Automated Cryptocurrency Trading for Beginners

Automated Cryptocurrency Trading for Beginners

By Crypto Adventure | Crypto Adventure | 22 Oct 2020

The cryptocurrency market is complex. Learning about wallets, exchanges, private keys, trading, and the incessant marching of a 24/7 market. At times it can become overwhelming.

Many crypto users want simple ways to manage their funds. Easy asset management, convenient tracking, and organized user interfaces. It's not too much to ask, but the crypto space is still yet to deliver on these simple ideas.

Instead of forcing you to adapt to these complex systems, the rest of this article will present alternatives that can lift the burden and simplify the way you manage your portfolio.

Cryptocurrency Rebalancing

Being online day and night simply isn't possible. It becomes frustrating to see your portfolio drastically change over the few hours you slept the night before.

Fortunately, there is a solution to this precise problem. That is Rebalancing Instead of allowing your funds to drift constantly, portfolio rebalancing can keep your portfolio aligned with a set of target allocations to keep your portfolio on track day and night.

This process can be automated using crypto trading bots like Shrimpy. By setting up a rebalance period or threshold, the application will take advantage of the rapidly changing crypto markets to rebalance your portfolio continuously. Keeping your portfolio always aligned with your target allocations.

What is rebalancing?

Rebalancing is the simple act of trading your current portfolio to reach a set of target allocations. These target allocations are determined by the trader and continuously maintained over time if rebalances are automated on a regular interval called a "Rebalance Period."

For example, say you have a portfolio of 50% BTC and 50% LTC. You want the percentages to stay at those values. So, to keep them at those percentages, as the value of those assets changes, you can periodically trade to reach those target allocations again. If BTC goes up to 60%, a rebalance would then sell BTC to bring it back down to 50%.

How often we rebalance a portfolio can be configured based on your strategy or how volatile the market is at the time. It's a low effort way to maintain your desired portfolio allocations.

Trading via Rebalancing

There is more to rebalancing than just resetting your portfolio to the initial allocations. It's also possible to think about rebalancing more generally. You can imagine rebalancing as a universal way to reach a specific set of target allocations from your current allocations.

For example, going back to the previous example where we had 50% BTC and 50% LTC in our portfolio. If you want to change your portfolio to consist of 50% ETH and 50% XRP, this can be done by selecting those assets as percentages and then rebalance to reach those target allocations.

The rebalance will then execute the trades to sell the BTC and LTC to buy 50% of each ETH and XRP.

No effort is required on your side. The trades will automatically execute to sell and buy the assets to reach the target percentages for each asset in the portfolio. You don't need to pick out every trade or spend a lot of time fussing with the exchange.

Market Indices

One of the most common ways rebalancing has been utilized is with market indices. These indices work to track the market as it changes and evolves. One traditional example of a market index is the S&P 500. This index tracks the top 500 stocks based on market capitalization.

Creating indices is also possible with cryptocurrencies. One of the most popular of these indices is the top 20 crypto assets by market cap. This would include each of the digital assets which make up the highest market cap assets. Generally, these indices will exclude stablecoins like USDT as the purpose is to get exposure to digital assets and not fiat pegged currencies.

Automating an index is a quick and easy way to jump into the cryptocurrency market. It requires little understanding of each of the individual assets while provides an automated strategy with little maintenance.

Indexing can also be done with applications like Shrimpy. By selecting the weighting, asset range, and percent allocation constraints for your index, Shrimpy can quickly build and automate a complete indexing strategy. It's as easy as setting it and forgetting it.

Portfolio Management

The process of rebalancing a portfolio or setting up a cryptocurrency index falls under portfolio management. These simple high-level strategies offer a solution to the complex world of cryptocurrencies.

Rather than managing a portfolio by trading each asset and focusing on single crypto movements, it's sometimes easier to manage a portfolio by looking at the bigger picture. Focusing on the set of digital assets you would like to hold in a portfolio, then let automation take over.

Portfolio management can be thought of as managing your entire portfolio instead of the individual trades required to accomplish the goals of the entire portfolio.

It's a high-level way to think about the assets you have in your portfolio and how they will be automated over time.

Instead of controlling your portfolio trade by trade, manage your entire portfolio with a few clicks.

Build Your Own Automation

That's not all. If you have a knack for working with technical systems, building your own trading bots and automation isn't out of the question.

There are universal crypto trading APIs that connect to exchanges and provide the infrastructure to quickly build your own trading, portfolio management, and data resources. Dive into these solutions to begin developing your own solutions and simplify the way you manage your portfolio.

Try it out here.

Crypto Adventure
Crypto Adventure

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