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YOUR ULTIMATE GUIDE INTO CRYPTO TRADING BOTS
WE BROUGHT TOGETHER ALL NECESSARY INFORMATION HERE. TAKE A LOOK.
What is a trading strategy?
A trading strategy is a set of rules and conditions that describe the actions of a trader under certain circumstances in the market.

For example:
  • Entry points to the market.
  • Point of exit from the market.
  • Approximate time intervals between entry and exit points.
  • Approximate time intervals between two consecutive entry points.
  • The percentage of capital depending on the conditions under which the position is opened
In drawing up a strategy, it is important to take into account the type of currencies. In the market of popular and volatile coins, the trading frequency can be higher than when trading in little-known and slow-growing tokens. Deals with them may be less frequent since it is more difficult to wait for them to jump or fall.

The strategy is based on a pattern that distinguishes one coin from another.

To form a trading strategy, you need:

  • Analyze the market behaviour of specific currencies
  • Select the most important patterns and take them as a basis,
  • Supplement with parameters that allow the maximum use of patterns.
  • Determine the rules and procedures for the occurrence of the desired market situation
    What is a trading bot?
    A bot is a trading algorithm that executes market orders on a crypto-exchange according to user-defined settings. Bots operate around the clock and are able to instantly respond to rapid changes in market conditions.

    Long Bots operate when prices rise according to the simple "Buy Low-Sell High" logic.

    Short Bots activate when prices fall. They are not actually "shorting", but leverage the principle of selling a token at a high price and buy it back at a lower price. This way profits are secured while maintaining the initial amount of tokens.
    What is a trading leverage and why you may need it?
    Trading on margin (or trading with leverage) is a way to borrow funds from the exchange in order to purchase more coins than you would normally be able to afford. The trader's funds are used as collateral and the exchange then lends the trader a multiple of that deposit.

    Margin and leverage go hand-in-hand. The trader uses margin to create leverage. The margin is the amount borrowed whilst leverage is the increased buying power. To use Bitmex as an example, they express margin in percentages (%) and leverage in multiples (X)

    Advantages and disadvantages:

    • Margin….that is a profit margin. Traders who make successful trades can increase their profits without the need to increase their working capital
    • The risk of proportional losses. A trader who doesn't carefully calculate their risk to reward ratio can, in an unsuccessful trade, make a larger loss with margin trading than without. High volatility in the cryptocurrency market can bring greater rewards to the successful trader whilst those who are repeatedly unsuccessful can find themselves losing their collateral.
    Short or Short selling
    Short selling is the sale of an asset that the seller has borrowed. A short seller profits if asset's price declines. In other words, the trader sells to open the position and expects to buy it back later at a lower price and will keep the difference as a gain. Short selling may be prompted by speculation, or by the desire to hedge the downside risk of a long position in the same security or a related one. Since the risk of loss on a short sale is theoretically unlimited, short selling should only be done by experienced traders who are familiar with the risks.

    Backtesting
    Backtesting is the process of applying a trading strategy or analytical method to historical data to see how accurately the strategy or method would have predicted actual results.

    For example, let's assume you devise a model that you think consistently predicts the future value of the BTCETH pair. By using historical data, you can backtest the model to see whether it would have worked in the past. By comparing the predicted results of the model against the actual historical results, backtesting can determine whether the model has predictive value.

    Backtesting offers traders a way to evaluate and optimize their trading strategies and analytical models before implementing them. The idea is that a strategy that would have worked poorly in the past will probably work poorly in the future, and vice versa. It is crucial that the key part of backtesting is the assumption that past performance predicts future performance, which is not always true.

    Paper trading
    A paper trade is simulated trading that allows investors to practice buying and selling securities without risking real money. While a paper trade can be done by simply keeping track of hypothetical trading positions, it usually involves the use of a stock market simulator with the look and feel of an actual stock market where investors of all levels can hone their trading skills.
    Bollinger bands
    Bollinger Bands — a very popular indicator of trend and volatility.

    Standard deviation is a mathematical formula that measures volatility, showing how the stock price can vary from its true value. By measuring price volatility, Bollinger Bands adjust themselves to market conditions. This is what makes them so handy for traders: they can find almost all of the price data needed between the two bands.

    The Bollinger Bands consist of a center line and two price channels (bands) above and below it. The center line is an exponential moving average; the price channels are the standard deviations of the stock being studied. The bands will expand and contract as the price action of an issue becomes volatile (expansion) or becomes bound into a tight trading pattern (contraction).

    Dollar cost averaging
    Dollar-cost averaging (DCA) is an investment technique which involves buying a fixed amount of a particular investment on a regular schedule, regardless of the share price. As a result of the approach, the investor ends up purchasing more shares of the asset when prices are low and fewer shares when prices are high.

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