Many times, when the Bitcoin price goes UP, people rejoice because their portfolios go up (yay!), but they forget that it usually means that ALTCOINS *in relation to bitcoin* go DOWN, which means either Gunbot trades dwindle (reduce in frequency), or, worse, bags occur (gunbot purchases a coin at an “high price” and holds onto it for a long time, unable to sell at a profit.
And then, when Bitcoin price plummets, they cry about it. But then they make all these profits.
Such is the cryptocurrency see-saw.
- Bitcoin price goes up == people get happy because they’re richer, but sad because bags happen, or not so many trades.
- Bitcoin price goes down == people get sad because they’re poorer, but happy because bags get removed, or more trades happen.
It’s like they can’t make up their mind whether to be happy or not. Or put another way – some people? They can’t be happy no matter WHAT happens. They complain, and complain and complain.
From January 2017 to about October 2017, Bitcoin’s rise was volatile, sure, but not near as volatile as November and December 2017. The swings were epic. A $5000 swing in one day?!??!
This is why Gunbot University Professors recommend important safety measures ahead of time and know your exit strategies before you start botting, and before you dive headfirst into launching your bot with default configurations.
LISTEN. When things are good, you will be popping champagne and ordering new cars and pumping your fists in the air. But as soon as the bear market hits (and it will, several times over), you will be looking for everyone to blame – maybe Gunbot, or the Exchange, or who you bought Gunbot from, or who introduced you to CryptoCurrency… anyone but yourself. These tips will help keep you from losing some of your cool when the bad times hit.
Always keep dry powder
Be ready for them. If you spent all your bitcoin on feeding gunbot, and gunbot ate your lunch because the price of gunbot shot towards the moon, and you were greedy and ran bullish settings on way too many coins, and gunbot ate up every coin in sight, and then you were thinking – hey, the market is doing great! look how good BITCOIN IS DOING!!!!!
And then you have all these bags. Because then you look at Poloniex or Bittrex and you see red all over the place. That’s because it’s red IN RELATION TO BITCOIN. A lot of people in this situation lose their cool and decide to sell off their altcoins to try and get bitcoin back. But if they just wait.. a lot of times, Bitcoin will fall again, or each coin will go through their individual rise cycle, and the bag may clear.
Which is why the “Dry powder” is keeping enough bitcoin aside to reload gunbot. The lesson here is – you don’t have to give Gunbot all your Bitcoin, all at once. Keep a lot of it in reserve. I, for example, only give Gunbot 7-10% of my Bitcoin to work with. I want to be able to replenish it when it runs out.
When bags happen (and they will, often!), you need a plan for what to do about them. It’s better that you figure this out ahead of time, and hopefully you’re starting out slow and with small amounts, so you can get a feel for what this is like with easy situations instead of hard situations.
The first thing you can do about bags is avoid them in the first place. Some settings are “bag avoidance” oriented. For example, if you have buy settings that are smarter, such as buying on Bollinger Band with “-5” or “-10” where it buys below the BB band, then it won’t buy often, but it’s a “smarter” buy. Also, if you have TSSL as a sell strategy, with a very fast trigger, such that you get rid of the coin quickly, but are able to ride the profit range, then you won’t collect as many bags.
There are five (5) main ways you can handle a bag:
- Do nothing (wait it out)
- Sell at a loss (confirm the loss)
- WallyBag (move the bag)
- Double Up (average down)
- Reversal Trading (combines double up with sell at a loss)
Each of these choices has its own advantage and disadvantage in terms of how much investment of your time and other resources you have to make, and whether or not it fits with your own philosophies of trading.
1. Do nothing (wait it out)
If you do nothing, Gunbot won’t trade on that pair. It’ll patiently wait until it can sell the coin back for a profit. This requires the least investment of your time, other than you looking, staring at the red, and wondering when Gunbot is going to act, or wondering why you used those settings. You may invest some time fretting at this point.
Depending on how long you have a bag, doing nothing is usually what everyone does, and is what everyone should do. It depends on your level of patience. Gunbot needs time to work its magic on trades. Some trades only take a minute or two to turn around a percentage or two of profit (very rarely, I might add). Most trades take longer. If you’re holding a bag for longer than a few days, that’s when you might turn to the other options.
2. Sell at a loss (confirm the loss)
Some Gunbotters feel that it’s better to cut loose a coin as soon as it’s lost a certain amount of value – say, 5% or 10%. I have zero experience in this realm of thinking as it is anathema to my entire being. I do not ever sell at a loss. I believe we are early enough in crypto that enough coins are still surging, or I can use Averaging Down as an option, that selling at a loss does not work for me as a philosophy. But since there are enough people doing it, I wanted to mention it as an option, even though I cannot advise much about how it works or how to justify it.
Gunbot supports an option where if a coin loses a certain amount of value since it purchased it, it will sell it off. I think the idea is that it would be better for Gunbot to re-enter the market at a new price point after a certain amount of lost ground, and then re-farm that new price point over and over. That way they’re not sitting and waiting for the price to recover to the bought price, which may never happen.
