Overview of the Margin trading bot. Part 2. Automation.
Automation is based on the strategy you choose. On the basis of the formed direction, the profile will be managed. It is important that the bot starts to make trades and follow the supply and demand of assets only after the automation in the profile is started. You can create several strategies (several automations). You can stop Margin account management at any time by clicking the "Stop Automation" button.
- Adding assets. To add an asset, go to the "Automation" section. There you will need to click on the "Add Asset" position, after which you will need to specify the currency and its percentage in your portfolio. Please note that you cannot use the "Create Index" function in the same strategy (automation) at the same time as the "Add Asset" function.
- Create an index (dynamic distribution). Cryptocurrency indexing is a more complex process than adding assets. It is necessary to understand exactly how a dynamic index will work with a bot. There are different indexing strategies:
- Weighting by market capitalization. This strategy is the most popular on the cryptocurrency market. The essence is that the index is as close as possible to the tracked actual value.
- Weighting by the square root of market capitalization. This indexing method is usually used for assets with high market capitalization (higher than other index assets).
- Equal weighting. This indexing strategy is the simplest. It consists in equal weighting of each asset in your portfolio. Each asset has the same value of allocated funds.
- Asset range. Before setting the technical parameters of the index, you need to decide how many assets should be indexed. To do this, you need to select the top 10 to 30 assets, with the highest possible market capitalization.
- Minimal interest. In the cryptocurrency market, only a few key assets still retain the leading position. For example, only 2 assets account for 75% of market capitalization, while others account for 1%, 0.5%, etc. This unequal distribution leads to a drop in diversification in an index fund when allocated by market capitalization. Instead of using a particular index strategy, a minimum weighting for the index is implemented. This is how each asset becomes a good contribution to the index.
- Maximum distribution percentage. In some cases, you can set a maximum percentage that is allocated per asset. This is relevant for an asset type such as bitcoin, which consumes up to 70% of market capitalization.
- Buffer zone. It determines the threshold value of the asset at which it can be added to the index. As a rule, the "threshold" is 5%. Then, if the new asset increases its market capitalization by 5%, it enters the index and beats out the one that loses in market capitalization.
- Include in the index. Sometimes you can add assets to an index that don't meet the "threshold" or other criteria. This was not available on many services, but it is feasible when you create your own index fund.
- Exclude from the index. Similar to adding to an index, the index fund owner can choose to exclude any asset from the index, even if it meets the criteria.
- Selecting the percentage of distribution. You can select the percentage of distribution only when you manually add certain assets to the automation. If you use the "Create Index" function, the percentage will be adjusted by the index configuration. After adding an asset, a slider appears that you can use to adjust how much of the asset can be used in automation. The percentage of distribution can only be 100 percent. At the same time, each asset must be fully or partially allocated in order for the bot to be automated.
The simplest method of rebalancing is periodic rebalancing. It occurs at every specific time interval. Cryptocurrencies usually use shorter timeframes than other types of assets. The reason for that is high market dynamics and constant price volatility. The optimal period is 24 hours.
This method helps to maintain the set of desired distributions without allowing the asset weights to deviate too much. The boundaries around each allocation are the threshold by which the range of asset weights is limited. The threshold is set by each user himself based on his investment strategy.
Averaging the dollar's value
This strategy is used by an investor to reduce the risk of placing a large amount of capital in the market at once. On the other hand, it can be expressed as the purchase of one asset through the one regular interest. It is used to efficiently allocate funds to the entire portfolio based on set target allocations.
This function is necessary to pull the entire portfolio out of the market when it begins to fall as market prices decline. The investor does not have to pull each asset individually - the bot automatically protects the entire portfolio from risk. After that, the asset is converted to a stable currency or coins like USDT.
The threshold is the percentage at which the stop-loss mode triggers. For example, if the time period is set to 24 hours and the threshold percentage is set to -5, when the price falls by 5% per day, the stop-loss mode will be triggered.
The time period shows the periods when the bot evaluates the state of the asset in the market and, if necessary, can implement a stop loss.
Currency is an asset that is bought when the stop-loss is triggered. Every asset in the portfolio is sold off to buy it at the time of the stop-loss. Restriction is imposed only on stabelcoins and fiat currencies.
Optimize commissions with Maker Trades
A maker order is similar to a taker order, but there is a slight difference - it is placed as an open limit order. Maker Order is a sell order, which is placed above the best sell order. The order is open to other investors, orders require a maker commission.
- Maximum spread percentage. You can enter the value of the maximum spread percentage, so that the bot will not execute a trade on a spread that is larger than the specified amount.
- Maximum percentage of slippage. Slippage occurs when a taker acquires a large order capable of absorbing the entire order, and as a result, the next resale price will be lower than the buy price. The maximum slippage percentage is set independently by everyone. The bot makes sure that the percentage does not go beyond the limits you specify. The slippage is calculated from the first transaction up to the current moment. This is how you track the dynamics of the order value.