Drop Loss + Roof In
The Drop Loss + Roof In strategy can always be used parallel to your other strategies no matter what the market conditions are but it is very useful in a Bear Market. Although you can use these Safeties by themselves, as a team they work great. A good idea is to have a bot with just these two Safeties in them on a trading pair that you are using, for example USD/BTC. Then you can trade with indicators on one bot, but this one is always waiting in case something big happens.
How it works
What does it do?
The Static Drop Loss or Dynamic Drop Loss secures your coins from big drops in the price (also known as stop loss), while the Static Roof In or Dynamic Roof In buys in to big upward movements in the price. In other words, you are protected from big dumps and can get in the big pumps.
Static Drop Loss + Roof In
This is the simplest form of this strategy. Lets say that the price is 100$ so you set a Static Drop Loss at 5% lower than the current price. Then you would set your drop loss at 95$ and it would be best to put your Static Roof In at 105% of the current price which would be 105$. This means if there is a big dump then you will sell your set trade amount at 95$ and if there is a big pump you will buy in at 105$.
At what price to set the Drop Loss + Roof in? In our example above we used a 5% difference. This may seem like a lot but it allows the market to move without having our Static Drop Loss or Static Roof In triggered for no good reason. With this basic strategy then you can get the BIG movements and ignore the small movements. There are other ways you could set it up though.
If you think the market is about to explode then you could "tighten up" your Static Roof In to 103-101% of the current price. Then you will buy in earlier when the market moves up.
The same thing can be done to your Static Drop Loss and you could "tighten up" to 96-99% and then you will sell at the start of the dump rather than later.
On the other hand if you want to "ride" your safeties, then keep them at around 4-6% or even 10% away from the current price.
- The closer your Static Drop Loss or Static Roof In is to 100%, the bigger the risk of a "false positive" is to being triggered. This means that the market might have moved 1%, but then quickly recovered and triggered your Static Drop Loss or Static Roof In even though the market did not really move. In other words, you have increased the risk and the reward by shortening the time and pushing the % closer to 100%.
- Since the price changes you will also have to change your Static Drop Loss and Static Roof In values. For a conservative approach once a day for a more aggressive approach once every 1-3 hours.
- Tired of resetting the Static Drop Loss and Static Roof In values and calculating the %? Then you need to check out the Dynamic Drop Loss and Dynamic Roof In Safeties.
Dynamic Drop Loss + Dynamic roof In
Just like the Static Drop Loss/Static Roof In, this strategy can always be used parallel to your other strategies no matter what the market conditions are. Although you can use these Safeties by themselves as a team the work great.
What does it do?
The Dynamic Drop Loss secures your coins from big drops in the price (also known as stop loss) while the Dynamic Roof In buys in to big upward movements in the price. In other words, you are protected from big dumps and can get in the big pumps. It also automatically recalculates the Dynamic Drop Loss and Dynamic Roof In values for you at a time increment that you set.
Example: Price is 100$ and the Dynamic Drop Loss is set to 95% and the Dynamic Roof In to 105% with a time of 1440 min. This means that the Dynamic Roof In and Dynamic Drop Loss prices will be recalculated every 1440min (one day). This is an example of a conservative "riding" setup.
Just like the static versions, you can adjust it to market conditions. If you think the market is going to explode or fall out, the first thing you could do is shorten the time span for recalculating the price. Anywhere from 60-720 minutes and you could also tighten up the % to 96-99% and 104-101%.
- The shorter the time and the closer the % values are to 100, the more often the Safeties will be triggered and the higher the chance of a false positive trigger. In other words you have increased the risk and the reward by shortening the time and pushing the % closer to 100%.
Inter exchange signals
If you think that one exchange is setting the tone for the market and the other exchanges are reacting to it, then you can use the signal from that exchange to trade on a slower exchange. An example would be to use the signal from Bitstamp but trade on BTC-E.