweat.

2. You Can Bank Larger Returns.

Generally, the longer your trade holds, the more room you’ll get to increase your profits, simply because you will have more margin to absorb any losses. A longer-term business will allow you to cover transactional costs and slippage, even if it means trading less frequently.

As you give more room for the trade to develop in your direction, you will ensure that you can take advantage of more significant gain opportunities.

3. Become Virtually a Stress-Free Trader.

There’s no doubt that stress hurts your trading and makes you more susceptible to making mistakes. And since you can crypto swing trade while working full time, you don’t have to worry about making money to pay your bills each month.

Of course, you want to be successful, but in this case, you’re not desperate because you don’t want to make money. What you want is to make “MORE” money, and at the beginning, trading will be your second source of income. That in itself is stress relief!

Similar to an automated crypto trading platform, swing trading is almost emotionless. These trading systems surely help to reduce the stress of the trade.

Crypto Swing Trading Tips

1. Join and Interact with a Crypto Trading Community

Trading cryptocurrencies requires a great deal of research. It’s not enough to “follow the crowd” and blindly follow the price movements of one crypto coin.

It is critical to have a vast network of fellow traders and investors who share ideas, experiences, and knowledge. They can help guide your trading decisions because, often, they’ve found solutions to the issues you are facing.

Crypto Swing trading doesn’t have to be a lonely profession or hobby. In our case, the Gunbot community is our biggest asset, not only because we can search for solutions but because we can make friends with like-minded people and even share a joke or two, which can help brighten our darkest day.

In general, Gunbot traders are very generous sharing their knowledge and experience. Connecting with more experienced traders will go a long way in getting your trading career off to a fast start.

2. Obey Your Trading Rules, so you Don’t Overtrade

Stick to the rules you’ve set. You’ll have a better chance of making money if you follow a set strategy than if you try to sketch out some new plan on the fly. Taking trades that are not signaled by your system will cost you a lot of money in the long run.

Your trading edge relies on the rules that make up your strategy. If you deviate from your plan too often, you’re going to stay behind with a losing trade.

You might be able to make a quick profit, but going against the rules you’ve set up can make it challenging to stick with your strategy and ultimately lead you down a path of failure. Don’t Overtrade!

3. Understand Technical Analysis

Technical analysis isn’t just about market timing. It is a powerful trading tool to help you identify trends and determine when to enter or exit trades. Seeing trends early on can lead to big profits, while missing them altogether can set you up for losses.

With technical analysis by your side, you’ll be well-equipped to define a trading system based on your research and experience.

Of course, you don’t need to become a technical analysis guru to become a profitable trader. But you can’t build a consistently good trading system without at least a basic understanding of it.

What that means is that you don’t have to focus on learning what every pattern means. It is best if you concentrate on how any given technical analysis works via experience. It’s up to you to do that by testing the patterns, developing your own trading rules, and discovering which ones work best for you.

You don’t need to know how technical analysis works. You only need to be able to tell whether or not it works for you. Anything else is irrelevant.

4. Backtesting Before Trading

Never trade a strategy or idea unless you have thoroughly tested it. If you haven’t previously taken advantage of the opportunity behind your opinion, don’t jump in headfirst and gamble.

Be precise about your entry conditions, wait until you have verified the underlying fundamentals, and only trade after you are satisfied that the market will not make a sudden turn against you.

If you’re a Gunbot user, take advantage of our Backtesting addon, otherwise jump on TradingView on your own and start backtesting your strategy before you use it live on the exchange.

Backtesting is one of the essential elements in trading, but it doesn’t mean that you should trade everything blindly based on what worked in the past.

In the end, it doesn’t matter how many great ideas you have. You need to clearly understand what has proven to work before you trade with it.

Crypto Swing Trading FAQ

hanging monkey with a bitcoin on his hand

What are the differences between scalping and Crypto swing trading?

Scalping and day trading styles involve making several trades in a single day, based on technical analysis and advanced trading systems. Crypto scalpers and day traders focus on making small profits multiple times a day, while swing traders are more organized and may hold onto their positions for several weeks or months.

Therefore, the main difference is the “Time Frame,” so swing trading may be for you if you’re patient enough. On the other hand, if you enjoy the trade rush and have a crypto bot, scalping can be your best choice.

What indicators or tools do crypto swing traders use?

Swing traders rely on a variety of technical indicators to find trading opportunities. They watch for crucial support and resistance levels, move averages, momentum indicators, and other specialized tools.

Crypto swing traders seek to identify and capitalize on market direction. Swing traders often look for patterns like head-and-shoulders and cup-and-handle or other technical patterns to help improve their trading strategies.

Which crypto coins are best suited for swing trading?

While working as a cryptocurrency trader, you can enjoy success in any number of coins. The best blockchain assets are those that are among the top performers on CoinMarketCap.

A swing trader can succeed in many cryptocurrencies, but the best candidates tend to have active trading volume across major crypto exchanges.

These are the coins with the most liquidity and volume and provide you with the best opportunity to make money.

Is Crypto Swing Trading for Me?

You’ve been stuck in a downtrend for too long, and your investment keeps on losing value?

You’re worried about the market dropping, and you’re not prepared?

You’re nervous about investing in the cryptocurrency market because it’s so volatile?

If your answer is yes to those questions, you probably should consider adding crypto swing trading as one of your weapons.

With Crypto Swing Trading, you’ll no longer have to worry about timing the market, and it will help you make the right trades at the right time.

By understanding crypto swing trading, you will learn how to invest in cryptocurrencies and make money without guessing the price movement because you can take advantage of opportunities as they happen.

If you don’t have the speed, the trading platform required for day trading, or the long-term attention that trend trading needs, swing trading could be the right investment option for you.

As always, this is not Trading Advice. Use this information to create your trading strategies and make an informed decision to help you profit in your trading career.

