First post: My objectives/plans and review of bots available on 3commas
Welcome to the Caerus Crypto blog. I created this as part of a “Deep Year” exercise that a friend put me on. You pick a topic to focus on for 6–12 months and write a post about it weekly. This keeps you focused on the topic, consistent with learning new things, and forces you to express what you’ve learned.
My Deep Year goal is to build up expertise in fully/semi-automated trading with “trading bots” and to build semi-automated trading processes to generate at least 1–2% daily (net) for my portfolio. This works out to ~20–50% monthly, which is an ambitious enough goal. I’ve been trading part-time for a few years, and in that time, a lot of third party tools have come online that make this sort of a thing a reality for someone, like me, without a coding background.
My ambition is to spend almost no time setting up individual trades and to spend less time, in aggregate, managing my portfolio while also achieving very consistent results. I’ll still have to review charts, but this will be quick checks to gauge market conditions before deciding which bots to turn on/off and shifting funds to different bots/strategies.
My Trading Style and Why I’m Switching to Bots
When I first started trading I was into chart patterns, breakouts, and momentum plays. The approach required me to regularly review a lot of coins. Most of my trades also involved a trend-break/continuation plus some review of subsequent price action. When I was consistent, the results were pretty good (i.e. 60–70% win-rate, 6–14% per trade, 2–4 days/trade). The downside was the time and repetitiveness, which often clashed with my work schedule. I naturally wanted to find a way to automate the process
I’ve also shifted my trading style preferences from reversals/breakouts to trend-following. I observed over time that outperforming coins tend to keep outperforming and that coins with out-performance also tend to have a good number of “pumps”. Trend-trading the right coins can be an easier way to make good money.
To buy into all of the coins found in my screens, I’d need to place a lot of manual trades, which is a huge pain to handle manually. I also need a way to capture the “pumps” that tend to happen with these coins. After the pump, I needed a way to get back into the trade, if the trend continues. If the trend breaks, I need a way to get out of the trade. The 3commas (3C) platform offered “Smart-trades”, which are great for catching pumps using their trailing take-profit feature (example here and here) and for getting out of dumps using the trailing stop feature (example here). But I still needed to manually set up new smart-trades to get back in the trend, hence my shift to bots.
Bot options available (on 3C)
For now, I’m only using 3C for my bot-trading experiments, so I’ll limit this to what’s available on that platform. The list below is arranged according to complexity.
Option 1: “Portfolio” feature
This tool enables you to select specific coins and the weight you want for each in a virtual portfolio. The interesting part is that you can then apply this allocation strategy to an actual account — ideally sub-account specifically funded for this. 3C will buy up coins to match your allocation strategy and, over time, can even re-balance the portfolio for you by buying/selling coins.
Application: Up-trending markets
Upside: Simplicity. For some exchanges (e.g. Binance/Huobi), 3C has a button to sell all holdings in the specific account to USDT or BTC. If the market turns and I want to be back in fiat, it takes less than 30 seconds. When things go back to normal, I can just re-apply the allocation.
Downside: No automated stop-loss (SL) for the portfolio
Option 2: “Grid” bot
This type of bot helps you trade a range or choppy market. You set a range (high & low) on a chart and select the number of levels to have in the range. 3C will buy the set lot size (# coins per level) as price drops down to each level and will sell the same lot as price increases to each level. The bot makes money from the volatility that we largely ignore as trades “develop”. I’ll write more on grid bots later.
Application: Sideways and up-trending markets. Grid-bots can also be used for shorting by going long on inverse/leveraged tokens (from FTX and I think also Binance)
Upside: Relatively simple, once you learn best practices and how to accurately gauge performance (I don’t quite trust the ROI% shown by 3C)
Downside: No built-in stop-losses with 3C. Some other vendors provide this, but their services seem much more expensive due to caps on trade volume and number of active bots. For 3C, active monitoring is required, but I’m also looking into how to use conditional sell orders (with Smart-trades) to sell the coins purchased by the grid-bot/
Option 3: “Simple” bot
This bot is focused on a single coin. You select the entry signals (“deal start conditions”) and exit options (take-profit, trailing %, stop-loss). For this, I tend to use a custom indicator on Tradingview (TV), but there are many open-source indicators on TV that you can use for your bots. 3C also has some preset entry signals from third parties (have a marketplace) and some technical indicators linked to TV. More info here — link1, link2.
