Part 1 – In The Beginning

My Cryptocurrency Adventure

Disclaimer: I am not a trader. This is not financial advice.

In The Beginning
My friend (and best man) Pampos, mentioned crypto trading in August 2020. At the time we were at a hotel in Protaras, relaxing by the pool. I had very little crypto experience, I knew only what I had randomly read online and at some point, I had bought some $XRP a few years back. He showed me a few of the applications installed on his phone and told me there was profit in trading cryptocurrencies. We met a few times after that and he was always mentioning his adventures with crypto and how he was slowly increasing his portfolio.

Getting Involved
A while later he showed me 3commas. A crypto trading platform allowing you to set up bots, that would handle trading crypto automatically. Which was literally making money while you were sleeping. We set a target for €5 per day, which would give us €300 per month. Good pocket money! The problem with 3commas was that the Pro package cost $99 per month and it would cut the profit significantly. We also looked at free alternatives like the Zignaly platform, which would allow us to follow other, more experienced traders, and replicate their portfolio. If they made profit, so would we, and in case they were losing money…well, so would we. At that point I had taken a more serious interest in automated crypto trading, as I saw great potential, even with the low margins we were working with.

Using Existing Knowledge
Like I said in the beginning, I am not a trader. I have been working as an IT infrastructure engineer for more than 20 years though. I have plenty of experience with Virtualization, various operating systems, and I can script in bash and PowerShell. I thought…why not use what I know? I decided to look into the open-source community for alternatives to 3commas and Zignaly. Luckily, I found plenty of open-source projects with bots that can trade in cryptocurrencies. One project though caught my attention more than the others. It was actively developed, written in Python, and the head developer was actively involved in the support of the project. I gave it a go.

The Bot
Freqtrade is an open-source crypto trading bot. You can define the coin pairs you want to trade on, set a strategy, and start trading. I set up a virtual machine on my ESXi server at home, installed Freqtrade and started experimenting. I even automated the bot building process, so we can build a bunch of bots and try out various strategies at the same time, using a feature called dry_run, which would allow us to trade with fake money, for testing purposes. For some reason though, trading with fake money is not the same as trading with real money. The results in our tests were promising, but when trading for real, the bot just wouldn’t make profits.

Back To 3commas And Zignaly
We went back to 3commas and Zignaly for a while, but I couldn’t get it out of my head, that Freqtrade had more to offer. So, we started reading on Backtesting and Hyperoptimization. These are Freqtrade features that allow you to predict how much profit you can make with your current strategy, and how to optimize it for more profits. We even talked about purchasing a computer with enough resources, just to run these algorithms in an effort to improve our strategy.

The Breakthrough
And then it happened. One day Pambos told me that he was testing a strategy that seemed very promising. Conservative and with a very good Win/Loss ratio, but with a very high stop-loss percentage. 30% stop-loss seemed extremely high to me, but there was a reason. A trade could go down to -20% or -25%, and then recover, to make a profit. I was worried that we would lose a lot of money, but you can’t make an omelet without breaking eggs. So, I gave it a go.

The Results
And what do you know. The strategy has been working just fine for a few months now, with an extremely good Win/Loss ratio and it’s slowly but steadily making a daily profit.

Go to Part 2 – Make It Smarter