Modern investors use a wide range of highly specialized instruments such as automated crypto trading and staking to build strong portfolios. The strong focus on trading is what makes the cryptocurrency market so intense yet profitable. Regardless of which strategy you employ, the quality of crypto signals makes it or breaks it. Learning how to build good trading systems capable of providing reliable signals consistently is the best way of achieving success in trading.
Which crypto signal is the most accurate?
This question, like many others in the world of finance, is impossible to answer definitively. One of the issues with crypto trading signals is that you need to use them wisely since some will work excellently during periods of high volatility while others work better in other market circumstances.
The same technical analysis strategy will deliver incredible results when applied to one digital asset and completely fail when used on another. The very quality of crypto signals depends on how, when, and to what they are applied.
We cannot pick any particular trading strategy and say that it produces accurate results in all scenarios. However, there are some tricks and tips that you can use to learn how to get the best signals from your trading strategies.
Understanding cryptocurrency trading bots
Signals can be analyzed and used manually, but they are designed to work with automation products. Contemporary bots offered by companies like WunderTrading are capable of outperforming human traders due to multiple reasons:
- Bots do not have to make pauses. The crypto market never stops and operates around the clock across multiple markets. It means that human traders have a significant disadvantage when competing against bots. Humans need to sleep, eat, and rest. During periods of downtime or leisure, the market may produce excellent opportunities for an entry which people often miss.
- An automated trading system never hesitates. If you automate trading crypto, quality signals from API on TradingView will allow you to make money more often than not. It is impossible to avoid losses altogether, but if you hesitate too much and miss out on potentially profitable trades due to fear or doubt, you will inevitably bring down the efficiency and consistency.
- Bots are cheaper than ever. Before the democratization of retail trading, automated trading systems were outlandishly expensive. Only huge financial institutions and investment companies could afford them. Today, all retail traders can use bots while paying small monthly fees. Companies like WunderTrading offer free plans with great utility!
- Bots receive signals from analytical platforms like TradingView. These signals trigger instructions which are instantly exercised by bots. With instant order execution on the side of centralized exchanges, a typical automated trade is processed within fractions of a second giving you a competitive edge that may improve your bottom line in the long run.
Since signals play such a huge role in determining the rate of success achieved by any automated trading system, it means that you must focus on building a reliable technical analysis strategy.
Trading crypto: quality signals settings
The most popular analytical platform used by crypto enthusiasts is TradingView. It is a website where you can open price charts for any token, stock, or commodity. TradingView offers its users a rich catalog of analytical instruments including highly specialized tools for cryptocurrency sentiment analysis, advanced indicators, and more.
When you open a new price chart, you can also deploy a variety of trading strategies. While it is a standard toolkit for many terminals, the social aspect of the platform is what makes it stand out. Retail traders gather here to discuss various systems and combinations of cryptocurrency technical indicators that actually work.
It is a good idea to go through community-tested trading strategies and pick those with proved consistency and reliability.
You can adjust the settings by using multiple approaches:
- Use the visual interface to tinker with various indicators included in the trading system and adjust them to your time frame and favorite assets.
- Learn the intricacies of Pine Script, the proprietary coding language used to build sophisticated trading systems on the TradingView platform.
- Adjust signals manually or use community guides and tips from professionals to supply your bots with reliable signals.
Remember that each separate financial asset requires a fine-tuned strategy that can be created only with dedication and endless testing.
How to test your strategies
TradingView and many other terminals store historical price action data which is incredibly useful when you want to test a new strategy. One of the best ways to do it is to use the backtesting feature on WunderTrading. Simply create a new bot and “hook” it to your signal-generator deployed on TradingView.
Here are some tips on how to adjust them:
- Create multiple iterations of a trading strategy with different settings.
- Run a back test for each of these iterations and compare results.
- Consistent strategies do not have to generate 80% true positives. 51% is often enough to deliver good performance across hundreds of orders.
