Mizar | Reduce Market Exposure with DCA Bots
“Nobody will ever tell you this but there is a guaranteed formula to make money out of trading. Analysis + Capital + Execution = Profit”
Whilst that statement is true it’s also a huge oversimplification, or at least it was only a few years ago. Effectively if you know what to do, have the means to do it and then do it you will succeed. The issues come when we break the components down, how do you know what to do in trading? How much capital will I need to do it and can you manage your emotions and execute even when the actions are counter-intuitive or anxiety-inducing?
Well with the advent of Mizar.ai you don’t really need to worry about knowing what to do, beyond loading up the marketplace and choosing a strategy that suits your needs. And in terms of actually doing it? Making the trade? Well, your strategy on Mizar is fully automated so you won’t even actually have to do anything, well other than clicking a button to start the strategy, your Mizar trading bot will be executing trades for you 24/7.
When it comes to capital though then this is all down to you. The amount you have to invest and the amount you are willing to invest is as individual as you are. It’s private and it should stay that way so do your own calculations and get your number and stick to it. But once it comes to investing that number we now have more questions to answer; how many trades will I enter? And how much will I invest in each trade?
This process is commonly referred to as allocation and when setting up your DCA bot on Mizar you will be prompted to make these choices.
As DCA bots comprise a base (or buy) order and then additional safety orders Mizar will ask you to select the amount to invest into the initial base order. The platform will then calculate the cost of this base order plus the additional safety orders giving you the cost per deal. You will also be prompted to select the number of deals or Max Active Deals that your bot is able to open. If set to 10 for example then once you have 10 concurrent active deals you will need to wait for one to close before another opens. You are able to adjust these amounts at any point to ensure that your bot is always operating in a way that is capital efficient for you.
So working back from the number you calculated earlier you are now able to create a bot setup that suits your budget by balancing the cost per deal and the number of deals.
Few Big Meals vs. A lot of Small Deals
The obvious next question is a few big meals or a lot of small deals. Small deals are easier to manage as adding additional safety orders is less expensive allowing you to address any hanging deals more easily. If you only have a few deals in which you are heavily invested, market crashes become difficult to navigate as you will require significant funds reserved to invest. Whilst the profits will be greater when deals do close they will be less frequent, lots of smaller deals give a better spread of the market so even in downturns your increased market exposure will increase your chances of being in deals that profit. So on balance more deals are advantageous, however, there is a limit. There are only so many coins and so many tradeable opportunities so there is a point at which having additional deals available becomes wasteful. Having deal slots available that don’t get filled with trades just means you have money sitting on the sidelines. Observe your bot and if you are routinely not filling your max active deals reduce the number of deals and increase your buy order.
When the market as a whole falls dramatically you may end up with deals that have triggered all their safety orders but are still in the red. At this point, you can either wait for the market to recover or invest further by adding safety orders. Ensure that you have this choice by allotting some of your investment numbers as an additional safety order fund. To do this simply keep a % of your investment amount out of deals i.e when calculating the cost per deal and number of deals set up for only 75% of your investment amount so that you have a reserve of 25% for additional “DCA’ing”.
The last consideration is how to manage your max active deals. The best practice is to increase deals when the market is most likely to go up and to decrease when the market is more likely to go down. Our strategy to do this uses the metric of BTC Fear & Greed. By understanding the sentiment of the market we can make informed choices on our level of market exposure. The higher the number or the greedier the market the fewer deals we want to have open as we are likely to reach the top of the market. Conversely the lower the number or the more fearful the market the more deals we want to have open as we’re expecting a bounce, and if the market does fall it likely falls less reducing the chances of going beyond our last safety order.
Once you are confident in allocating and managing your capital in DCA bots you will be able to maximize your profits from your chosen strategy. The markets are always evolving so feel free to join the free bot telegram channel for daily discussion on all aspects of BPT bot trading & register with MIZAR to automate your trading and get back your time.
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