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Quickish note about bots and leverage
Read some comments on CT recently that alarmed me. Novice bot subscribers going wild with absurd amounts of arbitrary leverage. To wit; here's the underwater plot + returns for a popular bot on a popular platform (2 years' live data):
Read some comments on CT recently that alarmed me. Novice bot subscribers going wild with absurd amounts of arbitrary leverage. To wit; here's the underwater plot + returns for a popular bot on a popular platform (2 years' live data):
And here's the same trades using the somewhat confused settings of 90% equity with "3x leverage" relayed to me by an actual user of this system:
n.b. I'm inferring "leverage" is being applied like a slot machine multiplier, does seem to be the case tho I could be wrong.
n.b. I'm inferring "leverage" is being applied like a slot machine multiplier, does seem to be the case tho I could be wrong.
So yeah, 3x lev.... sick returns bro, did you hold all through that -80% account drawdown bro?
I wager most users would throw in the towel and take the L, long before recovery.
Please
Don't
Do This!
I wager most users would throw in the towel and take the L, long before recovery.
Please
Don't
Do This!
let's shuffle the trades and run 1,000 simulations with those crazy settings, here's what that looks like:
We can see that in 970 of the 1000 simulations (97%), it blew *at least* half of your account.
Risk of Ruin: Inevitable
If you see anyone doing this please try and talk them down off the ledge.
(this simulation by no means gospel, but it's a tool to get a handle on things)
Risk of Ruin: Inevitable
If you see anyone doing this please try and talk them down off the ledge.
(this simulation by no means gospel, but it's a tool to get a handle on things)
Using the same tool, we can iteratively figure out a better (smaller) size that we'd be more comfortable trading with
Suggest that using 50% size (1x lev) we're unlikely to encounter drawdown worse than -30%
Suggest that using 50% size (1x lev) we're unlikely to encounter drawdown worse than -30%
Finally, feeding the sensible size back into that bot's trades
Assumptions...
trading USDT margined (linear) contract
fees: 0.06% (FTX, taker both sides)
slippage: random between ±2.5 and ±7.5 USD
trading USDT margined (linear) contract
fees: 0.06% (FTX, taker both sides)
slippage: random between ±2.5 and ±7.5 USD
bots do work as long as they're traded consistently, are given sufficient time, are not too crowded and the user isn't greedy or impatient
