3Commas use the term Safety Orders, but within the wider trading community Dollar Cost Averaging is a more frequently used term. Safety Orders are key to your trading success and profit. They are also one of the areas where many traders get confused.
Whilst all Keiko Signal subscribers have access to very specific settings, be aware that sometimes different pairs can have different settings, so pay close attention to the info within the members’ area.
It is however still important to understand what happens when Safety Orders are applied, and in particular the impact they have on trade size.
As an example, let us assume you are trading BTC-RVN and the bot uses the following settings:
Base order size:
Safety order size:
Max safety trades count:
Max active safety trades count:
Price deviation to open safety orders (% from initial order):
Safety order volume scale:
Safety order step scale:
0.0002 BTC
0.0001 BTC
3
1
2%
3
2%
The first thing is to explain what each of these terms means;
Base order size
This is your initial trade size.
Safety order size
The size of the initial safety order.
Max safety trades count
The maximum amount of safety orders that can be executed for 1 deal
Max active safety trades count
The difference here is ACTIVE. So if maximum was set to 1, the bot will place 1 safety order as soon as the trade is placed, and 2 are not placed but kept as potential spare orders should they be needed. Funds are not placed in reserve for non-active SO’s.
Price deviation to open safety orders
This is the percentage interval between each order.
Safety order volume scale
This is an important one – it multiplies the size of your safety trade on each new safety trade.
Safety order step scale
This scales the price interval between trade. The interval increases by multiplying the price deviation by the number entered.
What happens when SOs are activated
So now, we need to explain what happens to trade size when using Safety Orders. This is especially important because it will change your thinking about trade size. Using too large a trade size is often the reason a trader might fail and suffer large losses.
Below are some example settings, these are untested and we are not suggesting setting up a bot with these. If you are a user of Keiko signals, you will have access to a members’ area with all recommended settings
Base order size:
Safety order size:
Max safety trades count:
Max active safety trades count:
Price deviation to open safety orders (% from initial order):
Safety order volume scale:
Safety order step scale:
0.0002 BTC
0.0001 BTC
3
1
2%
3
2%
The trade initially opens with 0.0002 BTC
1st SO used, buys a further 0.0001.
The trade size now 0.0003
2nd SO used, buys 0.0001 x 3 = 0.0003 BTC.
The trade size is now 0.0006
0.0003 from prev + so of 0.0003
3rd SO used, buys 0.0003 x 3 = 0.0009 BTC.
The trade size is now 0.0015
0.0003 x 3, because the new SO size is taken from above. 0.0009 + 0.0006 = 0.0015
Manual addition of a 4th SO:
Trade Size 0.00425 BTC (completed 4 so’s)
0.0009 x 3, because the new SO size is taken from SO3.
0.0027 + 0.0015 = 0.00425
Manual addition of a 5th SO:
Trade Size 0.01235 BTC (completed 5 so’s)
0.0027 x 3, because the new SO size is taken from SO4.
0.0081 + 0.00425 = 0.01235
What started as a 0.0002 trade, quickly grows to 0.01235
- Trade Size 0.0002 BTC (completed 0 so’s)
- Trade Size 0.0003 BTC (completed 1 so’s)
- Trade Size 0.0006 BTC (completed 2 so’s)
- Trade Size 0.0015 BTC (completed 3 so’s)
- Trade Size 0.00425 BTC (completed 4 so’s)
- Trade Size 0.01235 BTC (completed 5 so’s)
A little history - "back half of the chessboard"
Back half of the chessboard is a reference to the invention of chess during the sixth century in present day India during the Gupta Empire. As the story goes the game of chess was invented and presented to a great Indian king. The king who was delighted by the game and preferred it over backgammon, offered the inventor any reward he liked. The inventor was quick to state his reward:
All I desire is rice to feed my family. A single grain of rice to be placed on the 1st square of the chessboard.
Then for two grains on the second square, four grains on the third square, eight grains on the fourth square, sixteen on the fifth square, and doubling up each time, until all squares were full.
The king was bemused that such a small request had been set as the price for such a wonderful game and immediately agreed. He ordered the treasurer to arrange prompt delivery of the rice to the house of the inventor. A week passed by and the inventor met with the king to ask why he had not been paid. An outraged king summoned to the treasurer and demanded to know why the inventor had not been paid.
The treasurer explained that by the time you get even halfway around the chessboard, the amount of rice needed was more than the entire kingdom had. The king thought for a moment and did perhaps what only a king could do. He had the inventor executed for trying to out-smart the king.
From a single grain of rice on square one, by the time yo uare at square 64 the amount has increased to over 18 quintillion grains of rice.
- = 1 + 2 + 4 + ….. + 9,223,372,036,854,775,808 = 18,446,744,073,709,551,615
= 1 + 2 + 4 + ….. + 9,223,372,036,854,775,808 = 18,446,744,073,709,551,615-
- where is the total number of grains.
The midpoint of the board would receive about 4 billion grains of rice, which is approximately one large rice field. It is only upon entering the second half of the chessboard that sustainability became a problem. Today ‘second half of the chessboard’ is a widely discussed topic, often relating to the sustainability of growth in many areas, eg computing speed.