Auto Averaging With The 3Commas Bot ( review )
3Comma's Bot & the Future of easy!
Safer trading with autotrading-bots? I can see you raise that eyebrow and normally I would totally raise mine along with yours. Not so in this case. We wrote already about 3commas in the past and recommended their very versatile tool with a team of super active developers. But their recent addition is just great and needs a small introduction. We will show you how we use the recently published auto-trading feature, and how to use it in the best way to sleep tighter with your trades running.
Patience is a virtue, everyone who trades coins and tokens has to know that, to stay profitable. Also, common sense is that not every trade can be a winner, especially not immediately. We place our entry, it becomes filled and sometimes the price might drop right after – “but, man – I thought I caught the bottom.” Moaning won't help here, but averaging out will often do a helpful job. The technique of averaging is well-known and easy to understand. Let's say you want to use 0.1 BTC for this signal by the 4C-Trading on Litecoin.
The entry price would be the current price of 0.0172 sats. Some might place the whole buy order of 0.1 BTC at this price, but it would be smarter to just use a percentage of these funds and spread buy orders in the buy zone down to let's say 0.0168. This way you lower your dollar-cost-average if the price drops and you will recover faster and/or chances are given, that you are faster green again, measured by the total amount of funds this trade.
3Commas are known for their tools which provides conditional order setups, copy trader features, and much much more. In addition to their great setup of tools they recently released several sweet trading robots, which enables the average trader to auto dollar cost average your trading orders. The actual intention of this bot follows a simple principle: buy low, sell higher. The bot which they created recently is going to do exactly that.
In our case, we want to use this bot as a safety option for a crypto signal we trade. Taking the example above, we want to buy LTC at 0.0172 sats with allocated funds of 0.1BTC for this trade. Of course, if we average a trade we most often end up with trading only a part of the actual amount we planned for that trade, but that's OK if we can manage our risk in exchange for that. Let's take a look at the settings and how one could start through with the bot:
- Target profit (%) Take profit level to sell all opened trade in one cycle. From 0.2 % to 10 %.
- Base trade size Sets base trade size when trading starts.
- Take profit type Sets how to target profit will be calculated – percentage from base trade size or from total open trade size.
- Safety trade size defines the size of every insurance trade.
- Price deviation to open safety trades (% from initial trade) step to create safety trade. From 1% to 10%.
- Max safety trades count the safety trades limit. From 3 to 100.
- Max's active safety trades count From 3 to 10. The higher number of safety trades, the more money will be reserved.
So how did we set this up? When we activate that bot, we immediately buy LTC worth of 0.01 BTC at the current price. The safety trade size is set to 0.01 as well. As the range from the buy area to the last targets of the signal suggests, there is room for an 8.3% profit on this trade. Conservative as we are we try to achieve a 7% profit. What does this bot do now, depending on the settings above?
Starting from our entry price it will buy more LTC at 0.0172, each 1% drop it will buy LTC worth 0.01BTC, for 9x times. This way we cover an ~10% drop in the price. What does the bot do next? It sells the purchased pieces on upward swings and targets until we reach our defined 7% profit.
One has to say that the described use of this tool is not the actual intention of the creators, I guess – though it makes total sense. You entered into a perfect trade, bitcoin makes one of its big-time moves and your setup is down the river. If you prefer to hold over stop/loss, averaging out might decrease your pain as you would break even much faster.
However, 3 Commas idea was another one: The bot can use the provided signals by Tradingview. The charting platform provides a page, that analyzes cryptocurrencies (only automated on technical indicators, no humans involved). You can tell the bot to buy on behalf of “buy”-signals or only on “strong-buy” signals – up to you. The bot is checking for fresh signals every 15 minutes. To make it more transparent how all of this works, the website provides an example and a step-by-step explanation of what the bot would do:
Suppose ETH costs $500 and trader with $1000 deposit wants to earn $10 using the bot. So here is the step-by-step algorithm:
- Bot buys ETH at the rate of $500 on $100, that is 0.2 ETH
- Bot places sell-order on his 0.2 ETH at the rate of $550, that is $110. So, if the rate will reach that point, a trader will take $10 profit.
- Bot places safety-buy-orders on $100 at ETH rate of $450, $405, $364.5 (Step between orders is 10%)
- Eth rate goes down to $440, which means that first safety order went through and bot just bought 0.2222 ETH at the rate of $450 ($100/$450). But trader still needs to make $10 profit (5% from 200$ – current amount spent on position). Bot automatically moves TakeProfit from $550 to $497.4 (+5% from average purchase price in $474.7). If that order will go through, the trader is going to get 0.4222 ETH * $497.4 = $210. Trader reaches his goal of $10 profit.
- If the price goes down until next safety-order, the bot is going to repeat same actions as in the previous step.
Here is how an auto averaged trade with the 3Commas bot would like at the charts (green lines are the buys, the red line is the final sell):
As this is an hourly chart, one can abstract that it needs some patience to let the bot do his job, although due to the huge volatility we can find in Crypto, it can be much faster also. 3commas shows off the overall stats of its tool (for their user base) and achieved quite sweet results – however, the future has to show how consistent these results remain. Consistency and success in the long-run is everything in cryptocurrency trading, so we would need to observe how this turns out ultimately. Here is a screenshot of the past results:
If you want to give this bot a try, check out 3commas. Hence all the other tools they offer it is worth it anyways.
With recent updates the past year 3Commas has also the NEW Copy-Trading feature as we wrote about before, to be fair we wish you to have one then one resource and one that we really thought was useful we found here: “Is it possible to have the same results while copying someone else's bot?” We found this at 3Commas website it self, in this instance it talks about having like results of the traders you follow and copy. We all want to have good results that track what we believe will be winning traders human or not 😉
Looking at all the improvement 3Commas has done this has been the #1 thing that imo which has caught our attention. We often get many user responses on this, because many traders will choose to follow a signal provider who will “Dollar Cost Average” so you should take into consideration their method of trading and strategy ahead of time.
You would not want to be caught not being able to get into trades or using a provider that is not profitable with you because they simply use a method of auto-averaging their trades that you are not setup for or maybe is too risky to even follow, so food for thought! Simply put “KYSP” Know Your Signal Provider. This will prevent some of the mishaps that can happen when using 3commas and their auto-trading signal providers.
To end this article, we would like to point you to Moonin Papa, he has many videos that use the features of 3commas in full detail and he is somewhat pleasant to listen too. You can find his youtube channel here “Moonin Papa” He goes over many of the inside features of the 3Commas platform and I find it super useful to have a visual representation being shown to me on youtube.
Yes he is like the most nerdy person you could ever imagine watching on youtube and that is exactly why you should watch him! LoL he really hacks into what trading with 3Commas is and all the features 3Commas has to offer, so please check him out when you have time or need a better understanding of how some of the more cantankerous features or as I call them oddities of how 3Commas works. Until next time EnJoy and AUTO-ONWARDS!