GM.
Before diving into specific trading bots, I wish to discuss my overarching trading thesis for trading bots.
Most friends I spoke to have the misconception that trading bots are generally dangerous and can potentially cause huge losses. I want to clarify that trading bots are only as good (or bad) as the trader who set it up. It’s merely a tool, nothing more.
In this article, I will share my philosophy of using trading bots, and the objectives I aim to achieve with them. Hopefully, it can inculcate the proper mindset on using trading bots.
Overarching philosophy of using trading bots
For any investment thesis, I always analyze it in 2 portions: strategic and technical. This article will mainly be talking about the strategic side of things.
The benefit of trading bots is the automation of otherwise tedious trading strategies that requires constant monitoring and adjustment. When the technical execution is outsourced to bots, the trader is freed up to make more critical higher-level decisions.
As such, the underlying trading strategy must be sound. Trading bots will not compensate for poor trading plans. Appropriate parameters must apply for trading bots to be successful and profitable. This is of paramount importance.
Remember, trading bots are merely tools to automate your trading strategy. It’s nothing magical; it’s nothing more.
Here are some of my considerations when using Pionex trading bots.
Let time be your ally
This legendary screenshot of Haze Wu’s grid bots perfectly encapsulates the essence of trading bots: time is our ally.
Haze used the Pionex ETH/BTC grid bot to generate an insane profit of 3.06 BTC (152.26%) from an initial investment of 2 BTC over 594 days.
If not for automation, there is simply no way a normal human being could meticulously execute a trading strategy for more than 1.5 years to reach this level of profit margin.
Volatility is the price of return
The crypto market is a highly volatile market with tremendous upside potential. We, as crypto traders, need to weather through these volatile periods and maintain profit margins. That’s where trading bots come in handy.
The beauty of trading bots is the ability to lock in profits from market volatility consistently. As trading bot users, massive price movements are often welcomed, not feared.
Safety net for investing in newer cryptocurrencies
Heard of some new tokens that skyrocketed 10x in 2 days? Itched to jump on the bandwagon but worried about short-term downsides? Fear not. Trading bots are here to help.
Investing in new cryptocurrencies using trading bots provides a safety net that guards against short-term volatility. As long as the price moves within the predetermined parameters, the trading bot will constantly lock in profits through the volatility to lower the overall cost basis, increasing the trade’s probability of success.
Remove emotions from trading
Admit it, you have FOMO-ed into pumps and failed to cut losses during dumps before. I know I did.
Humans act on emotions. Most of us do not have the discipline to execute our trading plan effectively. We often let emotions take over our decision-making process and make mistakes as a result.
Trading bots, on the other hand, is an algorithm. It is immune to human errors and serves as a perfect tool to bypass our psychological limitations.
To summarise, I see trading bots as a valuable tool to capitalize on the inherent volatility of the crypto markets. It allows me to effectively execute trades without the hindrance of human emotions and consistently generate positive returns over a long time horizon with an increased margin of safety.
My objectives of using trading bots
Let me reiterate this: trading bots are merely a tool. Different traders use it differently to achieve their objectives and goals. You’ll need to know why you trade crypto and choose the type of bots and accompanying parameters accordingly to optimize for desired results.
I believe that cryptocurrency is a sunrise industry with tremendous potential that will steadily materialize over the next five to ten years. We are still very early in technological developments, akin to the early internet era of the 2000s.
Currently, I have the bulk of my crypto portfolio in Pionex trading bots. This portion serves as the bedrock of my crypto investments because I know I can rely on it to consistently produce a positive return. I aim to achieve two main objectives with trading bots:
- To generate a steady positive cash flow in FIAT to DCA into my preferred cryptocurrencies.
- To consistently compound my existing crypto positions and HODL for the long term.
I also have a separate ‘degen’ portfolio where I buy and trade NFTs, it’s a sum of money I’m comfortable taking more risk with. I feel more confident taking risks knowing my Pionex portfolio is always going to be reliably profitable.
Conclusion
I hope you resonate with my rationale for utilizing trading bots and understand that you’ll need to tweak them to work for you specifically. Pionex has an array of trading bot products that cater to everyone’s trading needs. It’s worthwhile to learn their purposes and how to operate them effectively. You will definitely become a better (and more profitable) trader at the end of it.
I will get down to brass tacks and share the types of trading bots I use and explain the parameters I choose to achieve my objectives in future articles.
If you don’t inherently believe in cryptocurrency and only plan to utilize it as an instrument for short-term gains in FIAT. Your setup will look different from mine. There are important nuances to take note of, which I will elucidate accordingly.
Stay tuned!
If you have not signed up for a Pionex account, please consider using my referral link here!
If you found this content useful, please give my Twitter @SingaporeHODL a follow!
