When is the right time to copy someone’s trading bot?Copy trading, or copying someone else’s trading bot/trading strategy can be very profitable. But you need to know when it is actually the right time to do it.
Copying someone else's trading bot or trading strategy
I have been quant trading (creating crypto bots in gate.io) for some time now and I have noticed a few things most casual bot copiers do wrong.
One of those things is the timing.
When should one decide to copy someone’s trading bot?
Most people do it wrong. Including myself.
That’s when most people copy other’s trading bots
People want to make quick money. So when they are looking for the best trading bots to copy, they look for bots that have made the most most either long term or short term.
This means that they are looking for trading bots that have produced 100%+ returns recently.
Why is that a bad idea?
Huge profits right now means that that trader has found a good entry point and has made money because of it.
Now that the trading bot is in a good plus already, it means that things have gone his/her way for some time now.
When you copy their trading bot now, it doesn’t guarantee any results (although it can) – you might earn a little, but not too much.
Imagine a trader has created a BTC trading bot with 3x leverage. The bot shows a few hundred percent profit. BTC price now is at $25 000 (just an example).
While the bot might go up to $30 000 short term, it might not. It might go to $26 000 and then go down again.
Yes, even with that increase you stand to make money if you decide to exit at the right time, but you will never make as much as the original trader. That’s because the trader him/herself might have created the bot when BTC was at $18 000.
So while it definitely feels like a great time to copy a bot when it’s up a few hundred percent already, this is not the best time to do it.
That’s when you ACTUALLY SHOULD copy other’s trading bots
Instead of copying trading bots that are making huge money now, you should look for trading bots that are in the minus.
Especially in the bear market.
If the trading bot is in a big minus, and you have enough details about it, that’s when it might be a good time to copy the bot.
This is the only way you can actually make more money than the bot creator.
Of course, not all bots in the minus are worth copying, far from it. You still need to do your homework and decide which bots might have the potential.
Things to pay attention to before copying someone’s trading bots
So when looking at the trading bots, what information you need to make a (potentially) good copying decision?
You feel the market is at its bottom (or at least short term bottom)
Coming back to the previous BTC bot example – the good time to copy the bot would be below $18 000. Ideally you would see that the bot has made money, but is now in the minus.
You know the bot’s lower limit
When anyone creates a trading bot, i.e. spot trading bot or margin trading bot, the creator has to set a lower limit for the trades. If the crypto price goes below that, the bot won’t make any trades.
While bot creators often don’t share that exact info, they do sometimes tell you when the perfect entry point would be.
It’s been in the plus, but the perfect entry spot would be when DOT’s price is $6.3. If the bot is in the minus, and DOT is currently worth $7, it would mean that bot creator himself has created the bot when the price was probably around $8-9.
Obviously you can enter later on as well, up to even $12, but the higher the price is (and the more the bot has already earned), the less you stand to earn.
This is because in case of those trading bots there’s also a higher limit.
Imagine the bot shows 1000% ROI, the DOT price is now at $14. It might look like a good idea to copy it. But the bot’s higher limit might be just $15. Which means that if the price of DOT keeps increasing, you can earn with it, but your earning potential is limited.
That’s why you should copy a bot when it’s in minus.
How to make sure the bot’s lower limit hasn’t been reached?
Before you copy a bot in gate.io, you can see its trades and trade dates/times. So make sure to check if the bot has made any trades just recently.
Does the bot have automatic termination rules
That’s information you want to know – will the bot automatically terminate when it reaches the lower or upper limit? You do not want that in most cases.
Does the idea apply to all types of trading bots?
Not necessarily all types, but definitely spot bots, margin bots, and even smart rebalance bots. When you see a smart rebalance bot that is 85% in the minus, it might not sound like a good bot to copy.
But at the same time it also means that the cryptos in the bot have gone down a lot, so that might be a good time to actually buy those cryptos.
But before copying a smart rebalance bot, make sure to check out all the cryptos included in the bot, and make sure none of them are too sketchy.
My recommendation is not to pay attention to bots which have huge ROI right now. Instead, look for bots that have had good ROI, but are now in minus.
Those bots have the most potential to make you some serious money.
But pay attention to the important details such as recent trades, information about good entry points if available, and you should also be aware whether there are automatic termination rules.