Don’t forget that the best crypto trading bot platform can help you with ready-made strategies so you can profit. Check it Out!

Gunbot StepGrid Strategy Settings Ultimate Guide

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gunbot stepgrid strategy

Find out How to Set-up the Gunbot StepGrid Strategy in this Step by Step Simple Guide

The new Gunbot V.23 Stable version is out, and a new strategy for you to earn more. Take advantage of this new price action trading method included in all Standard, Pro, or Ultimate Gunbot Editions.

Suppose you want to make money in crypto trading in the long run. In that case, your trading strategy must give you an edge because without an advantage, even if you have the best risk management, discipline, and psychology, you’ll still be a losing trader.

And this edge is what the Gunbot StepGrid strategy gives you!

Gunthar’s legendary “Gunbot the Way I Run it” article that we haven’t seen since Gunbot V11 is out again. Gunthar got inspired one more time and took the time to explain how he runs Gunbot.

This time he and Pim tuned a unique strategy and named it “The Gunbot stepGrid Strategy,” this strategy follows the main principles as the SpotGrid strategy.

The StepGrid strategy capitalizes on the predictability of the crypto markets, following the price range only without any other trading indicator.

Before we begin, let me give you three remarkable facts about “Price Action.”

  1. Price action trading is about understanding the imbalance between buying and selling pressure so you can identify trading opportunities and make a profit.
  2. As a price action trader, price is king, and everything else is secondary.
  3. Price action trading is not only a strategy but a structure for trading in different market conditions.

Gunbot StepGrid Strategy Logic

stepgrid strategy logic example

The strategy logic is simple: BUY when the coin price goes down by “x” amount of price value (for example, $500) and SELL when the price goes up by the same “x” value.

For example, the bot can buy $250 worth of bitcoin every time the price drops $500 in value and sell $250 worth of bitcoin every time the price rises $500 in value.

Math calculation based on the above example:

  • $250 worth of bitcoin at a price of 34k is equal to 0.00735394BTC
  • 0.00735394BTC sold at 34.5k is equal to $253.67
  • Net Profit 1.46%

If you don’t want to run out of money, you have to calculate your TRADING_LIMIT based on your wallet balance and consider the price of bitcoin as if it would have dumped a lot.

Here’s how to calculate your TRADING_LIMIT based on your Total Balance:

Divide the price by the step and then divide your Total Balance by the result, like this: Wallet Balance/(price/step)

For example: With a wallet balance of 10k USD and a bitcoin price at 35k, a “STEP” of 500 dollars would give you 142 dollars max of TRADING_LIMIT

The idea is to keep some balance to cover if Bitcoin drops by a lot, so, regardless of how much the bitcoin price goes down, you can keep running your bot without running out of money.

Keeping Gunbot running means you will be able to trade continuously, taking advantage of the perpetual swinging of the USDT/BTC pair.

Gunbot StepGrid Strategy Keypoints

  • Calculate your Trading Limit so you never run out of money, or your bot gets stuck because you got useless bags.
  • Run this strategy only on coins you consider spendable “money.” In other words, don’t go for “Super-Shitcoins” ๐Ÿ™‚
  • If you run out of money because you didn’t calculate your TRADING_LIMIT with the above formula, do not add more funds to your balance. If you’re in a position, the bot will start selling at a loss because this strategy doesn’t consider BREAK EVEN unless the price is above your BREAK EVEN price.

The automatic trailing from the SpotGrid strategy family is now available on the Gunbot StepGrid strategy, too, on both buy and sell orders. Pim developed a system that would adjust your STEP automatically as the pair swinging range contracts or expand.

The crypto trading bot strategy calculates the STEP value automatically, no need for any unique settings. It continuously watches that specific pair volatility and adjusts the STEP internally to fix the price action and trade.

If you want to run manual steps, set AUTO_STEP_SIZE: “false” and enter a STEP_SIZE price value. However, trailing is hardcoded for buys and sells in the step grid. It starts trailing every time a step reaches the target.

With ENFORCE_STEP, instead, you can make it respect steps when trailing. It also supports Keep_Quote.

I did my best to explain his Guntharish, but if you want to read the original article, please check Gunbot V23 the Way I run it by Gunthar on BitcoinTalk.

Gunbot Step-Grid Strategy

gunbot stepgrid strategy overview

The Gunbot stepGrid strategy is an advanced price strategy that triggers a “BUY” or “SELL” signal when the price moves above or below your defined step.

You can choose between two-step size options โ€” Auto and Manual, while the trailing price is fully automatic and takes place on every step, either up or down.

Step-Grid is a simple but effective trading strategy. The idea of this strategy is to trade small price movements.

Even if you’re in an overall losing position, the strategy will still make you money by taking advantage of small price increases and selling portions at higher rates than their comparable buy orders.

Unlike most other Gunbot strategies, this strategy has only a few options and doesn’t use confirmation indicators. The step grid method behaves this way because it only needs to confirm that the price has moved in a particular direction.

StepGrid Trading Behavior with Auto Step Size

The “Step-Up” and “Step-Down” are placed close to the last order rate. But if the pair has never traded before, the reference price for the steps is the pair’s price when you started running the strategy.

When the price moves down one step, it automatically starts buying, trailing, and places a buy order for 1x the “Trading Limit” as soon as the trailing finishes.

When the price moves up one step while below break-even, it automatically starts selling, trailing, and places a sell order when the trailing finishes. Below break even, each sell order is 1x the “Trading Limit” in size.

The behavior is the same when the price is above your break-even, but the order quantities can exceed 1x the “Trading Limit.” If the price reaches a complete step above break even, it will sell that bag right away.

When the price increases enough to reach the point where the next buy step is above break-even, the buy step acts as a stop in profit for positions bigger than 4x the “Trading Limit.”

