Getting the right files
First, you need the download Portfolio Manager Bot. Let’s go to GitHub and download the zip file. Here
Once you get the files, you will have the following folder without “permission error” file. That will only be created if you encounter an error. All you have to do is, to start editing “settings” and start the bot.
Important note: When you are adjusting your settings, all the numbers that contains the word “percentage” are to be put like you say it. If you want 1%, please type 1. If you want 10% please type 10.
Important note: When you start the bot, it will buy all the coins and required amounts with market order. So, if you want to avoid slippage, you might want to manually buy the coins and then start the bot.
Set Up
License key: License key obtained from HFT Research goes here
Platform: This is the platform you want to trade on. Currently, BinanceSpot is the only choice but we are working implementing FTX as well.
Public Key: Public API key obtained from Binance
Secret Key: Secret API key obtained from Binance
Portfolio Creation
Base Currency: Select what you want your base currency to be. If you want to base your portfolio off of BTC, type BTC. Otherwise, please type USDT.
Desired Portfolio Value: This is how much you want your portfolio to be worth. The bot will make sure that your portfolio’s overall value will be this much. If you selected your base currency as BTC please put a BTC number here. Otherwise, please select a USDT value here. As a fail-safe option, if you have 10,000$, you can set your desired portfolio value to 5,000$ and keep the other 5000$ in the account. In case, prices go down, you can use that 5,000$ as a cushion and buy the coins at a lower price. So, you can stay profitable. Though, a more moderate approach would be, 7,000$ portfolio and 3,000$ as safety cushion. As your account grows, you can slowly increase your portfolio value and lower your cushion. However, for the simplicity of our math moving forwards, we will use 10,000$ as our desired portfolio value. Every calculation also applies if you want to base your portfolio off of BTC.
Coins in Portfolio: Choose the coins you want to include into the portfolio. This is really preference based. You can choose any coin that’s listed on the exchange you want to trade on. Please make sure to follow the same formatting when adding new coins. Otherwise, the bot will not work properly.
Percent Allocation: This is where you choose how much percentage of your portfolio should be allocated to each of the coins you have selected. When you add up the numbers, they should all add up to 100. Please make sure to follow the same formatting when adjusting allocation.
So far in our example, we have created a portfolio that’s worth 10,000$. It consists of;
3,000$ worth of BTC (30%)
2,000$ worth of ETH (20%)
1,000$ worth of LINK (10%)
2,500$ worth of BNB (25%)
1,500$ worth of ADA (15%)
At this point, the bot will check your account balance to see if you have any of those coins and check how much you have. Ultimately, it will purchase the coins that you don’t have and top up the ones you have but not enough or it will sell the coins that are worth more than what you allocated.
Rebalancing frequency percentage: This is where the magic happens. Here you select how often you want the bot to rebalance your portfolio. However, the bot will basis the frequency off of percentage moves within the portfolio. Let’s put that in context. You want to rebalance every 10% move within your portfolio.
We are currently holding 3,000$ worth of BTC (30%), 2,000$ worth of ETH (20%), 1,000$ worth of LINK (10%), 2,500$ worth of BNB (25%), 1,500$ worth of ADA (15%).
Let’s say the market goes sideways and the price of the coins change. Now, our portfolio is the following;
3,030$ worth of BTC (31%), goes sideways and doesn’t do much.
2,200$ worth of ETH (22%), performs fairly well
1,300$ worth of LINK (13%), performs very well
2,300$ worth of BNB (23%), performs fairly bad
1,100$ worth of ADA (11%), performs extremely bad
Now as you can see, the prices moved quite a bit. So, what does the portfolio manager do?
Since we set the rebalancing at 10%, the bot will only take action if the coins dropped or pumped 10%.
BTC only increased 1% which isn’t enough to rebalance, so the bot will do nothing.
ETH did increase 10% and now takes 22% of the portfolio. So, the bot will sell 200$ worth of ETH and bring you back to 2,000$ (20%) allocation back.
LINK goes up 30% and now worth 13% of your portfolio. Portfolio manager will sell 300$ worth of LINK and bring you back to 1,000$ (10%) allocation back.
BNB goes down 20% and now takes-up 23% of your portfolio. Therefore, we will buy 200$ worth of BNB to bring it up to 2,500$ (25%) allocation.
