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Capitalise Crypto: If This Then That – Automated Crypto Trading Strategy Creation

  • by Michiel Mulders
  • July 20, 2018
  • 0

For decades, people have tried to create the perfect trading bot which will make them six figures. The regular stock market has years of experience in creating such bots, however, few have proven to be (slightly) successful. It’s an interesting fact to apply these bots to crypto trading. A feature many bots offer is a currency swap. A swap is basically a simultaneous purchase and sale of identical amounts of one currency for another when the price of one currency is lower on exchange A compared to exchange B. However, it has proven to be very hard to predict the future of the markets by just analyzing historical data.

On the other side, crypto trading bots do offer some benefits. Controlling your emotions when trading isn’t an easy task. Fear and greed are the two most frequently occurring emotions that lead to bad trades. Fear lets traders delay the realization of a loss, which turns into much greater losses, and the fear of giving back profits which make traders close winning trades too early. Greed is supposed to be good, but when we look at the hard facts, greed often causes several impulsive trading decisions that should be avoided.

In addition, a more rational investor will create a crypto trading strategy. Rules like:
– Set buy and sell limits for Ethereum and Bitcoin
– Take profits when a certain altcoin reaches +35%
– Close a trade when an altcoin drops -20%
– Transfer $1000 to your bank account when your portfolio hits $10,000

The above rules seem to be easy and straightforward, still, many people fail to follow these rules. A trading bot can help you to implement your trading strategy more correctly.

Capitalise Crypto wants to offer the possibility for novice and experienced users to create their own trading bot by just using a language-based interface. The interface works with an autocomplete feature to assist you in creating your first strategy. For the platform (bots) to use your funds on an exchange like Binance for example, you have to input your API keys to allow the bots to trade with your funds. It’s removing the need for highly specialized programming knowledge or hiring expensive developers. Capitalise Crypto enables you to get started with automated trading by using your personal strategy trading bot.

Novice users do not have sufficient knowledge to create personalized trading strategies, so Capitalise Crypto offers an extensive library of examples you can copy and implement into your personal strategy. Let’s take a look at the different operators we can use for our automated trading bot.

Trading Keywords
Let’s take a glimpse at some of the keywords we can implement in our crypto trading bot.

Trading Operators
Is Above / Is below

This is the most basic operator. It just tells the bot to do a certain action when the price of a cryptocurrency exceeds or drops below a certain threshold. As Capitalise Crypto is using natural language processing, words like ‘higher than’, ‘lower than’, ‘more / less’, ‘over / under’, ‘greater’, etc. can be understood as well.

Crosses Above / Crosses Below
You can use this condition to describe the exact moment where the value of one term changes from ‘is above’ to ‘is below’, or vice versa. This operator is mainly implemented for strategies that use technical analysis.

By… (delta)
It’s possible to instruct the bot to buy the crypto pair IOTA/BTC if the price is ‘higher by 1%’ than the today’s open. You can also tell the bot to look for a price increment in dollars, e.g. ‘by $2’.

Trading Terms
Use the open rate on the current day in your strategy.

Last Day Close
Asset’s close rate on the previous day of trading.

Last Day Volume
Very interesting indicator to check whether the volume has increased this day.

Average Volume
Daily average volume for last 50 days (5 / 14 / 25 / 50 /100 / 200 days’ averages are available).

Bar / Candlestick (with properties)
You can use the high and low of a candlestick, but as well the opening and closing price. Using candlestick data allows you to create more complex strategies. You can even edit several properties for candlestick data:

  • Number of candlesticks you want to take into calculation.
  • Change the candlestick interval.

Price at HH:MM
Price at a specified time.

Crypto Coin
Use a coin with properties like ‘24 hours volume’, ‘24 hours turnover %’ (volume divided by coin’s circulating supply), ‘market cap’, ‘coin dominance’.

Technical Indicators
Moving Average Convergence Divergence (MACD)
People have been using the MACD indicator for decades as it’s invented in 1979 and it’s one of the most popular indicators. It can be used to spot a new trend or momentum.

