Algorithmic Trading
Bot Functions with 3commas
Chapter 2
Introduction To Bot Functions
Bot functions are sometimes referred to as trading algorithms or high-frequency trading. The primary objective of using bot functions is to automate your trading to achieve passive income. Using bots to automate your trading strategies is advantageous because they can trade the markets 24/7.
There are a number of different variables that can be altered to produce different results when using bots to trade. With the proper settings we have found consistently profitable, low-maintenance bots that can be used with any amount of capital.
The more capital you have, the higher your returns will average. Regardless of available trading capital, we have found multiple bot configurations that yield between 0.25%-1% daily (sometimes more depending upon market conditions).
Bots can be used with or without leverage in over 100 different currency pairs. Using bots without leverage prevents a trader from being liquidated but takes longer to compound returns. Using leverage can produce considerably higher returns in short term scenarios; however, it consequently comes with higher risks. A trader is exposed to the possibility of liquidation when using leverage. Although liquidation is possible when using leverage, we have found proven bot formulas and ratios to reduce the risk of liquidation while simultaneously increasing our profit margins using bots to trade futures.
In this module, you will learn how to create and manage simple DCA (dollar cost average) bots. There are multiple bot functions available to use and we specialize in DCA bots.
These bots open a position in a pre-selected currency pair of the creator’s choice. A take profit goal is determined and set prior to turning on the bot. Once the bot is turned on and deal start conditions are met, a deal is started and a buy order takes place. A take profit order and safety order are also placed. If the market moves in the direction of the take profit goal and the take profit target is reached, the bot will sell the position for a profit. If the market moves in the direction of the safety order and the deviation percentage is met, the bot will open another position on the currency pair acquiring more shares of that coin effectively reducing the overall average cost of the coin. As a result, the take profit goal is adjusted to a lower price due to the average buy price being lowered. This process will continue until the bots run out of safety orders or the adjusted take profit goal is met.
It is important to plan for an “X” amount of deviation in the currency pair chosen to avoid running out of safety orders.
The Dollar Cost Average Strategy
Have you ever bought into a trade at the wrong time and watched with discomfort as your position went negative and wished there was something you could do?
The DCA or dollar cost average strategy is an excellent strategy to use for bot trading and manual trading. It is a simple strategy to use for all skill levels. Let’s say for example you are holding 2 Ethereum tokens. You purchased these Ethereum tokens for $1,000 USDT each. Then, there is a pull back in the market and the price of Ethereum dips down to $900 USDT. Now that the price of the coin you have purchased has fallen, you can apply the dollar cost average strategy by purchasing more of that coin. You buy two more Ethereum tokens, but this time for $900 USDT. Now that you have purchased two Ethereum tokens at one price, and two more Ethereum tokens at a different price, you have effectively averaged the cost of the purchase price down. To calculate your new dollar cost average price, you will need to multiply the price you first paid for the coin by the amount of coins you first purchased. In this case, you spent $2,000 USDT on two Ethereum tokens. Set that number aside for a moment. Next, multiply the price you paid the second time you purchased Ethereum tokens by the amount of coins you paid the second time you bought Ethereum tokens. In this example, you spent $1,800 USDT on two more Ethereum tokens. Finally, you can add those two sums together and divide that number by the amount of total purchases made to find your new dollar cost average price. After dividing the two sums, the dollar cost average is $950 USDT. Now you can break even when the price of Ethereum rises to just $950 instead of waiting for it to return all the way to your initial purchase price of $1000 to be profitable. Any rise in price after $950 would be profitable.
Here is the formula:
(Price of asset at first purchase x quantity of coins at first purchase) + (Price of asset at second purchase x quantity of coins at second purchase) / Total number of coins purchased = New dollar cost average price.
You should follow the order of operations to simplify the equation.
($1000 x 2) + ($900 x 2) / 4 = DCA
($2000) + ($1800) / 4 = DCA
$3800 / 4 = 950
This equation can be expanded to calculate the dollar cost average if you have made two or more purchases of an asset at any price difference.
https://www.youtube.com/watch?v=Y4hlRbjUFbQ&list=PLa_th_mkwVKvXOb0rCVCaJl5OU6WmHWz0&index=3
Understanding DCA Bot Settings
Now that you understand the dollar cost average strategy and how to apply it, we can begin to understand how we can use bots to implement this strategy to our advantage.
If you are like most people, you probably have responsibilities in your life that may prevent you from trading full-time. Even with all of the wonderful content and resources available at DeadlyCrypto, you may find yourself having difficulty being consistently profitable for a number of reasons. This is where trading bots come in to help you!
https://www.youtube.com/watch?v=HoAfh0S3QeY&list=PLa_th_mkwVKvXOb0rCVCaJl5OU6WmHWz0&index=4
The first and most obvious reason to use a trading bot is for its speed. How long did it take you to calculate the equation above? If you have made more than two purchases, it could take longer to solve these equations. Bots can calculate the dollar cost average and adjust take profit targets accordingly much faster than most if not all humans.
The second major reason we want to use these bots is because they do not require sleep. They can monitor the markets 24/7 and close deals accordingly. Bots do not miss out on price action changes, and they constantly capitalize on market movements. Implementing bot functions into your trading not only allows you to be more profitable, it also allows you to reclaim your free time. You do not have to fear what the markets will do or constantly monitor price action. You can spend time on other projects or with family while your bots generate income for you.
Finally, bots can take advantage of any market condition! A lot of people do not know that there are two ways to make money in the markets. The first way to make money is to take a long position. To do this, you would want to buy low and sell high. The other way to make money is to short a market. To short a market, you should sell high and rebuy low. You can create both long and short bots to dominate any market condition.