Gunbot will buy again when it reaches the next purchase or sell step, and you’re in no position.

The bot will continue to accumulate until it reaches the “Max Buy Count” or when it runs out of available funds. Every new buy order will lower the break-even price.

Managing your balance is critical for your success with the Gunbot StepGrid strategy. Make sure you can afford the intended number of buy orders.

The following trading targets are constantly visible on your Gunbot GUI charts. Remember that the target lines keep moving all the time, and they represent the current targets.

How to Create a Gunbot StepGrid Strategy

On your Gunbot GUI, click on the “Strategies” tab to create a new strategy, name it, and select stepGrid as your BUY and SELL methods, then click “Create.”

how to create a stepgrid strategy

Gunbot StepGrid Strategy Basic Settings

Here are the three step-grid strategy basic settings:

Trading Limit: This is the amount of Base currency you want to invest per buy order.

On the USDT-BTC pair, a trading limit of 100 means that you want to invest $100 every time it creates a new buy order. Always make sure you’re trading limit value is higher than the Minimum Volume to Sell.

Min Volume to Sell: The value you add here will set the limit of your sell orders. You should set it to the minimum tradeable size according to your chosen exchange.

Gunbot won’t sell if your Quote coin value is lower than your defined amount. The bot will ignore small untradeable balances.

Max Buy Count: Limits how many buy orders are allowed. Setting a max buy count of 999 means that the bot will do 999 buy orders in a row. When you reach the specified maximum, the strategy will go into “Sell Mode.”

stepgrid strategy basic settings

There are a few more settings that you can optionally use with this strategy, described below.

Gunbot StepGrid Strategy Supplemental Settings

Here are a few extra settings you can implement with the step grid strategy.

Auto Step Size: When you switch it to Enabled, it will use automatic step size for your BUY and SELL orders.

Auto step size attempts to determine the steps that work. When you’re not in a position, the auto step size is smaller than when you’re in a trading position. When disabled, you can set a manual step size instead.

Step Size: This is the manual step size of your BUY and SELL orders.
Sets a manual step size, and the value represents a price. Setting 100 on USDT-BTC makes the bot trade each time the price moves by 100 USDT.

Enforce Step Size: When you enable this setting, it will restrict BUY and SELL trailing to step size.

When enabled, the price trailing cannot trigger trades at rates lower than the current step size. This StepGrid setting ensures a minimum distance between orders.

Stop After Next Sell: To stop trading a pair after the position closes.

The bot will not place buy orders when there is no balance left to sell when this setting is enabled. Averaging down the current position continues, and partial sell orders do not make the bot stop afterward.

Period: This is the time frame you wish to trade; it sets the chart interval. The default period is 15. Make sure only to use supported period values.โ€‹

SMA Period: You set how many candles you want to use to calculate the strategy support and resistance levels.

The default to calculate support and resistance is 50 candles. This strategy uses support and resistance to determine suitable trailing ranges.

ATR Period: How many candles Gunbot will use for calculating the Average True Range (ATR)

ATR is used to determine the auto step size; the default is set is to use a 50-period ATR. Using lower values might cause the step size to swing too fast.

Keep Quote: This setting allows you to hold some of your earned cryptos and not trade with it.
โ€‹
When you set a “Keep Quote” value higher than 0, Gunbot will hold your set amount when the next sell order happens.

step grid strategy step settings

Extra stepGrid Parameters

You can set Buy and Sell “enable” or “disable” in the pair override section, and if you enable “Watch Mode,” the bot won’t buy or sell.

You don’t need any other settings for the StepGrid strategy. All the system requires to function correctly is written above. If there is any change, this article will reflect the newest info.

Again, feel free to check the Gunbot wiki if you have any doubts.

Autoconfig Controller for the stepGrid strategy

gunbot stepgrid controller

FREE stepGrid Controller: Autonomous Spot Trading Strategy by Boekenbox

Pim has uploaded a dynamic version of the Step-Grid strategy preconfigured using Autoconfig.

Your download will include many pre-made configurations for you to use in spot exchanges like Binance, Huobi, Kraken, Kucoin, and Gunthy Mex. All you have to do is add your Gunthy wallet in the config js file and choose how many pairs you want to trade.

Once you set it up, the autoconfig controller will start scanning for volatile pairs and adding them automatically. Then the bot will trade with them using the native stepGrid strategy.

The stepGrid controller monitors what’s happening in the crypto market. If, for example, a currency is doing poorly, it will replace it with a better-performing one so you can always make the most profitable trading with the best-performing pairs of your chosen exchange.

You can trade multiple base currencies with ease. The Step Grid control will automatically prevent the overlap between pairs, so you can deal with them even if they are present in different marketsโ€”for example, USDT-BTC, USDT-ETH, BTC-ETH, etc.

The StepGrid controller supports USDT, BUSD, USDC, USD, EUR, BTC, ETH, BNB, and you can compound your “Trading Limit,” keep reserve or increase the (TL) trading limit. This method also includes Stop Loss as a risk management choice.

All that and much more is available for you to download for FREE from the Gunthy Marketplace. Click here to Download your copy of the StepGrid strategy controller.

Pointers You Should Keep in Mind when using this Gunbot Strategy:

  • Due to how compounding operates, it is difficult for the bot to combine trades with different limits on the same account.
  • Be aware that manual trading on the same account with the same base currency can lead your strategy to behave unusually.
  • Remember that this strategy works with Stop Loss, so when a stop-loss is used in this setup, it can sometimes lead to lost sell orders.
  • Note that trading behavior might become unpredictable in shallow volume markets. To keep the trading behavior in check, use the “force step size” option using the stepGrid strategy.
  • The included AutoConfig jobs must handle all pairs on the exchange.

