Exit Strategies

Exit strategies used by BravoBot to exit trades.

Grid Trading Strategy

The grid trading strategy is a very powerful exit strategy for cryptocurrency bots, due to crypto’s high volatility. The grid trading strategy allows for multiple buy orders after entering a trade along with a take profit. If the price of the coin drops the grid orders will be hit and the bot will buy more into the position making their position cheaper per coin – allowing them to exit the position sooner.

How does Grid Trading work?

Once the bot enters a trade the bot will place a spot limit-sell order as the take profit, if the coin rises in price and hits the spot limit sell order then it exits the trade in profit. However, if the price of the coin fluctuates downwards it will market-buy more each time the price action meets the user’s preset grid orders. Each time the grid levels are hit the bot will move the take profit lower to adjust for the new average per coin price.

Setting up the Grid Trading Strategy

BravoBot allows the users to choose between linear or geometric when it comes to the spacing between their grid. Linear means that the space between the levels is static (for instance 2%, see example 1.), the gap will always be the same, while geometric means that the gap will grow the further the price action moves from the original entry.

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Next up the user is able to set up the take profit level. This works just like regular take profit which you can find out about here.

After that, the user is asked to enter how many grid levels they wish to place. In order to use the grid trading strategy, your virtual wallet has to be split up into small amounts that will be used per grid order, this is determined at the top by the “fixed buy order size %.” This percentage is used to determine what percentage to use of the virtual wallet per level, that means if your buy order size is 5% then each grid buy will spend 5% of your virtual wallet meaning that you can only have a maximum of 20 grid levels.

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Next, you can adjust the gap between each grid by the percentage in price. Let’s just say you set the difference to 1%, this will place the grid 1% apart.

After that, you can adjust percentage-wise how much more you want the bot to spend per grid level. So for example, if you set the percentage to be 10% then the bot will spend 10% more each time it hits a new grid level. The last option adjusts if you want this increase to be linear or compound.

Example of how Grid Trading Strategy works

For the following example, these settings will be used.

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Diagram How Grid Trading Strategy Works

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Step by step How Grid Trading Strategy Works

  1. Bot enters trade and sets up a grid of 6 orders below entry price 1% apart (1, 3, 5, 7, 9, 10)
  2. Bot sets up the spot limit-sell order at 3% above entry price
  3. Price action reaches the buy order and the order gets fulfilled
  4. Bot removes previous sell order (2.) and moves it down to adjust for the new cost per coin average
  5. Price action reaches the next grid buy order and the order gets fulfilled
  6. Once again the bot removes the previous sell order (4.) and moves it down to adjust for the new cost per coin average
  7. Price action reaches the next grid buy order and the order gets fulfilled
  8. Once again the bot removes the previous sell order (6.) and moves it down to adjust for the new cost per coin average
  9. Due to volatility of the market the price action hits two grid buy orders at once, both of the buy orders get fulfilled
  10. The price action starts reversing so the last grid buy order does not ever meet the price action
  11. The price action meets the take profit line that was placed after step 9 and the bot exists the trade with a 3% take profit.

As you can see thanks to the grid trading strategy the bot was able to exit the trade before the reversal that happened shortly after. If the cost per coin was not decreased by buying more coins with the grid and simple take profit was used at 3% the bot would’ve not existed the trade and would’ve been stuck for a longer period of time.

Grid Trailing Take Profit

As of a recent update, BravoBot Grid Trading Strategy now supports trailing take profit, allowing users to maximize their profits when using the Grid Trading Strategy. The way it works is if the price starts heading downward, the grid will function the same way as previously however after it reaches a set profit, it will remove the grid and start to function like the Delayed Trailing Stop Loss. If you would like to learn more about how Delayed Trailing Stop Loss works, you can get additional information here.

New Options Explained

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The recent update introduced an additional take-profit method.  Which works similarly to the aforementioned Delayed Trailing Stop Loss. The other two options tell the bot on how the Trailing Take Profit should work. In this example you can see that the activation percentage is set to 1%, this means that the bot will only activate the trailing take profit once the overall profit of the position hits 1%, this is when the bot would remove all the grid buys and start the trailing stop strategy. The Second value is 0.5%, this is the distance where the trailing line will be from the 1%, so once the profit of the position has reached 1%, it will create an imaginary sell target 0.5% below it. This 0.5% line will follow the price action rising closely behind it, and once a reversal happens the price action will hit the stop order and exit the position with an increased profit rather than a static 1% take profit. However, there is a chance that if the price action reverses right away after reaching 1% the bot will sell its position at a 0.5% profit, still securing some profit.

Delayed Trailing Stop-Loss

Delayed Trailing Stop-Loss is a combination of regular stop-loss and trailing stop-loss. It starts with regular stop-loss to minimize the loss if the position drops in value. If the price goes up, there is an activation percentage, once the price action meets the activation percentage trailing stop-loss is activated, and from there, trailing stop-loss is used until the position is closed by the price pulling back into the trailing stop-loss.

The benefit of the delayed trailing stop-loss is that you can have a large stop-loss target at the start, later locking in your profits once the position starts going up with a much smaller stop-loss with trailing stop-loss. With regular trailing stop-loss, your stop-loss percentage is often very small, so small fluctuations could cause you to lose your position due to the tight gap between your entry and stop-loss. With delayed trailing stop-loss, you have a bigger opportunity to profit because you will have a much more significant gap until stop-loss is activated.

