One of the most important aspects of a successful trading strategy when using the WolfpackBOT is coin selection.
Many new users fall into the trap of setting up a new strategy, or using one of the built-in strategies, without giving any thought to how the coins you select to trade with can significantly impact the way your buys and sells are executed. More coins does not necessarily mean more profitable trades.
In terms of settings for the bot, the main principles to consider are VOLUME, SPREAD, ORDER SIZE, VOLATILITY, WHITE/BLACKLIST, and AUTOMATIC UPDATES.
This may be obvious to most users, but the volume of a coin is the most significant criteria to be aware of in coin selection. It also affects all the other principles.
If a coin has low volume, it essentially means there aren’t many trades or traders. This means you will have a lot of difficulty buying or selling the coin. Volume is also used to confirm trends in technical analysis, so the bot can be setup to only execute trades on coins with specific volume thresholds. This will vary depending on the base and pair.
If you are using MARKET ORDERS for buys and sells, the volume of a coin will also determine how quickly and how accurately the order will execute. As a general rule, the lower the volume, the higher the instability of price action.
This brings us to the idea of SPREAD. Spread is defined as the difference between the buy (offer) and sell (bid) prices for a coin.
The spread can be impacted by a range of factors, including:
- Liquidity. This refers to how easily an asset can be bought or sold. As the liquidity of an asset increases, the spread usually tightens
- Volume. Assets that have a higher trading volume will often have tighter spread.
- Volatility. This is a measure of how much the market price changes in a given period. During periods of high volatility, when prices change rapidly, the spread is usually much wider
Once again, if you are using MARKET ORDERS for buys or sells, then you need to take this into account when calculating your profit margins (and also taking exchange fees into account).
Although there is no specific setting to select according to spread size, it is vital to understand the concept as part of your coin selection.
Generally speaking, the top 10 volume coins for BTC and USDT will have a very true range, and it will be easy to buy and sell at any time, and with a much lower spread.
PAPERBOT: The paperbot does not take the order books into account, and only reads the general price of a coin. Market and limit orders will execute at the same price and not take the order book and spread into account. However, if you use the higher volume coins, the results will remain a lot closer to reality than for lower volume coins and pairs.
Order book and size
Order size refers to the amount of capital you are trading with for each position. If you wish to trade with significantly higher amounts than the minimum spend, then you need to take the order book into account. This is especially true for the lower volume base currencies such as BNB and ETH. Generally speaking if you are trading with BTC and USDT, the top 10 volume coins will be reliable with price action in both paper trading and real trading.
PAPERBOT: The paperbot does not take the order books into account, and only reads the general price of a coin. Market and limit orders will execute at the same price and not take the order book and spread into account.
The coin selection tool in the WolfpackBOT also allows you to choose coins based on a volatility index. This basically shows the negative or positive price action over a 24 hour period as an overall percentage reading.
For example, if a coin was pumped up in price by 40% overnight, then you might like to avoid buying a position with this coin as the price is likely to dump soon after. This will show as a volatility index of 40.
Or, if a coin’s price falls by 8% you might choose to exclude it as the price action might be part of a longer term downward trend. This will show as a volatility index of 8.
It can be considered as an extra safety net for coins that might act contrary to their TA signals due to external influences such as market manipulation.
For scalping it can be beneficial to choose a lower volatility range where you know the price oscillates more tightly and predictably to be able to trade on smaller candles.
You can also use the % change function if you only want to select coins that are above or below specified thresholds. This could be used, for example, to only select coins that have dipped in price in order to catch the bounce.
Whitelisting and blacklisting
WolfpackBOT also gives you the opportunity to exclude coins manually using the blacklist and whitelist functions. This is important for 2 main reasons. The bot needs at least one coin selected to start, so it is important if you are using automatic updates to whitelist at least one coin so that if there are no coins that fit your selection parameters over your specified timeframe, then the bot will not stop. We would recommend whitelisting BNB as it is recommended to use this for fees as you receive a discount on Binance.
Secondly, you can use the blacklist tool to exclude coins that do not fit with your particular TA strategy, or if you know coins will be delisted in the near future. For example, if while using the coin statistics page, or while testing on the Paperbot or in Backtesting, and your particular strategy repeatedly buys positions on a coin that does not do well – you are able to simply add that coin to the blacklist and you do not need to worry about that coin any longer.
It is also recommended to blacklist the other stable coins if trading on USDT so that the bot does not inadvertently buy positions that will not be profitable but you have to pay fees on.
The automatic updates feature allows you to choose parameters that update the coin selection at specific time periods to allow for changing market conditions. The bot uses Coordinated Universal Time (UTC), so make sure you know how that is relative to the time zone you are in.
So that’s the quick guide to the Coin Selector. If you have any further tips or ways you use it, or if you have further questions, don’t hesitate to get in touch.
This article is brought to you by WolfpackBOT, an advanced cryptocurrency trading bot that allows you to securely and automatically trade digital assets on Binance, and by the EvolV Smart Contract. The EvolV Ecosystem includes built-in referral dividends and volume based staking dividends for all token holders, meaning that every time EvolV is bought or sold, all EvolV holders receive instant dividends, paid in Ethereum.