It seems like almost every assumption we had on the market and trading is being tested these days. From QEs to taper, financial and actual war, inflation, and how the crypto markets behave during this occurring. This cocktail is quite bitter. But we are not the desperate type, even during a bear market.
The market is in a downturn. Now what?
These days, perhaps more than ever, having a well-formed trading strategy is essential. But strategy alone might not be enough when the market is rapidly changing and the volatility is high. This is when automation comes in handy, making sure you act at the right moment and avoid emotional decision-making. Sending manual orders for a group of assets can take its toll, as markets are responding fast and hard. An automated strategy will take care of that for you and eliminate the emotional factors that may interrupt your solid plan to navigate the bear market.
Here is what you should keep in mind when setting your automated trading strategy during bear market conditions:
Diversify Your Holdings
Putting all of your eggs in the same basket is not recommended on a regular day, during an earthquake, it can be disastrous. Hedge your portfolio with different assets, whether different crypto pairs or perps, stocks, commodities, FXs – all of them. It is the time of Silver, Gold, and Gas. Take advantage of the volatility with automated trading, and don’t forget to look at the bigger picture.
Look for the more complex indicators
Meaning, ones that take into calculation more terms. For example, prefer VWAP over MA/EMA, since it includes the volume. Another such example is OBV over MACD. The reason behind it is that the market behaves differently. The 100-day Moving Average goes beyond the recent downtrends, and will probably reflect a less reliable trend compared to the 25-day EMA
You can use any indicator available on TradingView to trigger your automated trading on Capitalise.ai. Simply create a TradingView Alert and add a webhook to it.
In this example, we created an alert on ETH to be sent when the OBV goes over the MACD. We’ve created an automated trading strategy on Capitalise.ai and added the relevant message to the TradingView alert webhook. Check out the full guide on How to automate any trading scenario using TradingView alerts and Capitalise.ai
Time Your Trades
If you are tuned to the news, or at least the geopolitical announcements, use timing conditions in order to prevent sharp movements. If you know that one of the influential leaders is about to give an announcement at 14:00 EST, set your conditions to trigger before 13:45 EST. You can always edit the strategy and adjust the trigger timing. For example:
Mind the Time Frame
As volatility rises, consider working with different time frames, not only for indicators (as in the previous paragraph) but also for bars. Week-based bars may probably include less volatility than daily bars, and 1-hour bars will contain the 60-1m bars volatility within them.
Find the time frame you feel comfortable with, as per the asset behavior or supporting indicators and technical analysis. Challenging times are opportunities to get creative, come up with new practices, and adjust to the changing reality.
JPY/USD 1h vs 5m RVI (relative volatility index)
Guard Your Position
This is probably the most obvious change that should take place in times of uncertainty. If you haven’t done it by now, start using stop loss (at least) on every exit strategy. With Capitalise.ai trading automation you can close your positions using advanced options such as trailing stop loss, take profit, and the recently launched trailing take profit.
Adjust the values of the exit conditions to the level of volatility and risk you are willing to handle. The more tools you have, the more sophisticated you can be. Another aspect of it is that you can be more relaxed knowing you have tight exit conditions, leaving no room for chance.
You can take it to the next level by adding advanced exit conditions based on tech indicators, time frames, and news events. For example:
A Grain of Salt
This is true for everything that may have an effect on your trading strategy, but for our purposes, make sure that your current analysis is not outdated. Test the strategy in a closer time range to the previous day, whether it is a backtest or a simulation. Use Backtesting to analyze your strategy performance risk-free, before putting real money into it.
You don’t have to change anything that is currently running. For example, I have decided that I want to analyze the performance from 25/1. The first hit since then was executed on 27/1, hit number 15. Adjust the hits bar to hit 15 and see the strategy’s visual performance since that day.
Plan. Test. Automate.
To sum it all up – these times can be frightening. The market can be affected by a variety of reasons, from technical indicators to macro events and geopolitical tides. Planning and automating your strategies is the answer. Using your tools, knowledge, and creativity will certainly teach you some things and maybe also generate profits.
But most importantly, wherever you are in the world, stay safe.
Plan Like A Human. Trade Like A Machine_
With Capitalise.ai you can test and automate any trading scenario, using a simple & intuitive interface – no coding or technical knowledge required.
Simply type in your trading strategy in everyday English and Capitalise.ai will monitor the markets 24/7 for you. Once your conditions are met – your trading orders will be sent automatically to your Eightcap MT4 account.
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