Course 12

The messy drawer with lots of information

What you will learn:

  • Random things I took note in my journals such as

    • Use only limit orders

    • trading can be spiritual

In this part, I will share with you a list of random info that I gathered while going through my 1 year of note taking. It is like going to the flea market, you don’t know what you will find but you won’t know until you go through everything.

Things to watch when setting up a bot:

- If you place your order @ a specific price based on your algo, be careful sometimes by the time your order arrives on the exchange, the price may have moved back beyond your order price target, and your order will get cancelled right away. Sometimes it takes a while (1-2 sec) for TV to send the alert to the exchange and you can get screwed this way. Happened to me, always have a back up in case your first order got cancelled.

- If you use position sizing on very small TF, and you risk a large amount of your equity, and the distance to SL is very small (because of the small TF calculation), it will result in a VERY BIG position size. This also means any fee or slippage will be proportional. Any mistake and you will do a hole in your equity. If you do have a strategy that uses high leverage based on position sizing, I recommend using a “Max” position size, so that you don’t go 100x. Usually, these problems happen when you sleep. Then you get up and half your account is gone (happened to me). I was putting my SL on the low of the candle – on the 1 min TF – then I was measuring the distance between SL and entry (usually this meant it was the distance between the close and the low). Sometimes on a tiny bar, this distance is super small. Could be 0.05%. If you remember position sizing, let’s say my risk was 1%, then my position was 1/0.05 = 20x. I hope this makes sense, if not let me know.

Pick nice markets:

Trade only active, liquid coins, the top 20-30 coins on coinmarketcap. The reason why is because they have nice moves, trends and randomness. If you trades something with low liquidity, then things can move in a way that doesn’t make sense. It also can kill your backtesting. Your indicators won’t work well.

Use limit orders:

The higher the frequency of trading you use, the more limit order you should use. On a ranging bot, only use limit orders, it will buy and sell all day long, and fees will add up big time. If you trade once a day, market orders are OK. This being said, always try to use limit order overall.

Hard to do:

STAY SIMPLE. In the previous course I gave you a very simple holy grail. If you use a too complicated strategy, your algo won’t be transportable to another asset/market. Also, it will for sure fit the past perfectly but will not work well with the future. 1-2 indicators max. Don’t build a nuclear power plant.

Understand the categories of indicators: (and use them appropriately)

- Trend indicators

- Velocity (acceleration, volatility, momentum)

- Quality (strength, continuation, duration, sustainability)

- Oscillators (price, volume) => only for sideways market

- Accumulation/distribution: large lot activity vs small lot => Google this, very interesting

- Cycle pattern

- Understand you get data (candle chart) and you have Price indicators, Time indicators (both lagging) and Quantity (sometimes can lead).

- RSI is a Price and Time indicator. RSI is the most versatile and most used indicator. It compares price to prior prices.

- Only use 1 price + 1 time indicator for your analysis.

- Look into TSV Time Segmented Volume

- Look into BOP Balance Of Power

- Look into the SQN indicator

Conclusion – Market Spirituality

The market is here to give me money, through volatility.

This is my job to take it.

Sometimes, the market doesn’t want to give money, it has no volatility. And sometimes, it wants to give a lot of money, there are a lot of big moves.

I need to take the money when the opportunity presents itself.

Algorithmic trading is having a system to automatically take the money when the opportunity is there.

I can predict my system, because I design it and I pick the rules and conditions.

I can’t predict the market. The market is absolutely random. There are no predictive indicators on which I can rely on.

I MUST rely on my system.

Divergences, Price Action, Points of Control, Vwap, Trends, Reversals, Breakouts are not reliable. Only my system is reliable.

I can’t change the market, only my system can change.