Extra Warning Notes:

This is an excellent opportunity for a financial lesson! ๐Ÿ™‚ Always keep some of your funds in reserve. It is good to be wise and prepared for any future market surprises.

Here’s a tip: Try to keep the number of pairs you buy to a minimum. This way, your bot will process your pairs faster and more frequently.

Don’t freak out if you see a lot of pairs being added to the strategy. This is OK because Gunbot won’t trade all of them, don’t worry, that’s how the autoconfig controller is expected to behave.

Gunbot stepGridHedge Strategy

The Gunbot Step Grid Hedge strategy is still in its beta testing phase and is currently available to trade on the futures market. To use the stepGrid Hedge strategy, you need to be running the Gunbot “v23.1.2 beta” build or newer.

StepGridHedge Logic and Expected Behavior

The (SGH) strategy uses the same order triggers as stepGrid does on spot markets but differently.

Imagine the stepGrid strategy trading futures longs. When it encounters a sell step below the average entry price (which would cause a loss on the long side), it will execute a trade on the short side.

The same principle works on basically any situation the step Grid can encounter. It fires an order in the direction that is either profitable or will not incur a loss by firing the order.

Additionally, some “not configurable” methods prevent DCA orders from trying not to accumulate too much too fast.

The stepGridhedge strategy gets more profitable once it has time to accumulate positions bigger than a number of your Trading Limit (TL), which it will close in many parts – ever further away from your average entry.

Long periods of sideways trading are the main enemy of this strategy because there is a risk of accumulating too much around similar prices.

How to configure the trading pairs on the Gunbot stepGridHedge strategy

The short pair is only there to collect data and visualize trades. The settings for the “short” trading pair are to make sure it never trades.

The long pair does the actual trading on both sides. Always make sure to have the short pair before the long trading pair.

There is no GUI strategy editor yet for the stepGridHedge strategy, so start by setting both the short and long pair on your config.js file, as you see in the picture below.

gunbot stepgridhedge strategy As you see in the image above, the settings are based on a 500 USDT test wallet with no other pairs active. So use that as a reference so you can adjust your settings based on your wallet size and preferences.

TRADING_LIMIT“: Add a numeric value in USDT. This TL is the regular amount per initial or DCA order. The first few orders can sometimes use 1.5x or 2x this amount.

MAX_BUY_COUNT“: This is the maximum position size (measured in TL) per side. Bot won’t add more to the position if this threshold is reached.

MAX_UNHEDGED“: This is the maximum unhedged position size, the imbalance between long and short. For example, if the “long” is 20x your TL and the short is 5x your TL, there is a 15x TL (Trading Limit) unhedged. Bot won’t add more to the position if this threshold is reached.

STOP_AFTER_CLOSE_LONG“: Set to true, but it doesn’t open a new long after closing one.

STOP_AFTER_CLOSE_SHORT“: Set to true, but it doesn’t open a new short after closing one.

Other stepGrid specific settings like manual step size also work precisely the same way as on the stepGrid strategy for spot trading.

There’s one caution with order sizes on Bybit, the min order size is rather big and makes it hard to estimate how much TL a position currently is.

For example, if ETH is trading at $3000 and the minimum order size is 0.01 ETH in value, then a trading limit of $31 or $35 will both result in buying 0.01 ETH.

This makes MAX BUY COUNT and MAX UNHEDGED parameters a bit imprecise when trading with a trading limit close to the minimum order size. You can see the current counts in the console logs.

StepGridHedge new setting, “USE_TREND“: true/false, this new feature is available starting with the Gunbot v23.1.6_beta build.

This new setting gives the strategy the option to pick a side and manipulate the trading limit (TL) based on trend data gathered on the 4hrs chart. This overrules your settings for BUY_ENABLED and SELL_ENABLED.

USE TREND feature behavior when it detects a phase where it trades long only:

  • TL for longs is multiplied by 2.
  • Shorts may only close, not DCA.

USE TREND feature behavior when it detects a phase where it trades short only:

  • TL for shorts is multiplied by 2.
  • Longs may only close, not DCA.

USE TREND feature behavior when it detects an undecided zone:

  • Both long and short use regular TL.
  • Both sides may DCA and close.

Expect this mechanism to pause DCA on the losing side for longer times during more robust trends – possible for many weeks. When you set USE TREND to false, the strategy will function normally.

Again, the Gunbot stepGridHedge strategy is in beta. You won’t be able to use it with the stable release yet. Keep coming back to check for new info to be released as the strategy gets updated.

Gunbot StepGridHybrid Strategy

gunbot stepgridhybrid strategy

The stepGridHybrid is an improved bot trading strategy based on pure grid trading that incorporates TA and price action trading styles.

Note: Some of these modes will perform better if you combine them with an Autoconfig controller script. The stepGrid Hybrid can be used only stating with the Gunbot v23.1.6_beta build. Not yet available in the stable release.

That been said, I suggest you set a “testing” Gunbot instance to check the strategy behavior and make sure you understand how it works before you use it as your money-making method.

Once the Gunbot StepGridHybrid strategy gets fully tested it will be included in the Gunbot core as a native strategy and will be released in a stable version. So, with that out of the way, let’s begin.

How does the Gunbot StepGridHybrid Strategy work?

The stepgridhybrid strategy works precisely like the regular stepgrid, with the only difference being the “sell amounts,” which are based on the remaining “buy volume” below the current price.

The strategy can “skip buy steps,” As soon as the trading operation continues at a lower level, it will not try to sell any bought coins at a higher price unless it reaches the average break-even price.

The stepGridHybrid strategy includes controls for setting percentage-based steps and trailing ranges.

Here are options to use a built-in trend module with the 4hrs, 1hr, and 15min candles to influence trading behavior.

  • When it’s allowed to open a new trade.
  • Place additional buy orders during a pump.
  • Skip buy steps when the price action is negative.
  • Increase the sell target and sell trailing range when price action is positive.

