We all hear the stories of traders who are doing money-making moves in the crypto sphere. They buy low and sell high, or at least that’s the main objective.
Even if you hold Bitcoin (or alts) and are in profit, you might still feel FOMO. A little voice in you that says you can win more by actively trading. You have a hunch when the price will drop, and you know when it goes back up. You can just feel it.
Is this true though?
Did you had more success trading crypto’s, over just holding a few coins?
If you do, congrats! You’re one of the few that is “beating the market”, which means you win more than the average rise of the market. For example, if BTC goes up 10%, and you profit 12% actively trading. This means you’re beating the market by 20% (12/10=1.2).
For the majority of traders, they are not beating the market. If you win 8% actively trading, but BTC goes up 10%, you’re actually better off just holding BTC. So why waste your time on trading?
In February, I ran a test with the GSMG bot which already netted me 0.13 BTC & 4.6 ETH in just 30 days…
Now that I have your attention, this is not financial advice.
Testing Bot Strategy
As I discussed before, I manage my portfolio in a way that I have different buckets for different strategies. One of the buckets is for altcoin investing, as I discussed in my previous blog series.
Another bucket goes to bot trading.
Now my plan is to test 3 different bots to see the difference in results, I started with the GSMG bot.
I personally met the development team behind it and I am in their first 100 beta testers back in 2017. They generously rewarded me with a lifetime free subscription. So a good place to start.
GSMG 30 Day Sprint
I usually don’t talk in absolute numbers, but for the purpose of this blog, I think it’s good for you guys to see how much money you can actually make doing absolutely nothing. And, adding some real numbers to this blog will help with the viral factor, cause I believe you guys are more likely to share this with your friends now ^^.
On February 2nd, I deposited 3 currencies in my Bittrex account.
- 1.5 BTC
- 25 ETH
- 25,000 USDT
On that day, BTC was worth approximately $35,000, while ETH was sitting at $1400.
At the time of writing, BTC is worth $49,200, a 40% gain. And Ethereum is trading at $1570, a nice 12% gain. The total value of my trading bucket in was around $112,500 at the start of February. Today it’s $157,300, which means the bot made me 39,8% in rough numbers. Almost a draw with BTC’s run-up, but better than holding Ethereum.
To give you a bigger picture, these are the total stats of the bot since 2017:
However, to understand the ROI of the bot, we need to dive a bit deeper into how it works.
Small High-Volume Bets Wins The Race
The bot wins your base currency. This means, if you deposit BTC and it trades BTC for you, it will win BTC.
Now I traded 3 different base currencies, BTC, ETH & USDT. Each with their own trading pairs and own profits.
The GSMG Trade Engine (TE) manages to buy and sell orders on the exchange. It applies a dynamic auto-adapting strategy to each of your selected markets. It’s placing small buy and sell orders, kinda like its cost averaging positions. As you can see in the picture above, the average profit per trade is 2.48%, so it’s not buying and Hodling the coins to the moon. It’s trading small wins and will perform well on the swings in the market.
And that is exactly why I have a bucket dedicated to bot trading. My HODL and altcoin portfolio are for the mid/long term, while the bot is making a profit on the swings. So when the market colors red, and my hodl portfolio is losing value, I know my bot is taking new positions to sell when we recover.
On the backend, GSMG uses market analyzers, machine learning techniques, and backtesting simulations. If you want to dive a bit deeper into this, you can check the GSMG FAQ here.
To visualize the small bet strategy, here’s a screenshot of February 25th and some of my profitable trades of those hours:
Currently the bot is closing between 150-500 profitable traders per day in my account.
The Biggest Risk of the GSMG Bot
A bot has no emotion, and I like that.
This bot will never sell a position with a loss unless you manually tell it to. This is great because you know every trade is profitable.
However, there is a downside to this.
When the market goes down, emotions take over and we as humans are likely to panic sell our positions. Only to see the market turn around and we buy back in at higher prices.
The GSMG bot will never do that. But what if the market crashed like it did in 2014 & 2018 and it takes 2-3 years to recover? Well, the bot will be patient, and wait for profitable trades, even if it takes 3 years.
In reality, this means, when the prices crash, the bot will find “good” buy opportunities for your trade pairs, and will keep buying coins until you run out of funds in your account (or whatever limit you have set for it). So in a crashing market, you will fill your bags with the crypto’s your trading with.
This is risky if you have speculative trade pairs, and it’s possible that you will need to be very patient for the market to recover for your coins to be sold.
There’s ways to limit this risk by:
- Don’t trade coins you don’t want to hold long term
- Reduce aggression factor of the bot when you think the market will collapse
- Manually sell positions
- Turn off the bot when the market crashes
- Add USDT pairs, so the bot sells crypto for USDT
This is the reason I turned off the bot in 2018, to wait for a better time to turn it back on. In my opinion, the bot performs best in a bull market or when we go sideways for a while because it will make nice gains in the small swings.
Trading Pairs, Allocations and Aggression factor
For each base currency, you can select the trading pair you like and set a percentage of your bankroll it can trade with.
