Aiming for smarter investing? It’s time to think about automation.
In this sense, success is driven by mixing science, luck, and effort. Simultaneously, expertise and determination are just as significant as using the right set of tools.
Apart from wallets, charting tools, and platforms that analyze market data, you’ll need more sophisticated software to manage your funds better. This piece focuses on portfolio rebalancing tools for crypto investors and DeFi indexes and bots for automating your routine.
One of the basic investment strategies, portfolio rebalancing, is a more systematic approach to regular holding. Some data suggests that rebalancing is more profitable than hodling by a median of 64%.
The idea is to determine the percentage of each of your investments and later re-distribute their allocation, buying and selling coins according to your original target. In the highly volatile crypto market, where asset prices change daily, risk management is essential. The portfolio rebalancing strategy suggests either re-investing profits in other promising coins or saving them in the form of stablecoins.
There’s nothing wrong with rebalancing your portfolio yourself. If you know your coins, trust your intuition or just good at technical analysis, you might need no help. Otherwise, there are a few platforms that can simplify your routine.
An easy-to-use social trading app, Shrimpy is excellent for those who are starting their crypto trading journey. Shrimpy works with all the major cryptocurrency exchanges and allows you to either create an index or copy the world’s most successful traders. Besides, it helps with rebalancing too. All you have to do is to set up preferred coin allocations and specify the rebalancing frequency, and the app will do the rest for you.
Shrimpy implements two types of rebalancing strategies: periodic and threshold. Threshold rebalancing suggests maintaining a certain amount of coin allocations preventing excessive deviation. Whenever one of the assets deviates from the course, the whole portfolio is rebalanced. Opposed to that, periodic rebalancing is meant to rebalance the portfolio at a certain period: hourly, daily, weekly, or monthly. This way, investors will be more informed knowing when to expect the next rebalancing session.
3Commas is another popular tool for portfolio rebalancing that also works as a trading bot. It offers an extended set of manual and automated trading and portfolio management features. Apart from rebalancing, 3Commas allows creating portfolios with numerous coins and reviewing incomes of other users.
Automated trading is possible with a simple bot that runs one pair trading. It works for both long and short algorithms and trades according to Trading View signals. Moreover, it can analyze other bots and copy their performance.
The platform has a free plan with basic features that can give you a taste of what’s it like to automate your trading processes.
Bots for Automated Trading
When talking about trading bots, it won’t hurt to mention how they work. Typically, you need to register an account and choose a strategy that will execute buy and sell deals by itself. Usually, these bots come in the form of API connecting you to one of the mainstream exchanges. Alternatively, bots can leverage blockchain and smart contracts technology for a higher level of security.
Some of the perks of using automated trading include time-independency, as you no longer need to wait for the signal yourself and just set up your bot to react at a specific limit and carry out the trade once the conditions are met. Emotions are the worst enemies of the smooth trading process, and people tend to overreact way too often when their money is involved. Bots, in turn, have no emotions and follow a well-designed scenario.
Apart from 3Commas, there are a couple of other popular crypto trading automation bots to consider.
Botsfolio is a crypto trading bot that helps create a diversified portfolio of assets and uses a combination of long and short-term strategies depending on your needs. When registering, you’re asked to answer a few questions about your investing experience, willingness to risk, trading style, and goals. Once you pass the test, you’ll know what type of investor you are, and Botsfolio will suggest you three customizable strategies to choose from. After that, you’ll be demonstrated how to set up your account using Binance as an example and start the bots.
Being optimized, Botsfolio is supposed to bring profit despite what type of cycle, bull or bear, the market’s experiencing. The best thing is that you don’t need any crypto expertise to start trading, and all the risks are manageable. Also, you’re free to withdraw your funds any time you please.
Another highly efficient cryptocurrency trading tool, CryptoHopper, was designed by a group of Dutch developers. It allows you to copy trades, add several exchange accounts, engage in market-making and exchange/market arbitrage, and simulate or backtest your trading.
You’re able to implement your technical analysis and make the best out of buy and sell signals. CryptoHopper features RSI, EMA, Parabolic Sar, CCI, Hammer, Hanged Man, and other indicators and patterns. It supports hundreds of cryptocurrencies and all the trending exchanges.
Another perk of CryptoHopper is that the platform is social trading-friendly which means that you can connect with other traders, talk about strategies, subscribe to signals, and even purchase bot templates from the marketplace.
Investing in DeFi, but if you don’t follow it closely, it’s only fair not to know what to bet on. Luckily, there’s a shortcut. Similar to exchange-traded funds, DeFi indexes are selections of DeFi tokens combined. Instead of buying a bunch of tokens separately and spending way too much money on ridiculously high gas fees, you can get one basket and trade it permissionless.
Here are the most in-demand DeFi indexes to keep in mind.
Contains 14 tokens: YFI, AAVE, SNX, UNI, COMP, MKR, WNXM, UMA, REN, KNC, BAL, CRV, SUSHI, 1INCH. sDEFI is an index token introduced by Synthetix, one of the leading synthetic assets and derivatives projects and contains some of the best-performing DeFi tokens on the market. However, it can only be bought on Synthetix Exchange with the project’s stablecoin.
DeFi Pulse Index, the largest token by a wide margin, features 12 popular tokens and was launched by Index Coop and DeFi Pulse. DPI’s collection of tokens is reviewed and adjusted monthly.
PieDAO DEFI+S and PieDAO DEFI+L
PieDAO Large (L) and Small (S) Caps are DeFi indexes created by the PieDAO group that monitors prices of 7 of the largest DeFi assets per market capitalization. They are managed by DOUGH token holders. The “small edition” is considered to be riskier since it represents smaller projects.
The Bottom Line
Undoubtedly, there are a lot of advantages that come with crypto trading and investing automation. It saves your time and spares you from doing repetitive tasks. If you know you’re not good at controlling your emotions, consider setting up a bot that will take care of your buy and sell decisions “cold-heartedly’. Not only will it trade more consistently, but also will be a lot faster in reacting to trading indicators than humans.
There are downsides, too. Using a trading bot means that you have to hold your funds on exchanges, and that goes against one of the basic rules of crypto safety. Also, there is a big chance that using such software will make you lazy and won’t let you grow as a trader and investor. If you want to gain experience, apart from getting higher profits, do not depend solely on the automation tools, but use a complex approach. Monitor the market, study different strategies, talk to fellow traders and investors, and don’t forget to educate yourself about all things crypto.