Does a Trading Bot Work in a Dominant Bitcoin Bull Market?
Using a tool takes some knowlege. In this article we will explain the ins and outs about using Cryptohopper as a tool.
Don’t use a blow dryer in the bathtub. That’s sound advice. A blow dryer is a useful tool, but you need to use it responsibly. A trading bot follows the same principle.
If you use the wrong strategy for the current market, you can end up getting hurt.
In our current market where Bitcoin is on a strong bull run, trading Bitcoin pairs using any technical analysis configuration is a risky game since Bitcoin can decide to go from steady to moon-bound at any moment.
This causes most altcoins to bleed and can quickly evaporate any gains if you’re not right there watching and ready to “panic sell” with a shift in the market. So, what are some strategies that could work well in our current market conditions?
Strategy #1: Use Bitcoin or altcoins to Earn Fiat
This is our recommended strategy. There’s a lot you try and it’s the easiest way of making profit. It’s an easy way to invest in Bitcoin and/or Altcoins.
You can fund your Coinbase Advanced account with fiat (USD, etc.) and configure your trading bot to buy Bitcoin or altcoin positions whenever the price dips. You can use USDT on Poloniex or Bittrex. This is the crypto equivalent of the USD.
Then use the trailing stop loss feature to ride up a run 3% or more and sell whenever the price drops back down 2.5%. This will ensure that at the very least, you cover your buy and sell fees, and anything beyond 3% growth would give you fiat profit.
Your trading bot will then look for the next opportunity to buy when Bitcoin or altcoins are oversold and build new positions.
This option should earn you steady fiat returns unless Bitcoin or the altcoins changes course and begin a steady bear correction. This strategy should do best when Bitcoin is moving sideways.
Strategy #2: Use Altcoin Signals to Grow Bitcoin
If you are going to be actively involved and watching your trades and market movements, you may also be able to do well combining professional signals with your trading bot.
The Cryptohopper trading bot allows you to subscribe to professional signalers for specific trade calls.
The market needs to show that Bitcoin has temporarily leveled out its growth and altcoins have started recovering.
You can set your bot up to trade these signals using the trailing stop loss setting. This allows them to run 10, 20, 50% or more and sell once the price drops 3–5%, for example.
Set the trailing stop loss to kick in at .5% higher than your trailing stop loss.
Just remember, market conditions can change at any time, so you’ve got to use stop losses, or limit your number of open positions and be ready to sell if Bitcoin starts shooting for its next all time high.
Strategy #3: Use Fiat to Grow Bitcoin
On the other hand, if your goal is to build your Bitcoin position, you could:
Fund your Coinbase Advanced account with fiat and let your trading bot buy dips, but not sell. This would be like dollar cost averaging, where you buy a consistent amount each day or week, but this strategy would emphasize buying during dips.
If Bitcoin just keeps zooming upwards without any significant correction, the “dips” will still mean higher and higher prices and you will have less Bitcoin in the end than if you just bought it all up front.
This strategy would work especially well if Bitcoin starts moving sideways for a while, has a significant correction, or developed a slower growth pattern.
We hope these strategies will help you finding your way. Make sure you watch our academy videos/read our tutorials. It’s almost as important as knowing you can’t use a hairdryer in a bathtub.
Happy Hopping!
