From part-time retail trader to full-time professional cryptocurrency market-maker, the Fourstroke story (part 2)

Part two: Building our first trading bot

This blog is the second in a four part series documenting how we started our cryptocurrency trading platform: Fourstroke. In the last edition, I shared the story of how we got started. In this episode, I show you what it took to build our first trading bot. Missed part one? Read it here.

With the 2017/2018 cryptocurrency bull run gathering pace, we didn’t have time to sit back and take our time. We absolutely had to start producing our cryptocurrency trading bot, time was of the essence. Speed of trades was our strength, but that doesn’t matter at all if we don’t have the tool to make the trades.

To capitalize on the bull run, we put our bot into production. It was under tested, we’d taken shortcuts to make it happen, and we debugged it as we went. But doing this through one of the most intense trading seasons, Bitcoin has ever seen helped us understand our bots’ strengths and weaknesses.

Deploying the bot early, wasn’t the only risk we took. We used all our savings to provide the liquidity needed for the trading bot, and topped that up with investments from family and friends. Sometimes, this is how stories about how one ambitious idea led a family to financial ruin, but this isn’t one of those stories.

Over the course of our family’s Christmas dinner, the bot had been doing its thing, and we’d generated €3,000 in profit. Within one month of turning our bot on, we’d made €30,000.

We were high on excitement! Our attention turned from a simple trading bot to making wild plans for a scalable market-making platform and hedge fund.

Before we get to that, it was time to take stock of what we’ve learned from our success so far.

1. Find your alpha first
   Algorithm-based cryptocurrency trading is attractive. The idea of making money without having to actively trade is attractive to anyone. Many software engineers have got into the game, however, their skill set often leads them to create a sophisticated bot and then realize there’s no alpha (profit above benchmark) to monetize. Instead, find your alpha first, then build a bot to realize its profit.
2. Start simple, improve while you go
   By their nature, trading opportunities are restricted by time, so making good trades is all about being able to spot an opportunity and act fast enough to take advantage. Coding for every single market event, like unexpected price spikes or exchange downtime, is unrealistic. Instead, accept that coding an agile bot that takes advantage of as many trades as possible will come with risk. Remaining agile is key. Start simple, keep your exposure to risk manageable, and improve your bot as you go.
3. Team up
   Traders don’t share much information with each other in fear of making their money making secrets public. However, having somebody who knows every detail of your bot is worth a tremendous amount. More importantly, though, celebrating success together is much more fun than doing it alone.

Learn in part three of this blog series how our new market-making platform failed and how we recalibrated for success.

Fourstroke is just getting off the ground. We’re looking for developers and engineers to help us build the most scalable and efficient cryptocurrency trading platform around.

Find out more about our current openings here.