Beginner’s Guide to Crypto Trading Bots — Part 5— Martingale DCA Bots
Martingales are my bag, baby!
Martingales are my bag, baby!
DCA Martingale Trading Bot
Profile
Best for : Flat, or Bullish Volatility
Profit Expectation : High, Short Term
Risk : Medium/High
Traditionally, the Martingale strategy is used in speculative games, such as the “High card takes it all”.
It also falls into the Dollar Cost Averaging principle, because it’s expectation is to buy assets at different price levels, thus spreading the risk.
Probability theory states that the final profit probability is 1–0.5^n if the winning rate in each round is an independent event.
Probability theory - Wikipedia
Probability theory or probability calculus is the branch of mathematics concerned with probability. Although there are…en.wikipedia.org
In other words, your chances of the market going upward will increase with the number of consecutive buys you make.
Since we are not talking about 4 friends at a table when talking crypto bots, you are technically playing with one opponent: The price direction of the market.
Because the market can only go up, or down, that means the initial bet has a 50/50 chance of winning.
Following probability theory, if the first round’s chance’s of winning are 50%, the second’s is 75%, the third’s is 87.5%, the fourth’s is 93.75%, and the fifth’s is 96.875%.
Since you are buying 1.5x — 2x as much in the final win as you did in the previous loss, the winning chips will always be more than the prior loss, resulting in a profit for you.
^ DISCLAIMER : THOSE ARE ODDS, NOT GUARANTEES! ^
The initial buy is $1000; subsequent buy is $2000; third buy is $4000; fourth is $8000; and fifth is $16000. (This is a very simplified example based on 2x doubling, for example sake)
The ultimate profit, assuming you win the fifth time, will be 16000–8000–4000–2000–1000= $1000.
The thing is — Martingale applied to gaming is far more risky than applying the strategy to swing trading, IF you know what you are doing and learn to operate the bot.
In a game of chance, you might really suck! You might not be able to bluff your opponents. They might simply have better random luck.
In a market with an automated trading bot, once you get the hang of it, it’s nothing at all like gambling.
It’s pure strategy and action.
Enter : Pionex Martingale Bot
The Pionex Martingale DCA Bot is developed and designed with the traditional martingale strategy core idea, which is a strategy of a laddering-buy in, then selling all at once.
This bot will use more funds to buy for each subsequent price dip, multiplying the total of each purchase until your full position is attained.
Unlike the grid bot, you will often see your full position invested.
Generally speaking, for that reason — this is a riskier bot.
But that also means this can be a far more profitable bot.
Lets take a look at configuration:
AI Settings (Default)
The AI Settings are an automatically generated configuration that generally leans on the side of safety.
The settings are based on a snapshot of the market conditions and the best prediction an algorithm can make as to the appropriate settings at that moment in time.
Unfortunately, the bot cannot dynamically adjust itself while it’s running, so when market conditions change, in order to maximize output I manually stop the bot and reconfigure the settings and restart it.
I try to only do this right after I capture profit, which happens every 1–3 days on average per my “see $100, take $100” strategy that I outline here:
How I Earn $6,000/mo with Semi-Automated Crypto Trading — Part 2
Martingale bots are a little complex, but once you understand them, you’ll see why I love them so much.
AI parameters come in two modes: Balanced, which is a default total buy-in set to 8; and the Conservative mode, which sets the total buy-ins to 15.
Increasing your total buy-in’s forces the initials buys to be much smaller.
The balanced type has moderate risks, while the conservative type has lower risks and far lower returns.
Personally, I only use Balanced when using AI Settings.
Manual Settings
To manually configure your bot, click “Customize”.
You can change every setting on this panel.
The most important settings are Price Scale, Take Profit Ratio, Volume Scale, and Safety Orders.
How to read the settings above :
Price Scale = 1% = when price drops by 1%, the bot will buy a number of coins.
Volume Scale = 1.5 = the next buy and each buy after that will increase by 1.5x, until….
Safety Orders = 4 = the 4th buy invests your full balance.
(There are 5 total buys. An opening buy + 4).
Advantages of Martingale
Spreading Risk Over a Dip — that is just what martingales do. And based on Probability Theory, eventually if variables remain the same, you win.
Easier to Understand- requires basic math and simple probability odds to grasp and operate — in general it is easier to “see a path and take it”.
Higher Profit Short Term Pontential — because you will have a goal of reaching full position with this bot, with some practice and learning — you can yield higher profits in a shorter period.
Disadvantages of Martingale
Martingales are not suitable for every coin — as long as a coin has good liquidity, and the price will not drop to zero in the long term, the Martingale Bot can help to make profits.
With greater risk comes greater reward, but with greater risk must come greater discrimination!
If you try running this strategy on an obscure coin while it is spiking hard, then it tanks and never recovers, you might just loose money. 🤷♂️
If that coin has few buyers and lots of sellers, it can just end up stalled out and unable to function.
Based on the above two points, it’s recommended that users choose the top coins with the big market cap which can make the profits with liquidity, reduce risks, and reduce drawdown of your funds.
As long as the selected coins are trusted, even if there is a short-term drawdown, it will likely be profitable again.
Pionex Martingale Bot VS Grid Trading Bot
The key difference between the Martingale Bot and the Grid Trading bot is that Martingale bot will laddering buy and sell all at one time; while Grid Trading Bot will laddering buy and laddering sell.
Because Martingale Bot will buy more and more coins during the downward process, it will keep a small position with the coins when getting started for the first time.
While Grid Trading Bot will hold more coins when getting started according to the parameters set by the user.
When the fluctuations are big in the uptrend market, Martingale Bot will take the higher arbitrage profit than Grid Trading bot.
Continue to Part 6 of this series :
Beginner’s Guide to Crypto Trading Bots — Part 6— Rebalancing Bot
The art of shuffling your coconuts to stabilize your coconuts, or even to get more coconuts!
Thank you for reading!
Until next time….
Onward and Upward Everybody!
-Chris
Automated Income Lifesyle w/ Chris Morton YouTube
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