Course 16

Features of bots

What you will learn:

  • What are the different features of bots

This one will tell you what features you can find in a bot.

I hope you read most of the courses and if you did, you should know that when you trade, you should have a specific entry, a stop loss, and a take profit level. These 3 should be predetermined ahead of time, before you trade, before your emotions are part of the decision making.

When you trade with bots, naturally these 3 things are at the core of any system. Below are the different features you will find in a bot, in addition to the 3 basic settings:

Entry: the entry is usually the same as the signal of the strategy. If you buy at the crossover of the EMA4 and the EMA21 of the price, and the signal is generated at the bar close, then your entry should be very close to the bar close. If you didn’t understand EMA and bar close, then the Entry is equal to the price when you received your signal, and the trade was placed on the exchange. Each bot has a “deal start” condition, or an “entry signal”. What is important for you to understand is once you get the signal, how do you enter? Limit order? Market order? For 3commas, as far as I know it is a market order. So, if you buy during a mega dump (meaning there is a lot of volume on the order book), then you will experience big slippage. In addition, if you buy with leverage let’s say 10x, then since it is a market order, you will pay 10x the market order fee (could be 0.05% times 10 = 0.5% already lost here …). Some other bot trading platform, everything is so user friendly that you can’t see your exact entry, and the fees you incurred. This is no good.

Stop Loss: this is self-explanatory, with regular bots, you just set up your stop loss at a percentage of your entry. You can also place it at a specific level. This places a trigger on the exchange, and once the price reaches it, the trade is closed. Most bots, you will get a market order. Expect some good slippage too – sorry I feel like this lesson is only bad news so far. This means that if you put your Stop Loss at 1%, it will get triggered when the price went down 1%, but with slippage, fees, etc. you may end up losing 1.2%. When you bot trade, 0.2% is a LOT guys. With my bots, I like to have a negative slippage – don’t try to understand yet, it will be for another course.

Take profit: this is also self-explanatory. Same as the stop loss, you set up a percentage or a level of where you will take profit. You are probably thinking that you have slippage again? You are right! But it is still not in your favor. So, on your TP’s, if you put 1% take profit, you may get 0.98% or something.

Based on these 3 very simple and basic features of bot trading, you can see that between theory and practice, there will be a GAP. If you read the courses, you know that the gap is coming from slippage, fees and delay in API.

Any bot software, any bot program, any bot tool, any bot website or algo out there: the less information you see/have, the more GAPs you will experience. This means the 1% a day you were targeting (or sold), will be more like 0.5% a day. And then the market will dump because of FUD, and you will get one major loss, your 0.5% for 29 days in a row becomes a loss on the 30th dump day.

In this journey of you learning about it, you must understand where each cent is going. Therefore the more you learn, the more you can understand the effect of slippage, the amount of fees incurred, and what delay you observed.

Most platforms won’t allow you to look under the hood. 3commas is alright but limited (great to start though). Once you are ready to look under the hood, check out Alertatron.

Me, I track what my theoretical algo profit/loss should be and I compare it with my actually profit/loss, to understand where the money is.

Let’s keep going.

The next features are features you can find in addition to the first 3.

Safety Orders: the safety order is an extra entry you can get, lower than your current entry if you are longing. So, for example maybe you entered on Bitcoin at $45,000 but the price drops at $40,000 and you decide to buy more. If you bought the same amount for both entries, your average is now $42,500. It is great because it allows you to lower down your average entry price. You can lay as many orders as you want, 5 or 10, and always lower down your entry. 3commas mains bots are DCA bots (check courses 14 for the different bots). DCA means Dollar Cost Average, basically it means to average down your entry, meaning using safety orders. The good part about safety orders is that they are usually limit orders. They are placed on the exchange ahead of time, and you incur much less fees. Safety Orders are useful only if your strategy needs them. Not all trading strategies use Safety Orders.

Along with Safety Orders, you will see Deviation to open safety order. This is basically the percentage that the price needs to move away from your entry to place the very first Safety order.

After that you will see Safety Order Step Scale. This is what is the percentage in between all subsequent Safety orders.

Finally, you will see Safety Order Volume Scale. This is the size of your Safety orders relative to the very first one. So let’s say you set up your base order to be equivalent to 10% of your account balance and your first Safety Order is 15%, if you set up your volume scale at 1, your safety orders will be all 15%. If you set up your volume scale at 2, then your safety orders will be 2 times the previous one. SO – base order 10%, Safety 1 15%, Safety 2 30%, Safety 3 60%. As you can see, it can go very fast and you can end up using your entire balance account, so you have to be careful.

Trailing Take Profit: Basically, once the price reaches the take profit level, it will start trailing it, meaning instead of taking profits, it will wait to see where the price goes. If it keeps going up, then it will secure more profits. As long as it goes up, it trails the price and brings the take profit level up and up.

Leverage: Another parameter you may encounter is leverage. When you trade, you can trade regular cryptocurrencies, this is called Spot Market, and you can also trade derivatives. For example “Futures”. There are other derivatives products out there, for now I will just talk about Futures. I highly recommend you to focus on one specific way to trade. If your goal is to make money, just focus on 1 of them (Spot, Futures, or Options, Margin, etc.) and then once you’re successful, you can try to branch out.

Back to our Leverage – in futures, you are basically betting on the direction of the market (Long or Short = price will go up or price will go down), and so you can buy more than what you have. If your account is $100 and you buy $200 worth, now you are 2 times more exposed to losing all your money. You can go on some platform up to 125 times your account balance. So, if you have $100, you can bet $12,500. Anything over 10x leverage is ridiculous, or I should say “Degen”. Many people will tell you actually to stay less than 5x. What you must understand is the higher the leverage, the smaller your room for error. Given crypto volatility, using 125x would mean you need to get in and out within the same 5 minutes, otherwise you get liquidated.

So, leverage is the number of times you want to bet your account balance. It is summarized and represented very simply here. You will have to set up leverage on your bot if you don’t use Spot. By experience, based on probabilities, losing streak, win rate, etc. a leverage of 2x or 3x is totally doable.

Leverage Type: Along with the leverage, you will have the leverage type. Cross or Isolated. Cross means that your margin will be shared across all your positions. Isolated, like its name indicates it, means that only the isolated margin is taken into account in the trade. The margin is the amount you are betting out of your balance.

If your balance is $1,000 and you will use 6x, using 50% of your account, meaning using 50% of your available margin:

For cross leverage, 100% of your account can actually be used to keep a position open. This mean you can get liquidated for the entire balance.

For isolated, only that betted margin can be liquidated, which is 50%.

You are probably thinking isolated is better than cross – well, it depends your strategy.

My recommendation is once you have a solid strategy, and it works, go 2 or 3x leverage and see what you get. It is reasonable, and the liquidation level will normally be beyond your stop loss anyway.