The concept behind the MACD is fairly straightforward. Essentially, it calculates the difference between an instrument’s 26-day and 12-day exponential moving averages (EMA). Of the two moving averages that make up the MACD, the 12-day EMA is obviously the faster one, while the 26-day is slower. In the calculation of their values, both moving averages use the closing prices of whatever period is measured. On the MACD chart, a nine-day EMA of the MACD itself is plotted as well, and it acts as a trigger for buy and sell decisions. The MACD generates a bullish signal when it moves above its own nine-day EMA, and it sends a sell sign when it moves below its nine-day EMA.

Relative Strength Index (RSI)
The RSI should give you a clear indication whether a cryptocurrency is oversold or overbought. It generates a value between 0 and 100. A value below 30 is considered to be low (oversold) and might signal a new upwards trend or swing. A value above 70 is considered to be high (overbought).

In an uptrend or bull market, the RSI tends to remain in the 40 to 90 range with the 40-50 zone acting as support. During a downtrend or bear market the RSI tends to stay between the 10 to 60 range with the 50-60 zone acting as resistance.

Bollinger Band (BB)
The Bollinger Band is plotted two standard deviations away from a moving average, invented by the famous technical trader John Bollinger. It’s mostly used to measure volatility of a cryptocurrency. The bands widen when the volatility increases, and vice versa.

In case the bands are close together, called a squeeze, it’s considered to be a period of low volatility, but as well an indicator for future trading opportunities.

Order Types

  • Market: default order type.
  • Limit: Set a max / min rate for an order.
  • Stop: A stop order allows you to create a market order that will be activated only if the price reaches a higher rate for a buy order, or a lower rate for a sell order.
  • Stop Limit: Combination of stop and limit order.

Time In Force

An order can be active until you cancel it (‘Good Till Canceled’). You can specify more accurate durations like ‘1 day’ or ‘3 days’. You can as well choose to execute an order immediately if the market conditions are correct otherwise cancel it immediately.

Creating Strategies
First Strategy
Let’s look at a basic strategy:
“Buy 450 units of IOTA/USDT @Binance if the price of Ethereum/Tether @CryptoCompare crosses below $4 and the market cap of BTC is below $300,000,000,000”.

Actually, the above strategy consists only of an entry strategy. The platform allows you to define an exit strategy as well. Something as simple as “Sell 450 units of IOTA/USDT @Binance if the price crosses above $8”.

You can now submit the trading strategy, so the Capitalise Crypto algorithm will start monitoring the market 24/7. Once the conditions are met, it will execute that strategy.

Trading Against Technical Indicator
Let’s start with trading the moving average. I want to buy Bitcoin when the price of Bitcoin crosses above the 100-day moving Average as this often indicates a positive break-out. You can create a very similar exit strategy in which you tell the bot to close the trade when the price drops again below the Moving Average.

Chaining Strategies
Let’s buy 100 euros worth of Ethereum in case the 24 hours volume of Ethereum is higher than the last day volume and the relative strength index of Ethereum crosses above 40. As you can see, we can chain multiple operations with the ‘and’ keyword. This is probably the most powerful feature Capitalise Crypto offers.

Product Roadmap
Capitalise has recently released the beta version of their platform. The Capitalise team is working hard to release a final version of the platform. To get a jump-start in the market, Capitalise decided to connect to the exchange with the highest daily traded volume, Binance. Within the second half of 2018 they are planning on adding many more exchanges to their platform.

Within the first half of 2019, planned is a social arena for sharing trading strategies. At last, we are very excited about the back-testing and optimising strategies. In a trading strategy, back testing seeks to estimate the performance of a strategy or model if it had been employed during a past period based on historical data. It’s great to get such performance estimates for your trades which are very useful insights for creating further trading strategies.

Key points for using Capitalise

  • Removes human emotion by defining an automatically executed crypto trading strategy.
  • Choose to simulate a strategy or execute it with your real exchange account.
  • Large variety of operations, terms, indicators, and actions that can be used to define simple but as well complex trading strategies.
  • Define both entry and exit strategies to a monitored trade.
  • Proper documentation and instruction videos; Large collection of examples.
  • Great Ux. Working beta.
  • Simulation mode.
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Blockchain Developer & Writer
Bio: Michiel Mulders is a blockchain developer with a passion for the crypto atmosphere. Michiel likes working with BigchainDB, Hyperledger Fabric, Stellar and Ethereum. You can call him a Lisk fanboy with a passion for JavaScript and carefully crafted beers.