- Make small adjustments after each test and look for the best combination of settings.
- Look when your best iterations perform better (some will excel during high volatility; some will make money when the market is calm).
Use crypto technical analysis signals from top-performing iterations of your trading system to improve the efficiency of your investment endeavors. It is necessary to continuously improve your bots by regularly testing other strategies and building a strong collection of well-performing systems.
Use cryptocurrency market indicators wisely
The best suggestion we can give is to use a variety of indicators to achieve good results:
- Standard tools like Relative Strength Index, Simple Moving Averages, Volumes, and others can be extremely useful when used as signal confirmation instruments. They can also generate reliable signals when properly adjusted.
- Contextual analytical tools such as Cryptocurrency Volatility Index, Bitcoin Dominance, and other are great at painting the general picture of the market at any given moment. Use them to identify good moments to start or stop trading.
- Complex technical indicators like Bollinger Bands, Ichimoku Cloud, or MACD are often used as main signal generators, but can also play the role of confirmation tools.
It is necessary to use a diverse array of various analytical instruments to achieve success. When singled out, these indicators cannot deliver a truly great performance. You need to create a trading system that has multiple levels of confirmations. Test this system against the market history to identify which of them can be automated.
The TradingView platform allows its users to deploy multiple crypto market indicators and use them simultaneously to generate reliable signals that can be used manually or to trigger bots into action. Do not limit yourself to just a couple of different analytical tools and try to deploy as many as possible while mastering each of them individually.
How to limit risks
Crypto price signals that you carefully test and select can be extremely useful and deliver reliable triggers for trading bots. However, you still need to build custom bots which are capable of correctly interpreting these signals and placing orders with strategically situated take-profits and stop-losses.
- Setting up limits for your bots is a great way to manage risks. Many retail traders believe that using take-profit and stop-loss orders is a sufficient risk management tool. The reality is that you also need to apply other investment rules to your strategy.
- Do not invest everything you have. Your life savings and emergency fund should never be used for investment activities. If you are short on money, invest what you can afford to and use leverage to trade.
- Build a balanced portfolio. The relation between risk and reward should be approached on many levels. Choose different types of asset classes to hedge against various risks that you will inevitably encounter while working in the crypto space.
- It is a good idea to dedicate a defined portion of your portfolio to bots. While these automated systems are good enough to generate profits reliably if you have a consistent technical analysis strategy, they are still prone to errors. You need to protect the portfolio as a whole.
About paid crypto price signals
A popular trend that took the world of finance by storm is one that focused on paying so-called experts for signals. One of the biggest issues with this approach is that you never know the true expertise of an influencer selling signals to their clients. Despite having some semblance of trustworthiness, people who try to sell trading signals should not be trusted.
If someone can make millions of a good signal, they will never sell it because the reaction that they will cause from retail traders will inevitably skew the market situation. It is simply unwise to share valuable trading insights with other market participants. It can be somewhat reliable for long-term market positions that you plan to hold for years, but it is never a good idea to use signals for day trading or market positions that are supposed to stay up for a couple of weeks.
Learning technical analysis is necessary for retail traders who want to achieve success in the crypto market. Knowledgeable investors quickly identify phony “experts” and find weaknesses in their analysis. At the same time, people with expertise are able to build advanced trading systems without relying on others.
Understanding how to build reliable and consistently performing trading systems that produce good signals is essential for the long-term success of your investment activities. Focus on experimenting, iterating, testing, and practicing. Do not try to “buy” your way into profitability and consistency by following experts trying to sell you signals.
The main takeaway
Trading signals can be extremely profitable if they are generated by a good technical analysis strategy or a knowledgeable individual. However, distinguishing between signals that can be applied to a great success and something that should never be touched is quite challenging even for people with experience.
Learn how to build custom strategies and use platforms like WunderTrading to test your theories by applying strategies to the history of the price action.