Is the Gunbot StepGridHybrid better than the stepGrid strategy?

The answer is that it depends on what you’re looking for. The Gunbot StepGridHybrid offers more settings options to tune the strategy, which means it does provide more control over how and when you trade.

But, some people might find this more confusing. In the end, Pim made the strategy with different trading styles in mind, not just a better trading style.

Remember: The success of any crypto trading strategy you’re using will be determined by what you want to accomplish with it. If it works for you and what you want, it is good. You can use the two strategies for different purposes.

What are the “modes” in the StepGridHybrid strategy?

The strategy modes are five different features or settings you can activate to customize your trading method. By enabling these modes, you can dictate when Gunbot can open new trades. You can also decide if you will use “Stop Limit” and how you want to use it.

If you do not activate any mode, all your new trades will always remain open. You should use the “modes” one at a time, from opening to closing a transaction, because enabling multiple modes on a single pair can lead to unexpected behavior.

How to use the StepGridHybrid strategy?

As I told you before, this strategy is still in beta mode, so you can not edit it from the GUI. So you will have to edit your config.js file.

Here are the Gunbot StepGridHybrid Strategy Pair Override Default Settings

“SELL_METHOD”: “stepGridHybrid”,
“BUY_METHOD”: “stepGridHybrid”,
“ATR_PERIOD”: 50,
“PERIOD”: 15,
“BUY_ENABLED”: true,
“SELL_ENABLED”: true,
“STOP_AFTER_SELL”: false,
“MIN_VOLUME_TO_SELL”: 10,
“MAX_BUY_COUNT”: 999,
“TRADING_LIMIT”: 100,
“USE_TLR”: false,
“AUTO_STEP_SIZE”: true,
“PCT_STEP_SIZE”: false,
“STEP_SIZE”: 2,
“PCT_TRAILING_RANGE”: false,
“CUSTOM_TRAILING_RANGE”: 0.5,
“USE_PSR”: true,
“PARTIAL_SELL_RATIO”: 0.4,
“TREND_SYNC”: false,
“TREND_BASIC”: true,
“TREND_PLUS”: true,
“TRAILING_MULTIPLIER”: 2,
“SELL_STEP_MULTIPLIER”: 1.2,
“CUSTOM_TRADING_RANGE_MODE”: false,
“TRADING_RANGE_LOW”: 8000,
“TRADING_RANGE_HIGH”: 10000,
“TRADING_RANGE_STOP”: 7000,
“PULLBACK_MODE”: false,
“VOLATILITY_MODE”: false,
“TA_MODE”: false,
“DYNAMIC_SL”: false,

Note: Make sure to set your desired “TRADING LIMIT” value.

Gunbot StepGridHybrid Strategy Settings Explained

ATR_PERIOD“: 50, the ATR_PERIOD is used for setting the auto step size. Unlike regular stepGrid, you can now safely experiment with lower values.

PERIOD“: 15, this is the default setting and is strongly suggested to use 15minutes. Using a different period will cause more API usage because the strategy will still fetch 15min candles for the trend module, next to 1hr and 4hrs candles. The exchange must support at least 15min, 1hr, and 4hrs for this strategy to work.

USE_TLR“: false, if you enabled it, the strategy will use a changing buy amount, if the price is relatively high (lower amount) if relatively low (higher amount). If you use this setting, make sure to set a value for TRADING LIMIT that is at least 4x the minimum trade size. USE_TLR is meant to be used together with VOLATILITY_MODE but can be used without it.

AUTO_STEP_SIZE“: true, if you disable it, STEP_SIZE defines the step size. AUTO_STEP_SIZE uses ATR-based steps.

PCT_STEP_SIZE“: false. If you disable it, STEP_SIZE will be set as an absolute price difference. When PCT_STEP_SIZE is enabled, the value in STEP_SIZE represents a percentage.

STEP_SIZE“: 2, setting two will lead your bot to have steps of 2% of the current price.

PCT_TRAILING_RANGE“: false, if you enable it, you can set a custom percentage in CUSTOM_TRAILING_RANGE to be used for buy and sell trailing. Setting 0.5 will lead your bot to have trailing ranges of 0.5% of the current price. By default, trailing ranges get set automatically based on the current distance between support and resistance.

CUSTOM_TRAILING_RANGE“: 0.5

USE_PSR“: true, if you enable it, the strategy sets a partial sell ratio automatically. It will use a higher value when the price is relatively low and a lower value when it is relatively high.

PARTIAL_SELL_RATIO“: 0.4, when placing a sell order below the overall break-even rate, the sell volume is defined by PARTIAL_SELL_RATIO. If you bought 200 units at rates lower than the current price, a PARTIAL_SELL_RATIO of 0.4 would yield a partial sell order of 80 units.

TREND_SYNC“: false, if you enable it, new trades may only be opened when the trends on 4hrs and 15min are aligned. This setting can be very restrictive.

TREND_BASIC“: true, this option enables dynamic strategy behavior like:
Using an increased sell step and trailing range when the market seems good for it.
Placing immediate buy orders (regardless of hitting a step) when price action is very positive.
Using a higher partial sell ratio after an immediate buy.
Skipping specific buy steps when price action is very negative.

This option can be risky and needs testing. If you see irrational numbers of trades in a short time, please disable the option and report the behavior.

TREND_PLUS“: true, this option enables dynamic strategy behavior like:
Placing immediate buy orders (regardless of hitting a step) when there seems to be a short term opportunity
Using a higher partial sell ratio after a quick buy

This option can be risky and needs testing. If you see irrational numbers of trades in a short time, please disable the option and report the behavior.

TRAILING_MULTIPLIER“: 2, setting TRAILING_MULTIPLIER to 2 multiplies the trailing range by 2.

