It’s every trader’s intention and desire to buy at the lowest level, given the allure of generating significant profits on price bottoming out. However, knowing when a cryptocurrency has reached a bottom is an extreme sport, given the volatility always in play. While many traders are always on the lookout for market lows, very few ever succeed in buying the dip.
Crypto trading bots
Fast forward, trading bots are changing the game, making it easy to buy market lows as fear grips the market. The automated trading systems avert the need to time the market in pursuit of the lows. Conversely, it’s become increasingly possible to buy the dip and generate significant profits as prices re-rate and move higher.
A trading bot removes emotions from trading by adhering to rules to identify oversold conditions, which are crucial to buying the dip. For instance, the bot would be configured to identify whenever the Relative Strength Index indicator reading slides below the 30 level, signaling oversold conditions.
Trading bot with dollar-cost averaging
With the RSI implying too much selling in the market, the crypto trading bot would be able to identify ideal entry levels to take advantage of any price reversals at the new lows. Once it’s clear that the market is oversold, the bot would also deploy the dollar-cost averaging (DCA) strategy to open buy positions at the new lows.
Instead of allocating the entire trading capital to one position, the crypto trading bot would essentially open a small buy position at the dip in anticipation of price bouncing back and edging higher. Should the price continue edging lower, the bot will open another small buy position. The bot will continue opening smaller buy positions at regular intervals.
The dollar-cost averaging strategy helps lower investment costs and boosts returns in the long run. In addition, the price bottoming out with small buy positions in play allows the trading bot to continue locking in small profits as the price rallies from the lows.
Dividing the purchase into multiple bits also enhances the chances of paying a much lower average price over time. In addition, the trading bot allows investors to buy small amounts as regularly as price fluctuations persist. Using a limit strategy to time the market also goes a long way in ensuring the trading bot ends up with the lowest price.
The trading bot with grid strategy
In addition to a trading bot leveraging the dollar-cost averaging strategy can also be programmed to take advantage of the grid trading strategy. In this case, a trader would have to set a range within which trades would have to be opened.
With grid trading, a trader would have to set the lower limit within which a buy position would be opened. Once the price tanks and closes in on the lower limit of the grid range, a buy position would be opened accompanied by a stop-loss order that will close out the position should the price tank below the lower limit.
As long as the price is tanking and has not breached the lower limit, another buy order would be triggered, using a much lower level than the initial order. Once two to three buy orders are opened before the lower limit, the trading bot will watch the trades to see what pans out.
Should the price breach the lower limit by a set amount of pips, the buy orders would be closed, averting the risk of accumulating significant losses. In return, the price correcting and moving up would open the door for locking in substantial profits as the price oscillates from the dip and moves up.
Creating a trading bot with a wide grid range makes it much easier to buy on the dip than timing the market. As the price moves lower, the bot continues to open small positions before reaching the lower limit of the grid range.
The trading bot should also be programmed to open limit orders below the current price at several intervals. Once an order is executed or canceled, the bot will start again.
The trading bot with martingale strategy
There are crypto trading bots that are programmed based on the Martingale strategy. In this case, the trading bot is programmed to double up on losing positions. For instance, the bot will open a long position if the RSI has hinted that the cryptocurrency is oversold.
Should the price continue tanking, resulting in a loss in the first opened long position, the trading bot would be prompted to open another long position, twice the size of the previous position. The loss-averse strategy is based on the thought that price will bounce back, eventually resulting in the doubled-up positions generating significant profits as price corrects higher.
Why cryptos trading bot
A crypto trading bot is an essential arsenal for anyone looking for an edge while trading volatile assets such as cryptocurrencies. The tools address the emotional aspect of trading, forcing traders to open positions after running out of patience while eyeing the dip.
While looking to buy the dip, a well-programmed bot that leverages various technical analysis tools would enter the market at optimal levels as the market moves lower. Conversely, one does not have to spend hours glued to the screen looking for the ideal time to open a position. Using such a tool, a trader can rest assured that any trading decisions are void of any human emotions and based on quantitative variables for the best outcomes.
Buy the dip bots are some of the best tools for automating trading activities in the highly volatile cryptocurrency market. Programmed while leveraging other technical analysis tools for identifying oversold conditions, the automated systems make it easy to get the best price while trying to buy the dip.
Some of the best buy the dip trading bot leverage the dollar averaging cost and grid trading strategy to enter small positions a spruce moves lower. Once the bottom is reached, the bot is always on the dial to take advantage of the lowest price level, locking in profits as prices bounce back and move up.