[3Commas] DCA Bot Tester

hace 4 días

DCA Bot Tester

🔷What it does: A tool designed to simulate the behavior of a Dollar Cost Averaging (DCA) strategy based on input signals from a source indicator. Additionally, it enables you to send activation signals to 3Commas Bots via TradingView webhooks.

🔷Who is it for: This tool is ideal for those who want a visual representation and strategy report of how a DCA Bot would perform under specific conditions. By adjusting the parameters, you can assess whether the strategy aligns with your risk/reward expectations before implementation, helping you save time and protect your capital.

🔷How does it work: The tool leverages a pyramiding function to simulate price averaging, mimicking how a DCA Bot operates. It calculates volume-based averaging and, upon reaching the target, closes the positions. Conversely, if the target isn't reached, a Stop Loss is triggered, potentially resulting in significant losses if improperly configured.

🔷Why It’s Unique

• Easy visualization of DCA Bot entry and exit points according to user preferences.
  
• DCA Bot Summary table same as the one shown in the new 3Commas interface.
  
• Use plots from other indicators as Entry Trigger Source, with a small modification of the code.
  
• Option to Review message format before sending Signals to 3Commas. Compatibility with Multi-Pair, and futures contract pairs.
  
• Option to filter signals by session and day according to the user’s timezone.
  

👉 Before continuing with the explanation of the tool, please take a few minutes to read this information, paying special attention to the risks of using DCA strategies.

DCA Bot: What is it, how does it work, and what are its advantages and risks?

A DCA Bot is an automated tool designed to simplify and optimize your trading operations, particularly in cryptocurrencies. Based on the concept of Dollar Cost Averaging (DCA), this bot implements scaled strategies that allow you to distribute your investments intelligently. The key lies in dividing your capital into multiple orders, known as base orders and safety orders, which are executed at different price levels depending on market conditions.

These bots are highly customizable, meaning you can adapt them to your goals and trading style, whether you're operating Long (expecting a price increase) or Short (expecting a price decrease). Their primary purpose is to reduce the impact of entries that move against the estimated direction and ensure you achieve a more favorable average price.

🔸Key Features of DCA Bots

• Customizable configuration: DCA bots allow you to adjust the size of your initial investment, the number of safety orders, and the price levels at which these orders execute. These orders can be equal or incremental, depending on your risk tolerance.
  
• Scaled safety orders: If the asset's price moves against your position, the bot executes safety orders at strategic levels to average your entry price and increase your chances of closing in profit.
  
• Automatic Take Profit: When the predefined profit level is reached, the bot closes the position, ensuring net gains by averaging all entries made using the DCA strategy.
  
• Stop Loss option: To protect your capital, you can set a stop loss level that limits losses if the market moves drastically against your position.
  
• Flexibility: Bots can integrate with 3Commas technical indicators or external signals from TradingView, allowing you to trade in any trend, whether bullish or bearish.
  
• Support for multiple assets: You can trade cryptocurrency pairs and exchanges compatible with 3Commas, offering a wide range of possibilities to diversify your strategies.
  

✅Advantages of DCA Bots

• Time-saving automation: DCA bots eliminate the need for constant market monitoring, executing your trades automatically and efficiently based on predefined settings.
  
• Favorable averages in volatile markets: By averaging your entries, the bot can offer more competitive prices even under adverse market conditions. This increases your chances of recovering a position and closing it profitably.
  
• Advanced capital management: With customizable settings, you can adjust the size of base and safety orders to optimize capital usage and reduce risk.
  
• Additional protection: The ability to set a stop loss ensures your losses are limited, safeguarding your capital in extreme scenarios.
  

⚠️Risks of Using a DCA Bot

• Requires significant capital: Safety orders can accumulate quickly if the price moves against your position. This issue is compounded if increasing amounts are used for safety orders, which can immobilize large portions of capital in adverse markets.
  
• Markets lacking clear direction: During consolidation periods or erratic movements, the bot may generate unrealized losses and make position recovery difficult.
  
• Opportunity cost: Investing in an asset that doesn't show favorable behavior can prevent you from seizing opportunities in other markets.
  
• Emotional pressure: Large investments in advanced stages of the DCA strategy can cause stress, especially if an asset takes too long to reach your take profit level.
  
• Dependence on market recovery: DCA assumes that the price will eventually move in your favor, which does not always happen, especially in assets without solid fundamentals.
  

