With the growing popularity of cryptocurrencies, many people are jumping into the crypto trading business. However, even though profiting with crypto trading is not rocket science, it requires constant technical and theoretical improvement. Because a bot will do far more than deciding when to purchase bitcoin on Paybis and call it a day.
Just looking at different graphs all day long will not make anyone rich, but crypto trading is a very demanding activity, both intellectually and emotionally.
In this article, you will discover how to create and provide a personal algorithm for crypto trading.
Understanding Personal Algorithm – Why Should I Do It?
When it comes to crypto trading, information is an extremely valuable tool. If you do not have the necessary knowledge to survive the market fluctuations, it is impossible to avoid financial loss and trading mistakes.
In this sense, one of the most important things that any trader can do is to write trading information very specifically and carefully. Given that successful trading is not simple, there are many rules to follow and you must be very organized.
Ultimately, the best manner to ensure you are on the right path is to create a Personal Trading Algorithm. But what is a personal trading algorithm? Well, think about it as a pre-flight checklist.
Imagine you are a pilot who gets into the cabin of an airplane, and you need to check everything before the flight takes off. Similarly, it is possible to do the same thing in crypto trading.
For example, before setting out a limit or stop order, or even choosing a specific trading pair, you need to ensure that the structure you are seeing is what you are actually looking for.
Creating a Personal Trading Algorithm – What Do I Need to Include on It?
There is fundamental information that must be included in any personal algorithm, regardless of the trader’s profile. Ultimately, a personal trading algorithm should include the following subjects:
Trading Schedule
People have to define a specific time in the day to sit down and take care of their trading activities. When defining a trading schedule, you need to determine the period in which your trading activities take place, so that you can analyze the crypto prices according to the most relevant time frame in our bitcoin calculator.
For example, some like to trade in the morning, while others prefer to trade in the afternoon market. Some people have time available to trade the whole day, while others trade in the evening because they work in a 9-5 job.
Markets & Products
This subcategory refers to the markets and products you are trading. It is important to not deviate away from your trading algorithm. Hence, if you are trading cryptocurrency, make sure to trade only cryptocurrency pairs that you know and that are encompassed by your trading algorithm.
Signal Types and Models
In the trading jargon, the term “trading signals” refers to specific triggers to buy/sell an asset based on a predetermined set of criteria.
When setting out a personal algorithm, you need to describe what type of signal structure you are looking for, as well as what kind of fundamental background should there be in the market.
In short, you must know exactly what you are looking for in the market while trading digital assets.
Risk Management
In essence, risk management refers to how much money you are risking in your operations. Risk management is not only a subject of crypto trading, but it has the same importance in traditional markets, such as stocks, FOREX, indices, etc.
When assessing the level of risk, you are exposed while trading, you need to evaluate how much money you are risking on any specific market and how much money you are risking on any currency pair regarding the volatility of each specific pair.
Also, make sure to include some small technical details that you must keep track of and follow in a very structured and organized manner.
Trading Rules
In the crypto market, there are thousands of different rules available for every strategy. For instance, some traders apply 50 or more rules to their trading game, while others tend to be more minimalistic and apply only 10 rules.
Regardless, it is crucial to note that no one will follow a certain rule all the time, but the trading rules allow traders to take advantage of specific situations in the market and avoid losses.
Final Thoughts
Undoubtedly, setting out a personal trading algorithm is not an easy task. It takes time to sit down, analyze data, compare different statistics, assess trading logistics (e.g., the daily period for trading), find out which crypto pairs are more profitable, etc.
Ultimately, a trading algorithm must be as detailed as possible, as it will allow you to avoid taking false signals. Plus, this unique tool will enable you to trade systematically, as long as you make sure that you are following the right trading rules.
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