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DCA Bots: Creating a DCA Bot using a Built-In Technical Analysis Indicator
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So you may be wondering how to create a bot to trade one of your favourite alt coins using one of the Technical Analysis indicators built-in to 3Commas? Well you’ve come to the right guide!
This help article will show you how to create a bot on an alt coin and use probably the most well known, and respected, indicator in the trading world, RSI (Relative Strength Index).
RSI displays a value, usually in the form of a line graph, that indicates whether an asset is Overbought (typically when it reads above 70-80) or Oversold (typically when it reads below 20-30). When the RSI is towards the extreme of its range, asset prices are known to reverse, even if only for a temporary “bounce” and it is these reversals we will aim to catch with our DCA Bot.
Creating the Bot
Head to the main menu and select DCA Bot and then click the Create Bot button:
We’re going to create a “Simple” bot, this allows you to trade a single coin pair.
We’ll choose the LTC/USDT coin pair in our example, we’ll also allow 3 Safety Orders and $150 of funds for each trade.
Ensure the Advanced tab is selected at the top of the page and that you choose a descriptive Name for your bot (this will appear in the History log and also on the My Deals page and DCA Bots page), choose the Exchange account this bot will use funds on and also choose Simple for your Bot type setting:
We will choose “LTC/USDT” from the Pairs selection setting for this guide, however, you may wish to choose any pair from the dynamic Recommended Pairs section; these are coins that are dynamically updated as have been the most traded pairs on 3Commas within the last 24 hours. Alternatively you can choose any pair you wish using your own criteria, such as high trading volume, daily candle closes above an uptrending 200 Moving Average or in anticipation of a positive news event for a coin you have been following:
Now we will look at the Strategy settings; the default settings will be fine here.
We’ll be using Long as we want to buy the coins at a low price and sell the coins at a higher price to make our profit.
We’ll accept the setting of Quote as our Profit Currency, so we make profit in USDT.
If this is one of your first bots, it may be worth keeping the Base Order and Safety Order amounts as 10 USDT, in total this bot will use 150 USDT of funds, should all the DCA/Safety Orders be used. As you gain more confidence in your bot strategies, you may wish to risk more per bot deal.
It is recommended to keep the Start Order Type set to Limit as this will guarantee the bot will open trades without price slippage and is particularly important to use on coins with lower liquidity:
Next, we will set the Deal Start Condition; this setting tells the bot when to open a new trade on the coin we selected. We’ll be using the trigger of RSI-7 value less than 20 on the 5 minute chart time frame this should enable the bot to open the trade if there is a quick drop in the buying strength for LTC/USDT that pushes price down, we’ll be aiming to quickly “scalp” small profits frequently everytime this condition occurs, so these trades should be fast to close and fairly frequent as they are used on a low chart time frame:
If you are wondering how you can visualise when the bot will open trades, please check the bottom of this guide where we’ll show you how to add the RSI indicator to a chart so you can view the RSI indicator values.
Now we will set the Take Profit settings on our bot, we are aiming for repetitive short trades as “scalping” low time frame charts is fairly risky, so the key is to aim to close all trades as fast as possible. We will not be using Trailing Take Profit for this bot. Please set the Target Profit value to 0.5% and set the Take Profit Type setting to Percentage from total volume as we would like the profit of 0.5% to be taken using the average price of the coins bought by this bot:
We will not be using Stop Loss settings for this bot. It is recommended you keep funds in reserve on your account to help manually “bail out” bot trades that may end up in a loss.
It you wish to use Stop Loss settings, please test these thoroughly using Paper Trading, however, the cryptocurrency market is known for being highly volatile, so you will often find that Stop Loss can actually increase your losses, as opposed to picking good quality coin charts that recover quickly or in a reasonable time should they suffer around a -10% drop in price.
We will be using 3Safety Orders with this bot, and the same for the Max Active Safety Trades Count; this ensures the funds required for the Safety Orders will always be reserved and unable to be accidentally spent on a different trade and entered into the exchange order book as Limit Orders. Safety Orders are used to lower the average purchase price of the coins the bot buys if the price falls lower once the trade has opened, this is also known as DCA or Dollar Cost Averaging.
The Price Deviation to Open Safety Orders will be set to 0.5% for the first Safety Order used; The Safety Order Volume Scale will be set to 2; this is so the amount of coins the Safety Order buys will double each time a Safety Order is created. This will help to aggressively lower the average cost per coin bought by the bot.
The Safety Order Step Scale will be set to 2; this means the bot will multiply this value with the Prive Deviation to Open Safety Orders setting, in effect, our first Safety Order will be placed at 0.5% from the opening price of the trade (Base Order) and the second Safety Order will be placed 1% lower and the third Safety Order will be placed 2% lower. This covers a 3.5% drop in the coin price after the trade is opened and means we can take profit faster:
We will not be setting any of the Advanced Settings for this bot as they are not required.
We can verify the amount of funds our bot will use by looking at the Bot Assistant – please don’t overlook the Bot Assistant, it is a good friend!
The Bot Assistant page will show the amount of funds this bot will need in order to work correctly with the configured settings, it also shows the maximum drop in price that your Safety Trades can cover and the percentage of your available funds the bot will use (always try to keep plenty of funds free to be used to manually help bot trades that don’t work out close faster).
The Table page shows you a visualisation of how the volume of funds will increase with your Safety Order Volume Scale setting and also the price deviation percentage the Safety Order Step Scale will cover.
Finally, one of the most useful features, the Table page which shows exactly how the Safety Orders will be used in granular detail.
After only a few days since its creation, the bot results look promising! Click here to find our
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Disclaimer: The contents of this article are not intended to be financial advice and should not be treated as such. 3commas and its authors do not take any responsibility for your profits or losses after you read this article. The article has been presented to provide readers with general information. There is only personal experience described herein. The user must do their own independent research to make informed decisions regarding their crypto investments.