This second part of the guide assumes that you have followed the steps in the first part here: Passive income with cryptocurrency trading bot
Step 1. Understand the strategy “Dollar Cost Averaging”
From the book: A DCA (or “Dollar Cost Averaging”) strategy is the practice of investing into a currency at preset intervals to reduce the entry price of a position over time and mitigate volatility risk.
But what dos that mean? OK, so, to the basics. A “trade” in this case is when you buy a currency at a certain price and wait until the price has gone up and then sell to collect a profit.
The problem is that you don’t know if the price will rise or fall. So what to do? If the price rises you simply sell and collect the profit. But if the price falls you start buying more at set intervals. What happens then is that your average price falls to, and as soon as the price rises you sell and still collect a profit.
– You buy 10 Bitcoin at a price of 100 dollars.
– The price of Bitcoin falls to 80 dollars, so you buy 10 more Bitcoin. Your average purchase price is now only 90 dollars.
– The price of Bitcoin rises to 95 dollars, so you sell and collect profit.
This strategy is weary well suited for automation and for making a profit in volatile markets. In other words it’s perfect for the cryptocurrency market as we see today.
Step 2. Crate your first DCA bot at 3commas
– Open your 3commas account via your computers web browser. You can crate bots via the mobile app to, but you get more helpful info in the web app.
– In the “TRADING BOTS” menu, click on “DCA Bot” and then on “+ Create DCA Bot “.
– On this page you can choose between a simple preset bot 3commas call Gordon (Multi-pair) or Advanced. Click on “Advanced“.
Now you should see a form with lots of setting and input fields. Let’s start filling them out.
– Name: “Binance BTC Long Bot” (or anything you like)
– Exchange: Binance
– Bot type: Multi-pair
This is where you choose which cryptocurrencies you want your bot to trade. For your first bot you want to keep it safe and trade the crypto that are proven and are traded by many other people.
You also want to trade against a “stable coin”. This is a cryptocurrency that is pegged to the price of a regular (fiat) stable currency like USD och EUR. The cryptocurrency we suggest is BUSD which is pegged to the price of USD.
Here you should do some of your own research because over time things slowly change, but for starters you can choose these that we recommend. It’s the top 10 in our stats.
– Pairs: SHIB/BUSD, LUNC/BUSD, LTC/BUSD, XMR/BUSD, ATOM/BUSD, LDO/BUSD, DOGE/BUSD, UNI/BUSD, FIL/BUSD, BNB/BUSDYou can always search the web for “Top Cryptocurrencies” and do some research. Look for hi volatility, lots of price changes up and down.
Here the DCA strategy starts to form. These settings are as low as you can go. If you have more money put aside for trading then the 500$ we suggested, then you could raise the “Max active deals”, and the “Safety order size”, to get quicker profits.
Look to the information in the box to the right under “Assistant”. There you will see how much the bot needs in USDT to execute all the safety orders. Your bot will very seldom need all that money, so it’s up to you how much you are willing to risk getting stuck with the bot waiting for prices to rise after a big drop. We suggest you keep/have at list 50% of the funds the bot needs for safety.
– Max active deals: 3
– Strategy: Long
– Profit currency: Quote (USDT)
– Base order size: 10
– Safety order size: 20
– Start order type: Limit
Deal start condition
This part is where you could make the bot “intelligent”. You could subscribe to “signals” to try and enter trades at the right time when the price is low and most likely will rise. But all that is not necessary with our strategy. Instead of chasing the highest profit and risk, we go for the thousands of small profits that accumulate over time.
To trick the multi-pair bot to start deals ASAP, set it to:Link to more about the RSI signal
– Deal start condition: RSI-7, 3 minutes, < 100
– Target profit (%): 1.25
– Take profit type: Percentage from total volume
– Trailing: off
This setting is important to keep off, you don’t want the bot to sell at a loss, that is for advanced users who can handle the risk.
– Max safety trades count: 20
– Max active safety trades count: 1
– Price deviation to open safety orders (% from initial order): 2.5%
– Safety order volume scale: 1.05
– Safety order step scale: 1
Alla these setting you can leave untouched.
That’s it! Now you just click on the “Create Bot” button to the right and the bot should start working for you.
Se how simple it was? Almost no skills needed! We hope you enjoy your new found passive income.