SELL_STEP_MULTIPLIER“: 1.2, setting SELL_STEP_MULTIPLIER: 1.2 makes a sell step 1.2x times as big.

These multipliers are used when TREND_BASIC or TREND_PLUS are enabled, and it detects a situation where increased targets make sense.

Multipliers apply to both automatically or manually set step or trailing sizes.

CUSTOM_TRADING_RANGE_MODE“: false, with the CUSTOM_TRADING_RANGE_MODE, you can define the price zone in which you want the strategy to operate and optionally set a stop target.

  • “TRADING_RANGE_LOW”: 8000,
  • “TRADING_RANGE_HIGH”: 10000,
  • “TRADING_RANGE_STOP”: 7000,

In the example settings, new trades may only be opened when the price is between 8000 and 10000. In case the price drops below 7000, all funds get sold. Set stop value to 0 to effectively disable it.

PULLBACK_MODE“: false, when enabled, a pair may only open new trades when a pullback happens (mostly on 4hrs charts).

VOLATILITY_MODE“: false, when enabled, only bullish pairs are traded in a controlled volatility range: it will attempt to start trading relatively low and stop trading when the price is about to peak.

This “mode” comes with a built-in stop mechanism near the top to hopefully often allow for a clean exit with minimal loss on the last sell order (this stop mechanism is separated from the DYNAMIC_SL option and cannot be disabled in this mode).

TA_MODE“: false, when enabled, only bullish pairs are traded after they hit one or more TA fractals.

DYNAMIC_SL“: false, this option is meant to be used together with VOLATILITY_MODE or TA_MODE and tries to provide a meaningful stop target. You cannot see the stop target before it hits.

PULLBACK_MODE, VOLATILITY_MODE, and TA_MODE are all very restrictive when new trades are allowed to be opened.

You may run a pair for weeks, and nothing at all happens. These options are mainly meant to be used with AutoConfig to feed the bot with potential pairs on which you can trade one of these modes.

Gunbot StepGrid Strategy Conclusion

This Gunbot strategy gives you a chance to profit from the market predictability by following the price range only without any other trading indicator.

When you use price action to time your entries and exits, you’ll be faster than someone who relies on indicators.

Here are some benefits of a Price Action Strategy

  • The price will always give you an objective view of the market.
  • There’s no need to be stuck doing fundamental or news analysis because all you care about is the price.
  • You don’t need to use trading indicators, only “Price.”
  • You can time your entries and exits easier.
  • You have a structure to trade in different market conditions.
  • As long as you calculate your “Trading Limit” correctly, it would help if you didn’t run out of funds and kept trading continuously. (unless BTC goes to Zero) ๐Ÿ™‚

Very Important: Remember to calculate your Trading Limit! Leave some room to give you enough buying cushion. Or set a pair with low TL to run for a couple of weeks to get a feeling of how many buys to expect because if you miss a step and add more base later, it will sell the missing step at a loss.

If you want to change your Trading Limit after a while, do it when you don’t have a bag you need to sell.

Last but not least, DON’T FORGET: This is not trading advice. My advice is, Do Not Trade with your Food Money, Never Trade what you’re not willing to lose, manage your risk, keep calm, and Gunbot.

That’s it for now, but don’t forget to check this article from time to time, as some of the Gunbot StepGrid strategy parameters may change over time.

Do you want to Trade with Gunbot successfully? Get it Now, so you can Profit!

cryptodroi gunbot buy now call to action

Gunbot High-Frequency Trading Fast Execution

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gunbot high-frequency trading

Discover How You Can Outperform Manual Traders and other Bots with the Gunbot High-Frequency Trading Advantage.

Get your trading edge and be ahead of the crowd with Gunbot HFT Lightning-fast execution.

In recent years, high-frequency trading and bots are becoming increasingly popular due to the automation and speed they provide. They allow you to control your trading 24 hours a day, and they take over the manual work that would otherwise require you to be sitting in front of a computer constantly.

You can also use trading bots to execute trades at lightning speed with a high level of precision. When you combine Gunbot with your favorite crypto trading exchange, you get a powerful weapon for making profits while you sleep.

That said, let me clarify first that Gunbot High-Frequency Trading is still a work in progress, so allow me to explain HFT in this article and give you a rundown to know what to expect from this superfast trading opportunity.

What is HFT (High-Frequency Trading)?

The use of supercomputers to execute trades at very high speed is called high-frequency trading. In the past, traders made hundreds and sometimes thousands of transactions per second. Lately, with the improvement of computing powers, traders use compelling dedicated computers to make millions or more transactions every second.

By many estimates, HFT accounts for over 70% of transactions made by large companies worldwide. This number speaks volumes about the acceptance of the superiority of bots over ethical trading strategies.

What is Gunbot High-Frequency Trading

Gunbot High-Frequency Trading is a Gunbot operating on WebSockets instead of Rest API.

Don’t get overwhelmed with the concept or thinking about how you will get a hold of a supercomputer. Gunbot HFT is not about that; let me explain.

We use Rest API as our method for Gunbot to gather information and trade on the exchange on your behalf, this is the most commonly used method out there and is implemented by other trading bots as well, but as you may know, Gunbot is always a step ahead, so Gunthar is experimenting with Websockets which are way faster.

Web sockets offer high performance by being better with high loads, their bi-directional nature, and their connection can scale vertically, among other technical things, making it ideal for real-time scalable applications like Gunbot.

What does all that mean to us? SPEED!

Gunbot High-Frequency Trading Scanning all pairs on the Exchange

gunbot high speed trading 4 seconds all pairs

We have a glimpse of that on our arbitrage bot “bitRage,” and that thing scans the exchanges pretty dang fast ๐Ÿ™‚

HFT in Financial Markets

High-frequency trading is efficient and therefore common in the financial markets. Institutional investors spend billions of dollars each year to develop and implement HFT strategies.

