• Jon Balkaran, Marketing Consultant at Web3


• 01.09.2022 03:15 pm
#tradingsoftware #automate

While Crypto is known for its volatile nature in general, bear market volatility is in a different class all by itself.

The whipsaw-like price action at times can be "unbearable" for traders.

There's also always that glimmer of hope that follows a deep price correction, otherwise known as a relief rally / bull trap that some traders get lured into engaging, often times leaving them in a red position. 

For those who have had similar experiences and haven't found a solution, it's time to Automate your trading.

What is Automated Trading?

Automated trading is trading done for you, automatically, by leveraging coded programs or "bots" that execute based on commands.

Although this type of technology has been around for decades, it wasn't until recently that it became widely available to the ordinary trader due to the technical nature required to create, deploy and operate it.

Now, some platforms offer automated trading software as a service making it possible for traders of all levels to take advantage of the undoubtedly more efficient trading style. 

Automated trading carries many benefits, the primary one being that it allows users to trade 24/7 without requiring direct oversight.

However, it's always wise to keep an eye on your investments whenever possible, especially during a crypto bear market.

Who Is Automated Traded For?

In short, anyone looking for passive income; wants to become a better, more efficient trader, automate their strategy, or all the above. 

Even for newcomers with little to no trading (or tech) experience, there are automated services tailored to their needs as well.

Since trading is highly psychological, letting advanced emotionless technology use raw data to make, decisions can greatly add a layer of discipline to your trading strategy.

Which Bot is Best for a Bear Market?

There are various styles of bots, some matching popular trade strategies such as arbitrage, coin lending, margin trading, leverage, market maker, and Dollar Cost Average (DCA) bot.

While each carries its unique value, the DCA method has been proven time and time again to be one of the most effective strategies, which is perhaps even more accurate during a bear market. 

"Attempting" to catch the bottom in a bear market is a commonly shared goal in this space among investors. However, rarely is that achieved, and in fact, the risk-to-reward ratio for those types of outcomes should speak for itself.

In a bear market, trading with other types of bots, such as a margin trading bot, is extremely risky, considering the sharp, sudden "liquidation hunting candles" looking to destroy both shorts and longs.

Traditionally, strategies like arbitrage trading are considered one of the most conservative approaches since the goal is very short-term, near simultaneous trade purchase and sale. 

But this strategy also has flaws (yet minimal) exposed during the worse of bear market conditions.

Monitoring

Once you've selected a service provider and deployed your DCA bot, no matter how enticing it may be to completely step away from your computer (or cellphone in some cases), monitoring the bot, particularly at first, is key.

As time progresses and you've confirmed the inputs, commands, or conditions you've set the bot to execute to meet your requirements, gradually increasing the times from when you check the bot may not be a bad idea, but a frequent mistake by traders is letting too much time elapse.

Even with an automated process, and especially in a market that is subject to change in momentum at any time of the day, for what seems like the slightest news, frequent check-ins can help improve a trader's chances of taking advantage of those random pumps or avoiding sudden spikes. red.

A quick glance a few times a day just to ensure that everything is running smoothly is a good habit to form - but anyone with experience in the crypto space knows that would be more like a few times an hour.

Take Profits

It's a wonderful position to be in, and oddly enough, when those conditions are in the trader's favor, it can be hard for them to exercise discipline; but not to worry because everything's automated, right?

Although there is no official time for when to close a bot, a good tip to remember is that nobody ever lost money taking profits. 

Sure, some upside price action may have been missed, and letting your winners run is important, but a green day beats a red day every time, especially in a bear market.