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Guide to Risk Management in Gunbot

Guide to Risk Management in Gunbot 10

«GunBot is a trading application that uses different strategies to buy and sell crypto coins continuous and automatically 24hr/365 days of the year at any of the 113 exchanges. GunBot comes pre-packed, so mainly it will trade for you without the need of being glued 24hr to your trading desk».

 

GunBot doesn’t have sentiments, it doesn’t fear, panic or express extreme happiness so it doesn’t make human errors, it’s based on algorithmic trading, which means its able to make decisions based on your specific strategy configured in the bot leading to a better ROI (return of investment).

 

Guide to Risk Management in Gunbot

 

Risk management is really important from any economic activity especially with a high volatility market like trading crypto coins and token in regulated exchanges.

 

Risk management in Gunbot, the triple R

 

In the world of economics, risk management refers to forecasting the risk associated with your investment. You need to analyze that risk in advance and take precautionary steps to reduce (curb) the risk

 How to handle your asset’s portfolio is as critical as how you handle your loans or mortgage. This is especially important in crypto due to the high volatility of markets.

 It’s just mathematically impossible you will win all trades but the most important rule is you win more trades than you lose with a positive “Risk vs Return Ratio” so, in the end, you are overall, in the long run, earning money.

 From a trading bot perspective, it is about when to enter and exit the market and how to forecast the market for better entries and exits. Another key part is to plan your exit from a bad trade either via stop loss or DCA in the crypto market.

 

Specifically related to Gunbot:

 

Risk : means how much you want to risk in each trade and how much it will cost when trying to exit from a bad trade. Considering this you should check your entry and RR (return ratio) As a general rule of thumb, never invest more than 1% from your wallet the first trade.

Return : where your profit expectations are or when to take profit and close the trade, honestly leave that to GunBot, never manually trade the cryptocoins the bot is trading, unless you are really advanced user, and specially the first time you trade with GunBot set a really short profit, like 0.25% to 0.5% gain from your entry.

Ratio: It is the overall risk vs reward of your trade strategy. If you plan to exit a good trade at 1% gain and exit from a bad trade at 3% loss, you will need 3 profitable trades just to cover 1 loss. To put it simply, your strategy will need to maintain approx 4w/1L ratio to make profit (80% success rate). If you plan your strategy to exit at 4% profit and 2% loss (for example), then you will have generate a positive Risk v Reward Ratio.

 

“Make sure you plan your trade strategies carefully to keep in mind the 3R’s”

 

How much could be my trading_limit my first test trade to minimize my Risk?

«Never put more money on an exchange than you can afford to loose.»

 

My recommendation is the minimum possible in exchange plus 0.0001 to 0.0005 Bitcoin (convert to USDT / ETH if BTC is not your main base, in the case of Binance you can gather more info for each base here .

In Bitcoin, the minimum trade amount will be 0.001 so we will set as TRADING_LIMIT in our Gunbot strategy as 0.00125 you will configure your Min-vol to sell and Min volume to buy like the picture below.

 Go to settings page – Strategy configuration – your strategy and set the values accordingly.

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Risk Management in Gunbot

 There are several risk management strategies:

 

STOP_LIMIT: if the price is going down Gunbot will stop_limit your position and sell your crypto coins at lost recovering part of your base from that trade, you can select specific % after coin loose it’s value in the market to trigger stop_limit, you can select that specific % based in local/daily or monthly support of that coin, so you can calculate from your entry where you should sell at lost and wait for next re-entry.

 

This can be set up in override or per strategy, I recommend per override in each of your pairs so it’s not a fixed % for all coins linked to that strategy.

 

 Go to your Dashboard – settings – Trading Pairs

add an override :

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Click Add and save.

 

When the price hits that exact % down from your averaged entry point it will sell at lost.

 you can check immediately at what price you sell at lost in the dashboard.

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To configure per strategy :

 

Go to your Dashboard – settings – Strategies – Misc

change your Stop Limit value to your desired % down.

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DOUBLE_UP: This is a Gunbot feature that allows averaging the price of your entry, that’s a really powerful technique but make sure you have enough funds to do it properly, so for a wallet of 0.015 BTC you should keep at least 75% to average in one pair if our TRADING_LIMIT is 0.00125.

 

 To configure DOUBLE_UP: Go to dashboard – settings – your_strategy – Dollar Cost Avg.

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Toggle the button Double Up Enabled and

 

Configure your DU Cap, that means how much BASE i will invest when my DCA triggers, it can be a 1:1, 1:0.5, 1:03 ratio, here you can decide based on what was your bought price and local support, daily support, etc.

Usually, ratio 1:1 means you double the investment in that coin, so if you started with 0.00125 and the coin dropped 5% you will re-invest again 0,0011875 the first time, the second time you will re-invest another 0.00225625, and if you do a third DCA you will reinvest 0.00428688 meaning that three DCAs starting at 0.00125 you will invest a total of 0.00898063 and as well means that the coin dropped 14.5 % from your price.

Configure your DU Cap Count (Number of times you will average the coin).

Configure your DU Method from the three available (HIGHBB, RSI, Numeric).

 

Gunbot has several methods based on different strategies:

Conservative: RSI

 Regular DCA we should use HIGHBB

 Aggressive: Numeric (no matter the market state it will buy automatically when the coin drops the configured % down and the price level is hit)

The recommendation is you set RSI 35% and then only will DCA if the coin is overbought in the configured PERIOD in your strategy.

 

Reversal Trading:

 

This is a Gunbot technique that allows your bot to sell the quote it holds in your exchange wallet and recover the base u were trading, so if the coin is dropping at a certain level you sell at lost, keeping your quote as the market is moving down your bot will rebuy at lower price keeping more quote amount that you had before and having a better entry price so when the trend changes upward you will be able to sell quicker with your configured gain setting.

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Login to your dashboard page – settings – your strategy

 

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you can get more information in our Gunbot Reversal Trading Ultimate Guide

as this is a complex mechanism and maybe don’t will be advised to run it as first-time Gunbot user.

 

What trading period you should select?

For starting GunBot and your first pair I recommend a period of 15 minutes, you will have a balance between being a large period and not waiting a lot to enter in the coin. This is the default period configured in GunBot.

Your GunBot will start and finish a trade based on a default gain strategy between 5 minutes and 24h per trade depending on the market if it’s bullish, bearish or sideways (estimated trade time could vary with real data) and will depend as well in your GAIN settings so if you set a too high gain it’s most likely that the coin will not reach that price, so it’s better to have more small trades than 1 big trade, you can play from 0.1 % to 1.5% as a startup.

 

What trading strategy I could choose as my first time trading strategy?

 

In Gunbot there’re several strategies from the gain based in EMAs, BB based in the Bollinger bands, MACD, Ichimoku. etc…

 

So to recommend one to choose is quite difficult and is really personal taste and will depend on which one you’re more comfortable to work with.

 

you can grasp more information about strategies here

List of strategies in the latest Gunbot version

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Backtest your strategy in Tradingview or Gunbot itself

 

Tradingview: We have specific strategy scripts in the TradingView portal that you can backtest before adding that strategy in your Gunbot and see how your strategy will perform with real-time past data.

 

You can grasp about TradingView strategies simulator here.

  

Gunbot backtesting:

 

Go to your dashboard – Settings – Bot section – Watch_Mode

 

When you toggle on the watch mode your GunBot will simulate execute trades (Buy and Sell) and you can see if your strategy is good or no.

 

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Have a good Gunbottin’!

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