Example

For example, you set your stop-loss percentage to be 2.5%, this means that if your position drops by 2.5%, you will have your position closed automatically by a market sell. Your trailing stop-loss activation percentage is 0.75%, which means that if the price goes up to 0.75% above your entry price, you will activate the trailing stop-loss. Finally, your trailing stop-loss percentage is 0.25%, this means that once the trailing stop-loss is activated by hitting 0.75%, you will have at least 0.25% of your profits locked in. So even if the price goes down, you will lock in at least 0.25%, but you can make way more if the price continues to go up.

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This means that if the price goes down an entire 2%, you will not exit the trade, but later once you’re in profit, the profit will be locked in by the trailing stop-loss activation and the original stop-loss will be replaced by trailing stop-loss.

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  1. The bot enters the position (black line).
  2. Right away the bot places a stop-loss 2.5% below the entry price (lower red line).
  3. Once the price action rises 0.75% above the buy price (orange line) trailing stop-loss is activated.
  4. The new stop-loss is now 0.25% (upper red line) below the current price action thanks to trailing stop-loss activating.
  5. Due to Trailing stop-loss activating the previous stop-loss from step 2 is now removed.
  6. The price action reverses and the position is sold when the price action meets the trailing stop-loss line.

Trailing Stop-Loss

Trailing stop-loss is a stop-loss that does not have a fixed stop-loss position. Once you enter a position regular stop-loss has a fixed position and does not move with the price action, while trailing stop-loss will. Learn more about regular stop-loss here.

Trailing stop-loss is a great way to increase your profits by being able to catch waves. Rather than having a fixed exit target trailing stop-loss raises the stop-loss with the price action meaning that the stop-loss will always be just under the current price. Once the upwards trend reverses and the stop-loss is now directly under the current price.

With trailing stop-loss, you do not use a take profit because the price action could go upwards multiple percent at a time with the stop-loss following right behind the price action.

For example, your trailing stop-loss is set to be 1%, which means if your position falls by 1% you will exit the position, this is true for both trailing stop-loss and regular stop-loss. If the price goes up the trailing stop-loss will follow the price action placing the new stop-loss always 1% under the current price so that it catches the trend and exits once the trend is over because the new price will reverse into the stop-loss sooner or later. Regular stop-loss does not move unless moved by hand/program.

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Image source: PatternsWizard

As you can see trailing stop-loss is a very powerful tool that can help you increase your profits by locking in profits gained and allowing you to ride out green waves.

For more information (also the sources) visit: Investopedia and PatternsWizard

Stop-Loss and Take-Profit

What is Stop-Loss?

Stop-Loss is an order type that is placed in the case where the position starts losing the trader money. When the asset price reaches a specific price it will sell the asset to avoid further loss. For example, the trader may want to set their stop-loss at 5%, once the position falls by 5% the position will be sold to avoid a further loss to the trader. Stop-loss can be both used for long and short positions.

What is Take-Profit?

Take-profit is a type of order where the position will be sold for a profit. For example, the trader wishes to make a 5% profit on their position, they will create a limit order at 5% above their entry so once the price action hits his limit order it will sell for 5% profit. A lot of trading strategies have a specific risk ratio which determines their take profit % so the trader is able to place their take profit ahead of time and not have to worry about manually exiting the trade.

For more information (also the source) visit: Investopedia (Stop-Loss) and Investopedia (Take-Profit)

Trailing Take Profit

Trailing take profit is a stop loss that functions very similarly to the Trailing Stop-Loss with one single difference: it has an activation point. Unlike the regular stop-loss which has a fixed position this one does not. Trailing take profit will work just like the Trailing Stop-Loss once the activation percentage has been reached by the price of the asset and it move upwards with the price action and sell once a reversal happens and the price hits the newly reached stop loss target.

Trailing stop-loss is a great way to increase your profits by being able to catch waves. Rather than having a fixed exit target trailing stop-loss raises the stop-loss with the price action meaning that the stop-loss will always be just under the current price. Once the upwards trend reverses and the stop-loss is now directly under the current price.

With trailing take profit, you do not use a static take profit because the price action could go upwards multiple percent at a time with the stop-loss acting as a take profit following right behind the price action. However, it could be wise to introduce a stop-loss in case the price never reaches trailing take profits activation point.

For example, your trailing take profit is set to be activated at 1%, your take profit is 1.25%, and a stop loss set at 1%. This means that if you enter a position and the price falls by 1% then you exit the position with a 1% loss. If you enter a position and the price goes up 0.5% but then hits the stop loss once again you will exit the position with a 1% loss. However, if the price goes up to 1% and the trailing take profit activates, now the bot will closely follow the price action with an imaginary stop loss line 1.25% from the highest high. This does mean that if the price goes up 1% and then dumps the bot will exit the trade with a 0.25% loss.

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Image source: PatternsWizard

As you can see trailing take profit is a very powerful tool that can help you increase your profits by locking in profits gained and allowing you to ride out green waves.

For more information (also the sources) visit: Investopedia and PatternsWizard