📖Key Considerations for Effectively Using a DCA Bot

• Use small amounts for your base and safety orders: Setting small initial orders not only limits capital usage but also allows you to manage multiple bots simultaneously, maximizing portfolio diversification.
  
• Capital management: Define a clear budget and never risk more than you are willing to lose. This is essential for maintaining sustainable operations.
  
• Select assets with strong fundamentals: Apply DCA to assets you understand and that have solid fundamentals and a proven historical growth record. Additionally, analyze each cryptocurrency's fundamentals: What problem does it solve? Does it have a clear use case? Is it viable in the long term? These questions will help you make more informed decisions.
  
• Diversification: Do not concentrate all your capital on a single asset or strategy. Spread your risk across multiple bots or assets.
  
• Monitor regularly: While bots are automated and eliminate the need to monitor the market constantly, it is essential to monitor the bots themselves to ensure they are performing as expected. This includes reviewing their performance and making adjustments if market conditions change. Remember, the goal is to automate trades, but active bot management is crucial to avoid surprises.
  

A DCA Bot is a powerful tool for traders looking to automate their strategies and reduce the impact of market fluctuations. However, like any tool, its success depends on how it is configured and used. By applying solid capital management principles, carefully selecting assets, and using small amounts in your orders, you can maximize its potential and minimize risks.

🔷FEATURES & HOW TO USE

🔸Strategy: Here you must select the type of signal you are going to analyze and send signals to the DCA Bot, either Long for buy signals or Short for sell signals. This must match the Bot created in 3Commas.

🔸Add a Source Indicator for Entry Triggers

Tradingview allows us to use indicator plots as a source in other indicators, we will use this functionality so that the buy or sell signals of an indicator are processed by the DCA Bot Tester.

In this EXAMPLE we will use a simple strategy that uses a Donchian Channel (DC) and an Exponential Moving Average (EMA).

• Trigger to buy or long signal will be when: the price closes above the previous upper level and the average of the upper and lower level (basis) is greater than the EMA.
  
• Trigger sell or short signal will be when: the price closes below the previous lower level and the average of the upper and lower level (basis) is less than the EMA.
  

Pine Script®

Then we create the plots that will be used as input source in the DCA Bot Tester indicator.

• When a buy condition is given the plot "🟢 Trigger Buy" will have a value of 1 otherwise it will remain at 0.
  
• When a sell condition is given the plot "🔴 Trigger Sell" will have a value of -1 otherwise it will remain at 0.
  

Pine Script®

Here you have the complete code so you can use it and do tests. Basically you just have to define the buy or sell conditions of your preferred indicator or strategy and then create the plots with the same format that will be used in DCA Bot Tester.

Pine Script®

To use the example code

1. Open the Pine Editor, paste the code and then click Add to chart.
   
2. Then in the Plot Entry Trigger Source option, we will select 🟢 Trigger Buy, as the plot that will give us the buy signals when it is worth 1, otherwise for the sell signals you must change the value to -1 in the Plot Entry Trigger Value and remember to change the strategy mode to Short.
   

🔸DCA Settings: Here you need to configure the DCA values ​​of the strategy, you can see the meaning of each value in the Settings Section. Once you are satisfied with the tests configure the 3Commas DCA Bot with the same values ​​so that the Summary Table matches the 3Commas Table. Pay close attention to the Total Volume that the Bot will use, according to the amount of Safety Orders you are going to execute, and that all the values ​​in the table adapt to your risk tolerance.

🔸DCA Bot Deal Start: Once you create the Bot in 3Commas with the same settings it will give you a Deal Start Message, you must copy and paste it in this section, verify that it is the same in the summary table, this is used to be sent through tradingview alerts to the Bot and it can process the signals.

🔸DCA Bot Multi-Pair: A Multi-Pair Bot allows you to manage several pairs with a single bot, but you must specify which pair it will run on. You must activate it if you want to use the signals in a DCA Bot Multi-pair. In the text box you must enter (using the 3Commas format) the symbol for each pair before you create the alert so that the bot understands which pair to work on.

In the following image we would be configuring the indicator to send a signal to activate the bot in the BTCUSDT pair using the given format it would be USDT_BTC, but if we wanted to send a signal in another pair we must change the pair in the chart and also in the configuration, an example with ETHUSDT would be USDT_ETH. After this we could create the alert, and the Mult-Pair Bot would detect it correctly.