While I can see the math part of that – taking a 5% loss now so that gunbot could then do ten or fifteen possible 1% profits later, the volatility of bitcoin, to me, paints too many worst case scenarios. I can see gunbot buying a coin, then bitcoin mooning so quickly that all the coins drop 5%, and gunbot sells them at a loss. Then gunbot re-buys when it recovers and then bitcoin moons again, repeating the process. I don’t see a stop-gap in place to prevent the continual bleeding of bitcoin when this is in place.
If I saw this presented on paper, or in a spreadsheet, or maybe with actual trades or a console log, maybe I could get behind it, but for now, I cannot support selling at a loss.
For me, the bottom line is — it’s not a loss until you sell.
3. Wallybag (move the bag)
Wallybagging was a term coined by another Professor early on (May 2017 timeframe) for a technique I used where I would move the bags that Gunbot created from time to time from one account to another account, either at the same exchange or another exchange. I would then set a limit sell order on the other exchange to either get the profit I wanted, or set “dream sells” to get higher profits, and then wait as long as it took.
This did two things
- This freed up Gunbot immediately to move on with its job at the new price point
- This built up a large portfolio that grew massively over time
Since crypto was and is still booming, this became an investment plan of sorts. I gained these crypto coins at a very cheap cost – and I ended up getting my bitcoin returns on most of them anyway. The ones that didn’t, I still usually got my USD returns. There were a few that I didn’t get any returns on, but the vast majority (90%) of coins received profits in this manner. All while keeping gunbot happy.
Now, because I moved the bag over to another account, I had to feed more bitcoin into the Gunbot account… which is why “Always keep dry powder” was important. Had I given all my bitcoin to gunbot in the first place, I wouldn’t have any left over to feed it.
This worked very well with Gunbot Versions 2.x and 3.x. With versions 7 and up, I haven’t yet performed extensive testing with Wallybagging since this version retrieves trade history of the coin(s) to get purchased price. Before using Wallybagging on version 7 or later, I’d verify first or wait for an article or two from me on it to make sure the procedure doesn’t make Gunbot sell at a loss or something due to coins being bought but not being sold in the trading history (due to being transferred out).
4. Double Up (average down)
Double-up, or Averaging Down, is another way to handle bags, and is one of the most effective, most profitable ways. However, the first thing that must be said is that it requires a large bankroll, and you must be willing to keep your trading limits lower than you normally might use.
Double up is not for everyone! Double up works like this – Gunbot buys a coin. If the coin behaves normally, fine. Everything works like it should. But if the coin starts to lose value and it becomes a nasty bag, then instead of the other three options (doing nothing, selling at a loss or moving it out of the way), Double Up option decides to invest MORE into the coin.
By investing MORE into the coin at a lower price, it lowers the average cost of the coin. A lower average cost of the coin means that the coin no longer has to recover all the way to the original bought price – it only has to recover some of the way.
If the coin continues to tank, then, depending on your settings, Gunbot will invest even more — DOUBLE what it did last time. It’s digging it’s way out.
This can get VERY expensive VERY quickly. You can specify the multiplier (100%, 150%, 200%) and a cap of how many times it will double up, but there’s a trade-off. If you make these too low to save money, you reduce the effectiveness of the solution and you may limit the capability of the Double Up feature to dig you out of the hole. Then the bag you have ends up being just really heavy and you have to wait for the coin to recover.
When you use Double Up, be sure to use a LOT of BTC (or funding currency) in your wallet and low trading_limits, and few coins. Try it out for a while before putting into place everywhere.
5. Reversal Trading
Like Double Up, this is a trading strategy that one must fully understand before it is employed. Reversal Trading was first made available in Gunbot v9.
Where Double Up keeps buying exponentially larger amounts at lower prices in order to reduce the Average Bought Price, in the hopes the coin will rise up and eventually sell for a profit, Reversal Trading sells the bag at a loss now, makes a note of it’s own actions, and then re-enters when the price has gone down a certain amount, reducing the Average Bought Price some. The hope is that the coin will recover enough to cover previous “sell at a loss” and take advantage of the lowered Average Bought Price.
Reversal Trading (RT) is an innovative technique that Gunbot uses to offer the user another option for holding bags, but it is not something to be used casually. There are several caveats when it comes to proper configuration, and expectations about managing a coin’s trades.
An old Gunbotter is teaching a new cryptocurrency newb about life.
“A fight is going on inside me,” he said to the newb.
“It is a terrible fight and it is between two wolves. One is evil – he is greedy, arrogant, resentful, bullish, prideful, wants all the bitcoin and the altcoin for himself. When the bitcoin price goes up, he thinks the altcoin prices should go up too. And he thinks the party never ends. He’s full of ego. He thinks that calm seas are the same as evidence of a good sailor.”
He continued. “The other is good – he is calm and peaceful. He is humble and kind, knows the truth and enjoys balance. He rejoices when windfalls come and is prepared for when the inevitable famine times come. He invests in his own learning, and knows greed has a time and it’s when others are fearful. He knows to be fearful when others are greedy. The same fight is going on inside you, and inside every other person, too.”
The newb thought about it for a minute, recognized the fight within himself, having recently seen double-digit, triple digit and quadruple digit gains posted, and having recently dreamed of his own wins. “Which wolf will win?”
The old Gunbotter simply replied, “The one you feed.”