Trading Script Analysis

Giving a shot at understanding my junior’s crypto trading script and documenting it here. Before I go deeper into how the program works, it’s important to understand what is currency pair and how each of the currencies within the pair plays its role in trading.

In order to find out the monetary value of something, it needs to be compared with a currency. (Ex. “Last month, the oil price was 67 USD per barrel, today it is up to 72 USD per barrel.“)

The same thing applies in currency trading. To find out a currency’s value, it must be paired with something in order to compare the value to one another. Within a pair, there is base currency and quote currency. Say you want to trade ETH, this will be your quote currency and can be traded against USDT, BTC, and tons of other currency that we call a quote currency. (Ex. “1 ETH is worth 1000 USDT today, I’M BUYING! ”)

If you pick ETH/USDT pair, the price of ETH/USDT will rise if :

  1. ETH’s value doesn’t change and USDT drops.
  2. ETH’s value increases and USDT’s value doesn’t change.
  3. ETH’s value increases at a higher rate than USDT’s.
  4. ETH’s value increases and USDT’s value drops.

Hope this clarifies.

So going back to the script that I am studying,

  1. Using a quote currency (ex. USDT) that you own, the program will create a buy order for some base currency (ex. ETH) of your choice, at the amount of your choice (ex. buy 500 USDT worth of ETH).
  2. It will take action if the price goes up X% (you set the value) or above, either up or down.

2.1 If the value moves up, it will take profit, you will still own 500 USDT worth of ETH.

2.2 If the value drops, it will buy more ETH to offset the difference between the value of ETH you own and the value that you’ve set to hold (500 USD).

Hence, to reap the max profit with this program, we want a volatile pair but at the same time, still maintain a certain level of stability (what I mean by this is, it’s not a coin that can go down 60% in a day. because then it will take a while to fully recover). Coins like ETH, BTC (and a ton more) that are backed up by their technology and use cases, with high volume, are not going to drop/go up that way since it requires a huge amount of capital to move the price 1% even higher or lower.

That’s all for this time. Personally, I think trading and value investing are both gambling (but at a different pace). If you’re up for the game, manage your risk, manage your greediness, take it slow, and have a portfolio. Learn about your market so that you don’t make blind guesses.