How to with Arthur: Portfolio distribution: what does it mean for your Bots?
Let’s look at portfolio distribution, what it can do for your bot and how to keep the volatility low. One of the essential parts of developing an algorithm is risk management. One of the ways to do this is by distributing your portfolio over several assets. But how do you do so, and what are the benefits? Let’s dive in.
The downside of trading in a single asset
As you know, it’s close to impossible to trade with a single asset continuously. If you make a trade at a specific point in the market and exit this trade a little while later because it doesn’t work out, that leaves you with a gap. During this gap, the market continues to fluctuate until you’re ready to make another trade. The downside of this is that during this gap, you might’ve missed out on some very interesting fluctuations and thus exciting trades.
The conclusion you can draw from this is that it’s not interesting to trade with a single asset. Too many gaps mean too many missed opportunities. But what if you wouldn’t scan one single asset, but multiple?
Trading in multiple assets
This way, you don’t have to wait for the perfect opportunity to come by in one specific asset. This ideal opportunity might just come by a lot sooner at a different asset. But the only way you can jump into this trade is by looking at several assets simultaneously.
● Door #1
When you do so, there are two doors to choose from. Door number one leads you to the most aggressive tactic: diving into each available position with 100% of your portfolio. You see an opportunity and fearlessly go for it.
But what if this opportunity turns out to be a bit less favourable than you had expected? In that case, you end up with your whole portfolio in that single market, without the opportunity to jump onto a great opportunity that might arise somewhere else. Obviously, not something you’d want.
● Door #2
To prevent this, you can decide on opening door number two and maximize how much you’ll put into every trade. So if you’re scanning five different assets and only put a maximum of 20% into each trade, you will still have a high enough percentage left to gain enough market exposure and jump into the other assets. This gives your users a stable return over the long term and the ideal spread of risk.
As you can see, there are a few ways to use asset distribution to increase or improve your risk management.
Join the BOTS community
Now, do you have any questions about the bots in the BOTS app? Please reach out to our support team. You can contact them right here. Or, if you’d like a quick fix, you can check the FAQ on our website, our YouTube channel or join other BOTS users at the BOTS Discord channel!
Are you an ambitious bot creator, and would you like to know how to get things started? Check our bot creator page!
BOTS is a tech company that has developed an app that makes it possible for anyone to start investing. You only need €50 to get started. BOTS uses automated trading strategies based on algorithms. We call these algorithms bots. These bots are tiny superheroes: they make automated investing accessible to everyone. With their help, you can invest in cryptocurrency within minutes — without any knowledge! And we’ll do you one better… In 2021, you’ll also be able to invest in stocks and other currencies through the BOTS app.
The app is free to download and quick and easy to install. BOTS currently operates in more than 15 countries, and by the end of the year, BOTS wants to be active in at least 60 countries and four continents.
Need any help with anything?
Even though automated investing is incredibly easy, you might need some time to find your way around the app and discover all the options. So if you still have questions wandering around your mind, or you just can’t seem to figure it out, please do not hesitate to contact the BOTS support department.
Don’t feel like calling our support team? Just head to the BOTS YouTube channel and browse through the dozens of instructional videos that may help you further. You are also royally invited to the BOTS Discord channel.
Ready to get started?
There is no such thing as risk-free trading. It is possible to lose (part of) your stake.