News and media coverage in Crypto can trigger massive price action both positive and negative. Aside from the perceived value of a crypto project, oftentimes major announcements result in spikes that are not supported by typical technical analysis indicators. Examples include “halving”, like in the case of LTC or BTC, MainNet launches or Partnership announcements, which typically result in major price gains. Sometimes, these announcements are carefully timed so interest in a particular token maintains a positive momentum and market sentiment. These kinds of price rallies carry risk as nobody can tell for sure how long the positive momentum can last or whether the “news” have already been priced in. As they say: “buy the rumors, sell the news”!
1. The price of an asset during rapid growth presents high levels of volatility and trades with conservative Stop Loss settings will prevent traders from capturing a higher percentage of the rise.
2. The optimal Take Profit target is unknown as the top of the market is hard to predict, especially when the price rally is triggered by “news”.
3Commas provides two features that, when combined, can help to mitigate risk and at the same time allow traders to capture most of a rally without the need to guess when a trend reversal might occur.
1. Trailing Stop is a feature that allows the existing Stop Loss setting to rise with the price by a set percentage. This protects the downside in case of price reversal without having to manually change the Stop Loss depending on the price movement.
2. Stop Loss Timeout out – When setting your Stop Loss you also select a timeout period. Our system begins a countdown as soon as the price reaches the set Stop Loss value but only triggers a Sell order to close your position if the price remains below the SL value during the entire timeout period. As such, if manipulators drive the price up, you are still in position and you can re-evaluate your Stop Loss or Take Profit targets accordingly.
Consider an example of how these tools can work, in conjunction, during a “news” triggered price rally.
You own a token that is currently pumped by positive media coverage. As the top of the market is impossible to predict, how can you ensure that you safely capture most of the profit? Let’s look a the example in the chart below and suppose that you already made a great entry at the price point indicated by the green line. Now, let’s walk through the settings that will allow you to capture the most profit.
Select the settings as illustrated in the screenshot below in the Smart Trade menu and set up bot Trailing Stop and Stop Loss Timeout. In this case, the trailing amount is 4.8%.
The Timeout length of time depends on your risk management and assumptions that the price may possibly fall to resistance levels, and then go back up. In this example, we see that the price went below the trailing stop level for no more than one minute, so the stop loss timeout can be set to a value from 1 to 5 minutes. With these settings, the trader’s transaction will not be closed in cases in which a regular stop loss would work, or a trailing stop set without combining with stop loss time out.