When trading on a Spot, there is a risk that the price will move significantly in an unfavorable direction for a long time. That is, the bot enters the deal, executes all placed orders in the grid, after which it goes into an “Invest” state – waiting until the price reaches a Take Profit order to complete the deal with success.
That is, either the traded asset decreased in price after the bot bought the coin expensively (Long Algorithm), or, conversely, the bot sold the initial deposit cheaply, after which it waits for the old price to return (Short Algorithm).
The bot may go into the Invest state due to aggressive settings (due to insufficient overlap percentage, due to entering a trade without selecting an entry point, etc.) or due to an unsuccessful choice of a trading pair. Therefore, we always recommend using coins from the Top 25 list of coins by capitalization, as well as not releasing the bot to the exchange without carefully testing your settings on the history.
What to do when the bot is in an invest state?
There’s no need to worry:
- If you did not make a mistake when choosing a trading pair, the price will return.
- Price changes +-30% is a standard market situation, so it is not recommended to use Price Change Overlap lower than 30-40%.
- You can deploy the bot algorithm so that the deposit is not idle until the price returns and reaches a profitable order, told in this article and in our other material.
What are the risks of trading in the futures market with a leverage
The main risk in trading on Futures is the liquidation of the entire balance on the trading account (margin call). The position liquidation process is a mechanism by which the exchange protects itself from loss if it sees that as a result of a change in the price of an asset, a trader cannot fulfill his obligations (Futures contracts for the purchase or sale of this asset). Then the exchange first starts the process of releasing funds to support a losing position (cancels orders that replenish it), and if this is not enough, then it force closes the position, partially or completely.
Before trading Futures, be sure to study the documentation of your exchange, which describes the process of liquidation of Futures positions. Practice on the demo account of the exchange, observe the process and how the balance changes on the account.
We recommend to observe the risks and calculate the settings in such a way to avoid such situations.
In our other article we will tell you how to reduce risks when using a futures bot.