🔸Strategy Tester Filters: This is useful if you want to test the strategy's result on a certain time window, the indicator will only enter this range. If disabled it will use all historical data available on the chart. If you are going to use the tool to send signals, make sure to disable the Use Custom Test Period. If you want the entries to only run at a certain time and day, in that case make sure that the timezone matches the one you are using in the chart.

🔸Properties: Adjust your initial capital and exchange commission appropriately to achieve realistic results.

🔸Create alerts to trigger the DCA Bot

• Check that the message is the same as the one indicated by the DCA Bot.
  
• In the case of Multi-Pair, enable the option to add the symbol with the correct format.
  
• When creating an alert, select Any alert() function call.
  
• Enter the any name of the alert.
  
• Open the Notifications tab and enable Webhook URL
  
• Paste Webhook URL provided by 3Commas looking in the section How to use TradingView custom signals.
  
• Done, alerts will be sent with the correct format automatically to 3Commas.
  

🔷 INDICATOR SETTINGS

🔸3Commas DCA Bot Settings

• Strategy: Select the direction of the strategy to test Long or Short, this must be the same as the Bot created in 3Commas, so that the signals are processed properly.
  
• DCA Bot Deal Start: Copy and paste the message for the deal start signal of the DCA Bot you created in 3Commas. This is the message that will be sent with the alert to the Bot, you must verify that it is the same as the 3Commas bot so that it can process properly so that it executes and starts the trade.
  
• DCA Bot Multi-Pair: A Multi-Pair Bot allows you to manage several pairs with a single bot, but you must specify which pair it will run on.
  
• DCA Bot Summary Table: Here you can activate the display of table as well as change the size, position, text color and background color.
  

🔸Source Indicator Settings

• Plot Entry Trigger Source: Select a Plot for Entries of the Source Indicator. This refers to the Long or Short entry signal that the indicator will use as BO (Base Order).
  
• Plot Entry Trigger Value: Value of the Source Indicator to Deal Start Condition Trigger. The default value is 1, this means that when a signal is given for example Long in the source indicator, we will use 1 or for Short -1 if there is no signal it will be 0 so it will not execute any entry, please review the example code and adjust the indicator you are going to use in the same way.
  

🔸DCA Settings

• Base Order: The Base Order is the first order the bot will create when starting a new deal.
  
• Safety Order: Enter the amount of funds your safety orders will use to average the cost of the asset being traded.Safety orders are also known as Dollar Cost Averaging and help when prices move in the opposite direction to your bot's take profit target.
  
• Safety Orders Deviation %: Enter the percentage difference in price to create the first Safety Order. All Safety Orders are calculated from the price the initial Base Order was filled on the exchange account.
  
• Safety Orders Max Count: This is the total number of Safety Orders the bot is allowed to use per deal that is opened. All Safety Orders created by the bot are placed as Limit Orders on the exchange's order book.
  
• Safety Orders Volume Scale: The Safety Order Volume Scale is used to multiply the amount of funds used by the last Safety Order that was created. Using a larger amount of funds for Safety Orders allows your bot to be more aggressive at Dollar Cost Averaging the price of the asset being traded.
  
• Safety Orders Step Scale: The Safety Order Step Scale is used to multiply the Price Deviation percentage used by the last Safety Order placed on the exchange account. Using a larger value here will reduce the amount of Safety Orders your bot will require to cover a larger move in price in the opposite direction to the active deal's take profit target.
  
• Take Profit %: The Take Profit section offers tools for flexible management of target parameters: automatic profit upon reaching one or more target levels in percentage.
  
• Stop Loss % | Use SL: To enable Stop Loss, please check the "Use SL" box. This is the percentage that price needs to move in the opposite direction to close the deal at a loss. This must be greater than the sum of the deviations from the safety orders.
  

🔸Strategy Tester Filters

• Use Custom Test Period: When enabled signals only works in the selected time window.. If disabled it will use all historical data available on the chart.
  
• Test Start and End: Once the Custom Test Period is enabled, here you select the start and end date that you want to analyze.
  
• Session Filter | Days | Background: Here you can choose a time zone in which signals will be sent or your strategy will be tested, as well as the days and a background of it. It is important that you use the same timezone as your chart so that it matches.
  

👨🏻‍💻💭 If this tool helps you, don’t forget to give it a boost! Feel free to share in the comments how you're using it or if you have any questions.
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The information and publications within the 3Commas TradingView account are not meant to be and do not constitute financial, investment, trading, or other types of advice or recommendations supplied or endorsed by 3Commas and any of the parties acting on behalf of 3Commas, including its employees, contractors, ambassadors, etc.