The cryptocurrency market is one of the most volatile financial markets in history. It is often associated with high risks, incredible profits, and speculative trading. While many conservative investors often try to avoid this ecosystem, people with a better grip on modern technology do not hesitate to invest in some of the most promising tokens out there.
Many examples of automated trading systems offered by WunderTrading are designed to help investors reduce risks and optimize profitability. Products like a DCA or Grid bot may not show impressive numbers right away but can reach fantastic heights in the long run. Using automation wisely and employing the whole range of available risk and investment management techniques are great ways to accommodate yourself in the crypto market.
Choosing the right bot for the job
WunderTrading has a large lineup of products, each with many advantages for retail traders and even institutional investors looking to expand managed portfolios with automated trading systems (ATS). It is possible to receive passive income with crypto investments, but creating a reliable ATS is a time consuming process with many challenges that you need to overcome.
Let’s start with simpler approaches to using bots and take a look at some ready-to-go products from the WunderTrading catalog:
- DCA bots. If you want to automate your crypto trading, starting with DCA bots is a good idea. These automated trading bots utilize core principles of the method called “Distributed Cost Average”. Sometimes, people call this approach “Dollar Cost Average”. The idea is to reduce the average price of investment by purchasing assets in multiple orders instead of buying all at once. DCA can be used to trade assets or to acquire them on the spot market. The latter method is used by many crypto enthusiasts to accumulate coins and hold them in the long term.
- GRID bots. Based on the same idea as DCA, these systems are designed to actively trade various assets. Delayed orders, such as stop-loss and take-profit, are applied automatically. Market positions with delayed orders form a net on the price chart giving these bots their name. Retail investors interested in creating a relatively safe ATS should look into this type of ATS. The GRID trading strategy can work well during relatively calm periods when prices do not change chaotically.
- AI-assisted trading. Statistical arbitrage is one of the most reliable yet hard to manage investment systems. With the help from contemporary automation platforms, a single retail trader can create a massive portfolio and manage it quickly without employing additional people. The WunderTrading platform offers a unique opportunity to all its users. You can launch a trading bot powered by an expert AI system trained on massive sets of market data to deliver an exemplary performance.
These systems are great for people without prior exposure to financial markets. Crypto trading for beginners can be quite comfortable and relatively safe if you work with reliable providers of trading tools.
Using profitable trading strategies
Ultimately, each investor is responsible for the outcomes of their investment efforts. While automation vendors can provide excellent tools to build an ATS of any complexity, the performance of your bots depend only on the quality of analytical strategies and risk management on your part.
Here are some interesting approaches worth exploring if you want to build an automated trading system:
- Trading with RSI. Relative Strength Index is one of the most popular technical indicators. It shows whether an asset is overbought or oversold. The value fluctuates between 0 and 100 depending on the price action. The general rule is to place a call order when the indicator reaches a value closer to 0 or a put order when it goes up to 75 and above. RSI is a great tool to produce signals for price retracements and trend reversals. It can also be used to check signals from other indicators.
- Stochastic Breakout. Another frequently employed tool is Stochastic Oscillator. It also shows when an asset is oversold or overbought. It is often used together with RSI to identify stronger signals. The indicator has two lines, usually depicted as red and blue, when the red line crosses the blue, it is a signal for a put order. Conversely, when the blue line crosses the red one, it is an indication of a moment when you should consider placing a call order.
- Bollinger Bands breakout. This indicator shows volatility and the standard deviation of price. When the price breaches the upper line, it may mean that a new bullish trend is forming in the market. When the bottom line is breached, it may mean that the market is controlled by bears. Bollinger Bands is an excellent tool to predict trends and can be used to identify favorable moments to trade against the market as price retracements often take place after a sudden change of price indicated by a breach.
Simple yet effective risk management techniques
While cryptocurrency trading can be quite dangerous for an inexperienced investor, it is entirely possible to create an automated trading system with minimal risks. It takes time and effort to learn appropriate risk mitigation approaches, but you can start with something manageable.
Here are some tips that you can use:
- Do not forget about delayed orders. Any market position can be protected by strategically placed stop-loss orders. Many experts suggest using ratios between stop-loss (SL) and take-profit (TP) orders. For example, a 1:3 ratio means that you place SL at 1/3 of your TP value. If you plan to take 30% profit from the deal, place SL at 10%. Depending on the interval and position sizes, you may adjust the ratio.
- Diversify your automation portfolio. It is a good idea to use various types of bots. Some with higher risks and higher rewards; some with lower risk and lower rewards. You may invest heavily in copy trading and put your chips on a high-performing trader while protecting your investments with GRID bots utilizing passive SL/TP settings.
- Manage the bankroll. You should never allow bots open market positions that may threaten your total portfolio if things go south. The WunderTrading platform allows its users to set a specific market position size for each trade initiated by a bot. It is a good way to protect your portfolio from overexposure to volatile market conditions.
It is highly important to use all available risk mitigation techniques and build a portfolio that can produce good results in the long run. Use the rich functionality of the WunderTrading platform to create a powerful trading system that will be robust against various risks.