Part 2 – Make It Smarter

My Cryptocurrency Adventure

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

Make it Smarter
We later discovered that the strategy we were using was not the only important part of the trading equation. Don’t get me wrong, the strategy was working great, but there were things we could do to improve the functionality of the bot, and its trading abilities. We noticed that the bot would open multiple trades, and depending on the status of the market, they could stay open from a few hours, to a few weeks. And we were stuck there, waiting for the coins to recover, and make a profit. So, we got to studying.

Dynamic Coin Selection
Freqtrade has a feature called VolumePairList. It dynamically decides which coin pairs to use, following configured criteria. While in the past we would hardcode in the configuration all the coin pairs we could find, this method uses multiple filters to make educated decisions on which coins to invest. This way instead of manually updating the coin pair list all the time, the bot would download it automatically, and then filter out any coins it considered bad investments.

We also implemented multiple protections to the configuration. These protections will stop the bot from trading if it’s losing more than an X amount of money, if the market is going down, or even if a specific pair is making significant loss. It can even stop trading for specified intervals, just as a cool down period after a successful trade. It’s amazing really how dumb or how smart this bot can get, depending on the amount of time you can invest in learning what it can do.

Leveraged Tokens
Leveraged Tokens have the potential of higher profit, but as with anything else, high profit means high risk. There have been cases where Leveraged Tokens gave us 5x or 10x the profit. But in a bad market, they lost as much also. So, we configured Freqtrade not to use any Leveraged Tokens, thus avoiding unnecessary risk.

The Results
Freqtrade now functions a lot more conservatively. Errors in the log file that were previously caused by bad coin pair decisions, are now gone. Open trades now show less negative percentage, stay less time open, and it generally gives you a lot more confidence that it’s trading decisions are educated and not random.

to be continued…