IMHO, the most interesting preset entry signal option is the TV “ratings”. TV uses uses specific levels on a host of technical indicators to determine a Buy, Strong-buy, Sell or Strong-sell rating. Here’s an example for Bitcoin. There is a rating available at any time and there are multiple timeframes to choose from. Example, for a 3C bot, you can choose to wait for a “Buy” rating on multiple timeframes before a buy signal is released to your bot. This limits trades, but you can also limit the number of trade entries by capping the number of active trades for the bot.
Application: Both up and down-trending markets, but I find using signals is problematic in choppy or highly volatile markets. Unless you have a great signal that is good at catching bottoms/tops.
Upside 1:With good signals, a bot can catch >50% of the swings up while missing >50% of the swings down. However, one may need to intervene if markets are choppy or bearish and turn the bot off to avoid bad trades. I’m working on automating this aspect as well to have a truly autonomous bot.
Upside 2: Trend-following approach can be used for both bull and bear markets and across different timeframes. I plan on having bots set up for strong out-performers but also bear-market bots ready to go if things turn negative. The same trend-following technique can be used for my mid-term trades (2–8 weeks) as my long-term holds (2–6+ months). The main difference will be the candle intervals and the take-profit / stop-loss settings.
3. Downside: System for entry/exit signals can be complicated and there’s a technical learning curve (e.g. message system, signal/execution delays, handling conflicting signals, trade volume limits at exchange-level, setting up/running sub-accounts, ensuring all funds are being used, pros/cons of various TP/SL choices). I may post about some of these random lessons learned
Option 4: “Composite” bot
Multi-coin bot with mostly the same options as the Simple-bot but can run multiple coins’ trades at a time. All coins will use the same type of entry trigger; however, if using the presets in 3C, these can still be unique to each coin. If not a 3C preset, then you can send custom signals from Tradingview, but these will be for universal action on ALL coins.
Application: Up-trending markets (strong) or for coins with high correlation
Upside 1: Simple way to coordinate a LOT of trades on a large number of coins. I had one composite bot execute 100 trades in a day and achieve 2–3% ROI. That’s far more than I could do manually and a great ROI.
Upside 2: Bots can also cover lots of coins and look for micro-gains, both of which are very difficult to do manually. With a composite bot, you can trade on 20+ coins at a time.
Downside: It can be challenging to find a signal that works for all coins and your exit settings will never be fully optimized for each coin. The volume/coverage usually makes up for this though. This is also why the DCA options (below) are so helpful.
Option 5: “DCA” options (for simple & composite bots)
DCA stands for “dollar cost average”. All simple/composite bots on 3C have the option to enable “safety orders” (SOs). If done, the bot becomes a DCA-bot and will execute more buy orders (after entry) if the price drops. You can select the number of these SOs, the scale for each order (e.g. growing in size as price drops), the trigger points, etc. The goal is to keep buying a coin and lowering your effective entry price. I’ll write a post on this later.
Application: Up-trending markets, but with the right volatility/settings, can also make money in downtrends. This can work for short-bots to, in theory, but I have yet to test.
Upside: The DCA feature can reduce your average entry price and enable you to have a deeper SL, which is great for coins that are trending up but may have some volatility. Instead of setting a SL that you hope is reasonable, you can split your entries with the SOs and have a SL that is much further away from entry. This is great for a coin that is trending up but has some volatility (read: most coins have this problem). thought was deep enough, out a temporary low-point, the bot will buy more at a low-point, only to sell when price continues back on trend. With the right entry frequency, this can be very lucrative.
Downside: The chosen settings can drastically increase the amount of capital allocated to a bot/coin, so one has to be careful. There is also a learning curve for this, and I think it’s difficult to get the full picture of bot performance without some excel analysis. The summary stats on 3C are okay (perfectly fine for most people, but not enough for a finance nerd like me).
My Plans from here
I’m looking to use all of the options above for my portfolio, as follows:
- Portfolios: For up-trending coins that I’ll hold for either 1–2 weeks or 3–5 weeks (depending on short-term vs. mid-term allocation)
- Grid bots: For coins that are choppy and/or up-trending. Leveraged trades will also be tested (working very well so far). Later I’ll also run tests trading my HODL coins against BTC.
- Simple bots: For coins that I want to HODL, or even hold for just a couple months. These will run semi-autonomously and be linked to my custom indicators. HODL bots will be built with signals at HTF intervals. Mid-term holds will operate at lower intervals but nothing less than 1-hour. I’ll also test out the DCA feature for both — for buying dips and for staying in up-trends (moving out SL).
- Composite bots: For quick profits on up-trending coins, mostly on smaller time-frames (<2H) but I’ll experiment with HTFs too. Most of these bots will use the DCA feature.