For example, If I trade with 10 ETH, and I select the trading pair ETH-LINK. The bot will buy and sell LINK to win me Ethers. If I want it to trade with 1 ETH, I set my ETH-LINk trading pair to 10%. This way the bot never buys more than 1 ETH worth in total of LINK.
So these are the trading pairs I used this month, and their allocations.
Red means Sell orders, while green is buy orders.
Each base currency has its own allocation. Meaning my BTC base currency has 100% to allocate, but so does my ETH base currency and my USDT base currency. That’s why you will come to a total of 300% if you add all the positions together.
On big drops in the market, sometimes the bot finds good buying opportunities but you don’t have enough funds allocated to that trading pair. In that case, you will get a notification in your dashboard advising you to add some funds. Or you allocate a bit less to one trading pair, to add to another.
Another interesting setting to look at is the aggression factor. For each trading pair, you select you can choose how aggressive the bot is. The higher the aggression, the quicker on the trigger the bot will be with buying and selling your coins.
As a default, it’s set to 20%. However, on “Safe” trading pairs I personally set it to 60%. Pairs like BTC-ETH, or BTC-USDT. On the more speculative pairs like BTC-DOGE or BTC-XRP, I have my aggression set to 20-40%.
These are the settings where we as humans have an impact. You might pick a better trading pair than I do, which means you would make more money than me.
In an ideal world, I’ll see the bear market coming a few weeks ahead and will adjust my aggression on all pairs and eventually turning it off completely when we reach the top! Unlikely, but this would be the dream scenario.
Some Useful Stats of My Test Run
As I mentioned above, I know the team behind the GSMG bot. So I got to ask a few things that aren’t available in the dashboard.
Here are a few screenshots of my base currencies and the profit for each one of them.
In 30 days, my BTC base currency has an ROI of 9.33%
February was good for ETH trade pairs with 18.39% ROI.
Last but not least, my USDT pairs won me 29.3% in 30 days.
The average ROI of the 3 base currencies is 19% in February. However, the USDT pair performed the best but that’s my lowest allocation. Plus I still have a lot of ” unrealized profits”. Meaning the GSMG bot entered a trade but did not close it yet.
When I look at my total account value (all my coins calculated back to USD at the current price) I’m up $44,800, a whopping 39.8% in a month.
That’s over 1% per day!
Here are some interesting stats of my personal account, which the GSMG team were nice enough to look up for me:
- Average profit per trade: 3.5%
- Completed profitable trades: 8107
- 3 Highest volume trade pairs: USDT-BTC, USDT-DOGE, USDT-ETH
- 3 highest profit trade pairs: USDT-DOGE, USDT-ADA, USDT-UNI
I believe the more volatile coins will complete the most trades and will gain you more profit. However, the downside to this is you need to make sure to turn off the bot before we turn into a bear market.
How You Can Set This Up Too
The bot doesn’t require technical skills. It’s a simple API connection to your Bittrex or Binance account and you’re good to go.
GSMG bot does not control your funds, it only controls the buy and sell orders in your exchange account. So make sure to secure your exchange account with 2FA and other security measures.
Here are the steps to get started with the GSMG Trading Bot.
- Create an account at GSMG using my referral link (you are given some discount on the fees so you can test your first trades for free)
- Make a Bittrex or Binance account, go through the verification and add 2-Factor Authentication (mandatory), make sure to save the back-up key. The last will have more trading pair options.
- Go to Settings, click on “API-Keys” and generate a new API. Make sure to check-mark “Read Info” and “Trade-Limit”, as doing so will give you 2 API keys. Both of them are needed to associate your GSMG bot with your trading account.
- Log in to your GSMG account, go to Menu, and then to Settings. Here you can submit both of your API keys, then click “Update API Settings”
- Select your trading-pairs now, shown in Available markets. Choose your desired settings. Go to Trade Engine in the dashboard and let the bot do the work
If you run into issues setting up your account, you can ask in the GSMG Telegram community group. I’m in there as well.
The Cost of Using GSMG
Nobody works for free, and of course, the GSMG team also needs to earn a buck.
As I was part of their Beta test group back in 2017, I got a lifetime free subscription. Yay!
But for the rest of you, there are two options. You either use the free version and GSMG will take a % of your profitable trades. Or you pay a monthly subscription which can vary between $15 per month up to $950 a month. Depending on your bankroll, amount of trades, and trade pairs.
Don’t invest money you can’t lose. This is the case for any investment, including using the GSMG bot. If you’re not sure how much you want to invest, please read my previous blog about creating a framework that fits your personal risk profile.
Even though my test run was highly successfull, it could lose in March.
When you get started, the first days or maybe even 2 weeks can be slow in trades. The bot doesn’t have any positions yet, so it takes a while (and preferably a nice wick down) to get you into trades. Stick to a few basic trading pairs before you start adding more.
That being said, The last 2 weeks of my bot run, were significantly better than the first two weeks in trade volume. So I’m looking forward to seeing what GSMG does for me in March.
And the beautiful thing about this is, I’m not taking profits so I’ll compound the money to infinity and beyond. Well not exactly, cause when I see the bears coming I’ll shut it down.
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