I have always heard about trading bots but never really dig into it. I saw a youtube video recently, and the youtuber mentioned that he made 1% each week, which isn’t much by crypto standards. But if I can use this trading bot to generate trading income of 3-4% each month, I probably should take a more detailed look into it.
So how does a trading bot work?
Grid Trading Bot is a trading bot that assists you in carrying out the Grid Trading Strategy. It enables you to place a series of purchase and sell orders within a given price range. When a sell order is fully executed, the bot instantly places another purchase order at a lower grid level, and vice versa.
https://medium.com/coinmonks/
Month 1
Month 1 was a lot trial and error, and understanding how grid steps and level works.
These are some of my month 1 results.
I was trying out with different parameters to see how each one will work, and deciding which pairs to run the bots with. The bot in most cases will always be able to make profit.
But why am I still losing money? The problem is with the crypto that I am trading against. I could be making trading profit, but losing value in the crypto that I’m holding.
And the worse part is that if your bot goes out of range because crypto price went below your lower range, you will be left bag holding the crypto. The bot will not execute any more trades until the price moves into your given range.
Month 2
Taking into what I learnt in month 1, I’ve narrowed it down to 3 cryptos that I don’t mind bag holding.
Because crypto just went into a rally recently, you can see that my PNL are all positive.
Unfortunately, for ETH/USD, the price went out of my upper given range, which means, it won’t be executing any more trades until it falls back to my given range (if it falls back ).
It also means, this bot will not beat hodling onto your crypto, if a crazy ATH rally comes.
However if we look at the bot profit for trading income, it’s around 5% for month 2. I’m going to continue to let this run, and see if I can continue with the same bot profit for the next month.
I’m also looking to restart the ETH/USD pair with a new range. I’m just giving it a couple weeks time to see if it’s going to retrace back to my given range.
Summary
Some pointers that I learnt:
- trade only with pairs that you don’t mind bag holding at the current prices
- trading bot will not beat a hodl strategy when crypto goes into a ATH rally
- the tighter the range, the more bot profits, but it also means your bot will go out of range more easily
- if you want some exposure to crypto in case a ATH rally comes, trade in pairs with crypto as your base currency e.g. ETH/BTC
I use Bitsgap (referral link: https://bitsgap.com/?ref=a5986dcb) for my trading bot.
As always, none of these should be taken as financial advice.