Finally, ADA dumps 26% and only makes 11% of the portfolio. So, we buy 400$ worth of ADA in order to bring it back up to 1,500$ (15%) of the portfolio.
Ultimately, it is shuffling capital across selected coins and profiting from market moves among them.
Important Rule for Capital Allocation
Due to Binance’s minimum trade amount being 10$, you have to calculate if your rebalancing percentage falls below the minimum trade limit.
If you want to allocate 10$ into x coin and you want to rebalance every 10% move, your orders will get rejected by Binance because 10% of 10$ is 1$ and minimum limit order is 10$. So it is important to work around that math.
For USDT Markets
If you want to rebalance every 10% move, you need minimum of 100$ allocated to one coin.
Consecutively, for a portfolio to have 5 coins and rebalance every 10%, you will need 500$
If you want to rebalance every 1% move, you need minimum of 1,000$ allocated to one coin
Consecutively, in order to create a portfolio with 5 coins and rebalance every 1%, you will need 5000$
For BTC Markets
If you want to rebalance every 10% move, you need minimum of 0.001 BTC allocated to one coin.
Consecutively, for a portfolio to have 5 coins and rebalance every 10%, you will need 0.005 BTC
If you want to rebalance every 1% move, you need minimum of 0.01 BTC allocated to one coin
Consecutively, in order to create a portfolio with 5 coins and rebalance every 1%, you will need 0.05 BTC
This is due to Binance’s minimum trade rules. They allow minimum order size to be 0.0001 BTC per order in BTC markets and 10$ minimum order in USDT markets.
Risk Measure
You will face three different market conditions and they will all effect you in a different way. Though, it is always good to be prepared about all scenarios. Let’s go from good to bad.
Good Scenario
You create your portfolio and the market starts climbing. The bot slowly starts selling coins into USDT or BTC. You are profiting and building a safety net in case market tops and drops. So, you can buy the coins that you have sold for a higher price at a discount. In this scenario, you don’t have to keep any USDT or BTC in your account as safety measure. Because, as you created your portfolio, you sold coins in profit before you needed to buy them. No BTC or USDT needed at start.
Normal Scenario
Market is going sideways so as your portfolio. Some of the coins are going down and some of the coins are going up. As a result, you are able to shuffle and reallocate the capital you have. Though you may need a little safety cushion. Why? Let’s say you create your portfolio and the market takes a slight dip. It would be wise to have some USDT or BTC (based on your base currency) sitting in the account. So, you can buy the dip. If the market drops and you can buy while its dropping, you will be able to sell all those coins for a higher price. If you are confident that the market will not drop more than 20% in the foreseeable future, having a 80% desired portfolio and keeping 20% of your capital in the account is advised.
Bad Case Scenario
This is an unlikely but still a scenario that everyone trading cryptocurrency should be aware of. Let’s say you create your portfolio and right after the market drops 70% like March 13th 2020 and you want to be prepared for that scenario. In that case, you will need to keep 50-50 ratio of desired portfolio to base currency sitting in your account for safety purposes. Why?
Let’s say you are rebalancing every 5% and you have 10,000$. You select 5 coins and create a portfolio that’s worth 5,000$ and keeping 5,000$ in your account for back up. The market drops 70% in a single candle before you realize what’s happening.
The bot will buy the 5 coin you selected every time they drop 5%. Ultimately when the dump is done, you will have spent 3500$ to buy the coins at a cheaper price and still have 1500$ as a back up for further drop. At this point, you will be selling the coins you bought every 5% increase. Essentially, once the prices start recovering, you start unloading all the coins you bought for cheap, turning them into profit.
The worst thing that can happen to you is that the market drops and you don’t have enough capital to buy at a lower price. The best thing you can do to combat that is to keep a 50-50 ratio. So, you can always buy and sell and stay in that continuous profiting state.
Conclusion
Overall, this is a very dynamic and profitable strategy if used properly. It is by far the safest bot we have released due to trading on spot market. So, you can’t get liquidated and its easier to manage risk. As long as you keep a 50-50 ratio, your downside will always be limited. You can increase the ratio to 70-30 and still be fairly safe.
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