How to Create Profitable RULES
Before we can generate a profitable RULE, let us first understand our strategy and the principle behind it.
The strategy that we apply is simple but effective and proven, instead of relying on various statistical indicators, which provide questionable signals at best. The common indicators are generally designed for Equity and Forex Markets; while Crypto Currency rates fluctuate upto 10% per day compared to Stocks and Equities which fluctuate under 10% per month. We keep it simple. We rely on overselling and overbuying that occurs during sudden market shifts. For example, for those of you who are familiar with candlestick charts, would have noticed the candle wicks, this is what out strategy exploits. With sudden spikes and drops, there is a tendency of the market to oversell or overbuy, and these are the points of entry we are aiming at. Our strategy is based on our understanding of the RISK and REWARD ratio.
Now, to Trade using our bot the very essential prerequisite would be to have a Registered Account with an exchange. Then we would require you to create an account with us and connect your Trading Account with our platform via API. Currently our preferred exchange is CoinDCX.com
Assuming we are done with the prerequisites, let’s get on with creating a RULE for this strategy.
While creating your RULE, the first option you are presented with is to choose an exchange, here you choose the exchange you have an account with.
Next, you choose the type of Trading you would like to engage in, our bot can either Trade currency in Exchange or Margin. Exchange Trading is a simple buy and sell of the cryptocurrency, buy low and sell high. While Margin Trading is quite different, instead of actually buying or selling the amount, you borrow the money or asset from the market to make a Trade, you make a profit from the difference in the buying and selling price.
After selecting the order type and the mode of Trading, we begin with the actual configuration of the RULE.
Here, type in the percentage amount you want the bot to use for each Trade, from your exchange’s wallet balance. To illustrate, let’s say you have 1000$ and you use 10%, then the bot will place Trade order worth 100$. It is suggested to go for a value between 5% to 10 %, the higher the value higher the risk, lower the value lower the gains.
Now, comes the question, when to make this Trade, choose ‘Rising’ if you want the bot to enter a Trade when the price has climbed a certain percentage, similarly choose ‘Falling’ if you want to enter the Trade when the prices have decreased a certain percentage.
“Either follow Trend or take Reverse position to Trend based on reversals. Always use BACKTEST on currency to verify your strategy”
Enter here the percentage of the current price you want for the bot to wait for before placing an order. Also, enter the time period within which you want the price change to count. For example, if you select falling and input 10% and 5 min, then every time the price falls by 10% in 5 min, the bot will place an order.
Enter a name for your RULE, so it’s easier to identify it.
Now, that the bot knows when to enter the Trade, let’s teach it to exit it.
The bot can exit the Trade/ book the profit, in two ways or a combination of both.
The first option is ‘At once’, where the bot will sell off/square off the entire position/ Trade amount when profit reaches a designated percentage. Let’s say you input 10%, then the entire position will be done away with when the Trade reaches 10% profit. We must understand here that the higher this value is the more profit we make, but it would also decrease the chances of such an opportunity to arise. The lower this value is the lesser the profit would be per Trade, but the chances would be higher for the price to reach that point.
The second option is ‘In Small Lots’, where a certain designated percentage portion of the position/ Trade amount will be sold off in lots or batches with every designated increase in percentage profit. For example, we enter 2% as profit percentage and 20% of the current amount, then with every 2% increase in profit, the bot will sell off 20% of the initial balance of the Trade.
The third option is a combination of ‘Both’, let’s say you enter the following values, 5% as square off, 2% as Z% increase in profit and 20% as lot size. Then, the bot will sell off 20% of the Trade amount with every 2% increase in price, and finally, sell off the remaining 60% when profit hits 5%.
While Trading we should think pragmatically, we all want to profit with every Trade, but chances of this to happening is next to zero. So, let’s teach the bot to deal with situations involving loss.
In such cases, our first line of defense is ‘Stop Loss’ percentage, you can set a loss percentage value at which the bot will sell off the entire Trade position, thus limiting our losses. For instance, if we set it at 2% then, as soon as the loss percentage reaches 2% the bot will sell off the entire Trade amount.
We can further manage losing Trade with the ‘Advance steps’.
Advanced steps include, ‘Increasing order’ where we increase the initial Trade amount by a designated percentage with every designated percentage of loss. For example, we enter 1% as loss percent and 50% as a fraction of the Trade order, then, the bot will keep buying 50% of the initial Trade amount, with every 1% increase in loss of the Trade. This technique is generally otherwise known as ‘Dollar cost averaging’, this is useful in bringing down the price at which you need to reach to break even.
Similarly, with ‘Decrease order’ the bot will keep selling off a fraction of the initial Trade amount with every specified percentage increase in loss. For example, you input 1% as loss percent and 20% as a fraction of the Trade amount, then at 1% loss, the bot will buy 20% more in addition to initial Trade amount, at 2% loss the bot will buy another 20%, thus bringing the total to 40% more of the initial Trade amount.
Now, you can go ahead and save the RULE.
Then comes another important step in creating a profitable RULE.
BACKTEST: it is running the bot on past data, to evaluate its performance.
Great! Now we are done, you can keep iterating and find a profitable RULE.
Note: RULE explained above is just for an example. It is not a real Profitable RULE. Please do not use these values to create your Bot!