3Commas Visible DCA Strategy

This trading strategy is a long-only strategy based on a crossover of two moving averages to trigger entries. It uses both base and safety orders, referred to as Dollar Cost Averaging, to enter and manage trades. Take profit and stop loss levels are used for exiting trades, set as a percentage of price movement from the average position price.

To trade this strategy manually:

• Indicators:
  • Short Moving Average: Choose between SMA(5), EMA(5), or HMA(5).
  • Long Moving Average: Choose between SMA(50), EMA(50), or HMA(50).
• Entry Condition:
  • Go long when the Short MA crosses over the Long MA (i.e., ta.crossover signal).
• Safety Orders and DCA:
  • Calculate price deviations based on a 0.4% initial deviation, increasing by a 1.19 scale for subsequent orders.
  • Place safety orders at these calculated levels to average down the entry price if the market moves against the initial position.
• Exit Conditions:
  • Take profit is set at 1.5% above the averaged position price.
  • Stop loss activates if the price moves 15% below a safety order level.

Improving the 3Commas Visible DCA Strategy for manual trading can involve a few key adjustments to enhance decision-making, optimize entry and exit points, and manage risk more effectively. Here's a plan:

• Refine Moving Average Selection:
  • Instead of sticking with fixed periods (5 and 50) for short and long moving averages, experiment with adjusting these based on market conditions. For instance, use different periods in a trending market versus a sideways market.
  • Mix types of moving averages; for example, combine an EMA for the fast line and an HMA for the slow line, as they respond differently to price changes.
• Enhance Entry and Safety Orders:
  • Utilize additional technical indicators as confirmation signals for entries, such as the Relative Strength Index (RSI) or MACD, to reduce false signals from crossovers.
  • Manually monitor the set price deviation for safety orders; in volatile conditions, a dynamic approach to setting these deviations may capture better prices.
• Implement Advanced Risk Management:
  • Consider incorporating a trailing stop loss in addition to the fixed stop loss to lock in profits during extended favorable movement.
  • Adjust position sizes dynamically based on market volatility, increasing the base order size in low volatility environments and decreasing it in high volatility conditions.
• Optimize Take Profit Targets
  • Instead of a uniform take profit of 1.5%, use ATR (Average True Range) to dynamically set take profit based on recent market volatility. It allows capturing more profit during high volatility but safeguards the trade in low volatility.
• Regular Analysis and Adaptation:
  • Periodically back-test and forward-test strategy adjustments in a simulated trading environment to understand how changes would have affected past performance.
  • Keep a trading journal to document each trade and the reasoning behind manual adjustments, which can help identify patterns and improve decision-making over time.

This strategy is ideal for traders who prefer a systematic and disciplined approach to trading. It caters particularly well to those comfortable with the nuances of technical analysis and employing moving average crossovers as entry signals. Here’s a breakdown of the trader profiles and trading styles suitable for this strategy:

• Trader Profiles:
  • Intermediate to advanced traders who have experience with Dollar Cost Averaging and managing multiple entry levels.
  • Investors seeking a mix of active participation and automated systems to make data-driven decisions.
  • Risk-averse individuals interested in mitigating market volatility through strategic averaging techniques.
• Trading Style:
  • Trend-following traders who capitalize on short-to-medium term market trends.
  • Position traders focusing on capturing lasting market shifts while using DCA to smooth out entry points.
  • Suitable for those comfortable with manual trade management or wanting to enhance automated strategies with manual oversight.

• Strategy Purpose: The 3Commas Visible DCA Strategy is designed for those looking to leverage moving average crossovers to enter trades while using Dollar Cost Averaging to manage entry points and minimize volatility risks.
• How It Works: The strategy triggers buy positions when a fast moving average crosses over a slower one, using additional safety orders to average down entry prices.
• Application Method: Suitable for semi-automated trading or manual approaches using alerts for MA crossovers while integrating personal analysis for better management.
• Enhance Performance: Optimize by adjusting moving average lengths based on market conditions, adding confirmation indicators like RSI, and setting dynamic take profit and stop loss levels based on ATR.
• Risk Management: Incorporate trailing stops and adjust position sizes according to market volatility while maintaining meticulous trade journals for continuous improvement.
• Trader Suitability: Best suited for intermediate to advanced traders seeking a disciplined, systematic approach aligned with trend-following and position trading that balances risk through strategic averaging techniques.