In addition, HFT is expanding into new markets like the cryptocurrency market and gaining media coverage. Ordinary traders have to face this power in the market and avoid the pitfalls it sometimes creates.

The reality is that HFT (High-Frequency Trading) helps stabilize the exchange-traded fund (ETF) market by ensuring that the price of funds stays close to the net asset value (NAV) of holdings, according to a news report study.

This should benefit all investors, not just Wall Street professionals.

It is known that High-frequency algorithmic trading reduces the magnitude and persistence of ETF price deviations from net asset value.

These findings are now much bigger than ever, as the HfT market has grown to be gigantic compared to just a decade ago.

Or, to put it differently, if the algorithm keeps the HFT market healthy, the financial market as a whole has a chance to stay healthy.

How does High-Frequency Trading Work?

Traders using HFT create algorithms that analyze stocks and price patterns much faster than anyone else, giving them an edge in spotting new market trends.

Usually, HF traders are not looking to make a big trade but make many small trades, sometimes just looking to spend a few pennies between the bid and ask prices, which doesn’t seem like a lot, but when you do, it’s millions of dollars.

Thousands of operations per day add a lot of money when you keep it consistent.

High-frequency trading became popular after the exchanges began to offer incentives to provide liquidity in the markets, which would later earn them fractions of pennies per share to provide liquidity, which is known to happen under the name of redemption.

So, for example, if you place buy orders at the bid price or below and they are executed on the market, you provide liquidity in the markets where, if you place a buy order on the market, you would withdraw liquidity from the market and do not receive a refund.

What the HFT Speed Relies On

The speed of transactions depends on the proximity of the servers that carry out the transactions. It relies on the transfer of data by light using optical fibers, but it also requires fast and comprehensive direct market access.

High-frequency trading works because large brokers have to buy a lot of stocks to satisfy the portfolios. Rarely can a shareholder or trader supply enough of it, so the broker must buy pieces from multiple traders to fulfill the order.

The time taken allows high-frequency trading platforms to step into the trade, spot the first trade and realize that there will likely be more trades in the stock, buy before the broker can buy, sell to the broker when the purchase order reaches them.

The mark-up can be a few fractions of a cent, but with a sufficiently large transaction, the profit can be substantial and take micro-fractions of a second.

Repeat this several times a day, and the high-frequency trader can make a lot of money.

Whether an individual can profit from it, the answer, for now, is no, because the speed of personal or desktop computers, as well as the distance to commerce, are far that they would be way behind the completion of the trade.

High-frequency Trading Strategies

High-frequency traders never stick to a single strategy and instead use multiple techniques.

As high-frequency traders never hold a single asset for a long time, they constantly make new portfolio-allocation decisions using algorithmic models.

The success of such models mostly depends on whether they can simultaneously process large volumes of data. Most techniques consist of several arbitrage strategies executed at lightning speed and market-making.

HFT execution strategies aim to execute large orders from institutional players with little or no impact on prices.

These include the Volume Weighted Average Price (VWAP) to execute orders at a better average price and the Time Weighted Average Price (TWAP), which is used to buy or sell assets without affecting the price.

HFT Order Flow Prediction strategies: attempt to predict high player orders ahead of time, take trade positions ahead of them, and lock in profits due to the subsequent impact on the high player trading price…

Automated HFT arbitrage strategies: attempt to capture small profits when there is a price difference between two similar instruments.

HFT market maker strategies are necessary to establish a quote (the most recent price at which a portion of the asset was traded) and continuously update it.

Our Market Maker is pretty fast, especially when using the staggered orders strategy, Imagine Gunbot Market Maker on WebSockets!

gunbot market maker bot trading example

High-frequency Trading and the Cryptocurrency Market

HFT accounts for more than 70% of orders on the US stock market and is available on crypto exchanges.

To enable high-frequency trading, an exchange needs to offer colocation facilities, which means the traderโ€™s server is placed in the same facility or cloud as the exchanges.

This process has occurred in different asset levels as trading has become more algorithmic. Traders can trade more effectively, which improves price formation, price discovery, and liquidity.

However, good opportunities may become fewer, which is a sign of a more efficient and developing market.

Bots have been present in crypto for a long while, but colocation brings algo trading to a whole new level.

The list of some exchanges that offer colocation services is, Huobi, Gemini, and ErisX. Huobi, for example, stated that one of its clients makes about 800,000 trades a day using colocation. So, HFT trading is now expanding on crypto.

What is the latest version of high-frequency trading?

As already mentioned, HFT is responsible for a large part of the operations that take place in the US and UK. Therefore, after the Knight (Capital Group) incident, e-commerce centers and businesses worldwide have been slapping techs on the neck and making sure their algorithms are working fine.

It is definitely not drawing back due to the huge benefits it provides. In some cases, HFT is the only way out due to the highly fragmented nature of the market, for example, the spot stock market.

Others, who have tested their blood with this method, are ready to go to war rather than stop using HFT.

Why Traders use High-Frequency Trading

The motivation behind using these powerful computers to bid is simple. Computers can overtake humans when it comes to placing bets at super high speed.

For example, suppose a stock is offered simultaneously in two markets with a slight price difference.

With HFT, the trader can buy the right market and sell the expensive market by accumulating profit along the way on each trade. This method has very little to do with fundamental or technical analysis taught in professional institutes.

The biggest complaint with high-frequency trading is its potential to disrupt financial markets within moments dramatically.

However, a good algorithm can be tailored to work with hundreds of coins. Its capabilities are directly derived from the skills of the developer.

Therefore, the HFT created by experienced traders can be adapted to any market or exchange. Moreover, if necessary, they can be changed and improved, making the algorithm perfect for the trader’s needs.

