Trading Bots, do they actually work and are they actually passive income? I’m undecided….

By Mark @ RealisticCrypto | RealisticCrypto | 17 Feb 2022

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Over the last few years, I’ve spent soooo much of my time creating new bots, tweaking and changing settings, in some cases, getting liquidated and trying again with new settings or a new bot. I’ve bought tools that test all different variations of multiple TradingView view strategies and I’ve analysed millions of possible variations. These vary from well-known paid indicators to simple strategies like a MA cross. In this article, I’m going to cover at a high level of what I have tried, what I have learned and what are my results in the last 30 days?

As the famous quote from Albert Einstein goes “Insanity is doing the same thing over and over and expecting different results” so am I insane? Not quite yet… so what have I tested and what I have I learned?

I’ve tested many different solutions and bots. These vary from 3Commas DCA & Grid, Cryptohopper, Capatalise.ai, LickHunter, WickHunter, ScavengerBot, Mudrex and the list goes on. Most of these platforms focus on Dollar Cost Averaging (apart from Mudrex & Capitalise.ai) but the way the bots enter and manage trades are fundamentally different. If you’d like me to cover these in another article, please leave a comment.

So, learnings?

Test with small amounts

This is the number 1 piece of advice I can give anyone that is setting up a bot. I’ve seen endless YouTubers claim TradingView strategies and they use 100% of account capital and the result from the past 12 months is some obsurd 7 figure percentage. This is not realistic! Manage your risk, use small amounts and let it build. If the market shifts and you end up taking a loss, you want this to eat in to the profit you have made and not wipe out your accounts. Which leads nicely on to the next point.

If you use leverage, be prepared to be liquidated

Leverage is a great tool when used properly but you are playing a risky game. I took my largest real loss (proof below) with relatively low leverage after getting too confident with the bot I was running. When I got liquidated, this ETH was worth around $17,724. This was one expensive lesson but it did reduce the tax bill so every silver cloud, right?

There is no set and forget strategy (unless you have LOTS of money)

Shifts in the larger market trends make it really difficult to set and forget DCA strategies unless you have a lot of money to have a lot of open positions and you can wait for months for positions to close. For those with smaller accounts, setting and forgetting these can leave you sat on bags for months at a time, with your capital tied up when other opportunities exist to make money. Being on top of the market and the change in trends can greatly reduce holding bags for months to make relatively smalls amounts of money. Not quite as passive as people suggest right?

Back test your strategy!

I’ve paper traded so many bots using out of the box settings in 3Commas. These do not work for all coins or pairs. Choose a bot strategy based on your back testing results. This can be a painful, long, never ending task but this can give you a good level of confidence that the strategy fits the pair. Alternatively, if you use DCA bots, I have a TradingView indicator that can help with this further down the article.

I DON’T use a stop loss on my DCA bots

I monitor my bots daily and the back testing gives me confidence that they will work themselves out. If I have an open trade that doesn’t look like it is going to go in my favour, I go to the chart, analyse the technicals and make a decision. Sometimes, I’ll take the loss and close the position out manually but given the size of some of the crypto wicks, I don’t want to get stopped out before I can review the price action for myself. In some cases, I have another indicator that helps me decide when to manually DCA to get me out of tricky positions. More on this later!

Find a pair that has lots of wicks

I want volatility in the pairs I trade. I want the price to hit my safety orders and take profits quickly. If you can find a chart where this happens regularly, then you can make a good percentage on your capital relatively quickly.

Find an indicator that will stop your bot and close your open trades when the trend changes

I don’t want to be in longs when the BTC trend changes regardless of how well my DCA bots perform in the current trend. If I have a bag of a specific crypto that I aim to accumulate, I switch to a short bot for that pair. This works in spot trading by selling some of the bag you have any buying it back at a lower price.

TIP #1: There is a free strategy in TradingView called “Zendog V3 backtest DCA bot 3commas”. This allows you to backtest all different variations of 3Commas bots using RSI-7 starting conditions. It displays how many times it hit your Safety orders and even breaks down the daily % return in the previous X days.

TIP #2: If you’re in a long position and you’ve been left with a bag and you need some confirmation of where to manually DCA, there is a free TradingView indicator called Add find simulator by TheTradingParrot. This can even be automated to some extent using TradingView & 3Commas.

What are my last 30 day results?

I’ve included a screenshot below of the performance of my bots over the last 30 days.

Kucoin Breakdown

On Kucoin, I’m running a long bot for Multivac (MTV) & a short bot for Deeper Network (DPR). Why?

Well, lets start with the DPR bot.

First thing to note is that in terms of dollars, the bot is in the red since I started running it. Why? Well, I made a couple of errors matching the settings when I set the bot up, we had a huge pump and rather than wait to see if it recovered, I took the loss, changed the settings and now I’m making the $$ back.

But why DPR?

I recently bought a Deeper Connect Mini and I’ve been waiting for it to ship for the last few weeks. If you are not familiar with this device, it’s a decentralised VPN device that you can use at home which mines DPR for supporting the network. Part of the requirements are to stake a number of DPR tokens to increase the daily earnings. I bought 10,000 DPR last month and left them in my wallet until the miner turned up which still hasn’t arrived yet so I took the opportunity to run a short bot to increase the number of DPR.

MTV Long

This project seems to get a lot of focus and attention. If I’m honest, this is a project that I made big money on last year and after cashing out (way too early!). I found some interesting results when I back tested a TEMA cross strategy that made this a new bot for me in 3Commas.

Binance Breakdown

ENJ, KEY, MBOX & RNDR Shorts

I picked all of these pairs as I hold some bags of Web 3.0 projects. All of these bots are based on various settings of the Zendog V3 backtest indicator which had really good results. I started the KEY bot a couple of months ago and I’ve never needed to touch it. I only set up the ENJ, MBOX & RNDR bots over the last couple of days.

Do what’s this months total percentage gain on accounts based on this number? Well, I roughly hold $4,100 across these accounts. With a 30 day gain of $320 that’s a 7.8% increase in this account this month. Results that I’m really happy with and with a few new bots created over the last couple of days, I’m excited to see if we can beat that number next month!

DISCLAIMER

This is not financial advice, I’m not a financial advisor or accountant or tax professional. This is my experience of software tools that have helped me and my experiences with them.

I do use referral links in this guide. Using these supports future articles so if you found this article useful and you want to check out the tools I’ve covered, please use them. I’ll also call out where you get a discount – win-win right?

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