High-frequency Trading Software

gunbot hft

There are several ways traders can access HFT, including finding a broker, owning a powerful computer, and installing good software.

Several software suppliers are on the market, but it is worth considering the next steps before you buy quite expensive software.

It would be best if you had a trading strategy in mind because no software vendor will sell you a trading strategy, algorithm, or high-frequency signal. Gunbot comes with predefined strategy settings, but it is up to you to adapt them to your style.

HFT trading is associated with high infrastructure costs, localized servers, high-speed data providers, brokerage fees, etc.

HFT software is not plug-and-play, so you must adopt a lot before you place your first order.

Remember that cryptocurrency trading comes with significant risks. You can suffer huge losses and potentially lose more than what you have invested. If the risks involved are not clear to you, consult an external specialist for independent advice.

All indicators, studies, and trading signals provided on the platform are based on technical analysis.

They are predefined algorithms that use price history, order book status, and other data as input. These tools should only be used in conjunction with in-depth market analysis.

No tool can guarantee future profits or predict market developments with absolute precision.

Benefits of High-frequency Trading

Although market players used algorithms and HFT technology to manage their transactions and risks, their use also clearly contributed to the flash crash in May 2010 when the DJIA fell more than 1000 points in just 20 minutes.

However, a big advantage that some people do not understand is that HFT helps reduce the risk of market instability.

Also, before high-frequency trading, the cost of trading stocks was much higher, and spreads were generally much higher; introducing HFT helped with this. They provided a ton of liquidity in the markets and allowed retailers to trade and participate cheaper.

Below are other benefits of the HFT algorithm.

The robotic nature of this type of trading leads to greater efficiency and better trading. The result is easier and less error-prone trading. Another result is an often dramatic increase in the profits of the trading system made by the company or the individual.

Executing operations manually to maintain a similar level of efficiency would be difficult, if not downright impossible.

Commercial systems like these operate within time frames measured in fractions of a second. It is this extreme speed in decision-making that also makes manual negotiation of such strategies impractical. There are cases when the trader is not at his desk, and the opportunity suddenly presents itself.

In other cases, the residual fear caused by a recent large market loss can sometimes elicit a “deer in the headlight” reaction even from the most seasoned traders.

Flexibility

High-Frequency Trading is not limited to forex or stocks, with a cryptocurrency trading system. The same set of technologies and strategies can be developed, with some minor adjustments, to take advantage of opportunities in markets and worldwide.

Nor is a portfolio limited to a single methodology. An algorithmic crypto trading bot can handle multiple trading systems simultaneously. These systems excel in what is called “high-frequency trading.”

Gone are the days of browsing yesterday’s charts. HFT algorithmic can make real-time trading decisions with current data as it arrives. Humans cannot compete with a high-speed algorithmic trading bot.

Easiness

Algorithmic crypto trading systems facilitate your access to vast reserves of liquidity, thereby improving overall execution time and accuracy.

Money Management

HFT algorithmic trading bot help with money management, also known as trade size or simply “position sizing.” The eternal question has always been to buy or sell.

But the astute trader knows that the question of how much to buy or how much to sell may be more important than being long or short. Position size requires calculating complex formulas, which can only be done by computer if one has a realistic chance of trading algorithmically.

An HFT crypto bot analyzes real-time market data to make buying and selling decisions and calculate how much to buy or sell short accurately. This enables the next step in a complete automated trading strategy: risk management.

Risk Management

Suppose you have successfully figured out when to “enter a trade.” That is when to buy or sell a particular coin pair. Suppose further that you have also determined exactly how much to buy or how much to buy.

Neither responds although they do participate in helping answer the question “when to go out.”

A logical and consistent exit strategy is required before entering a trade.

If you try to decide in the heat of the market when to close a trade, you are simply inviting disaster.

Before opening the trade, one should carefully and cautiously determine what exactly needs to happen to trigger the liquidation of the position. If your trading turns positive, so much the better. Making money is good.

However, if your trade goes against you, the question is. “How much am I prepared to lose on this trade?”

Suppose you decide not to lose more than 2% on a trade. It is essential to know precisely when this loss threshold of 2% has been reached.

Conclusion High-Frequency Trading Algorithm

gunbot hft opportunity

Cryptocurrency trading algorithm is basically trading crypto with bots. Bots are computer programs that allow you to buy and sell cryptocurrency at the right time. Its objective is to generate income for its users and ensure that they will benefit in the long term.

Bots carefully observe market conditions and execute trades based on predefined algorithms. It should also be pointed out that you are free to make your own settings, which will help you to perform various operations.

This software responds almost a thousand times faster than a human, so its operational efficiency is questionable.

Expatiating on Gunbot in this section, Gunbot is useful and can trade in a matter of milliseconds. Speed depends on the number of coin pairs you are trading. This bot can follow trends and execute when it is profitable to buy or sell something according to your settings.

Once all the conventionalities have been done, you can move to the installation procedure. In fact, you can get a trading bot by resorting to one of the following options:

  • Get it for free through an open-source platform
  • Get a paid version of a licensed bot like Gunbot

Let’s recap 4 benefits Gunbot has over humans.

  1. Speed: There is no doubt that bots run a hundred times faster than humans
  2. Resilience: Bots can trade 24/7 without interruption
  3. Capacity: Gunbot can process gigabytes of data per second
  4. 100% Objectivity: Bots are not subject to emotions of any kind. They do what is asked of them.

As you can see, cryptocurrency trading bots are beneficial and multi-functional, allowing you to generate a lot of profit.

Just keep in mind that to give them a full game, it is highly recommended that you analyze the details of the bots. And then run to all your chances to benefit from this nifty technology.

So there you have it, that’s all I believe is important for you to understand and prepare you with the basic knowledge for the upcoming Gunbot High-Frequency Trading Feature. Are You Ready? Take Gunbot Now and Start Profiting.

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