https://twitter.com/mkuegi/status/1288433020547076099?s=20
My bot just made 70% within 5 days while i was lying in the sun enjoying time with my family. Sounds awesome right? Who wouldn't want that? But would you stand the heat that lead up to this? Let me take you on a small tour throu reality 🧵
The bot started to trade with "serious" size in feb 2020 and it hit the ground running. First 3 months saw returns of avg. 15% per month which was in sync with the backtest results. Backtest also showed months with 10% DD but also 100% gains so 💵
For 3 months it showed "continuous" profit: there have been weeks of DDs, sometimes even 10%, but every month ended in nice gains. So i decided to raise it up a bit and increased risk by 50% (cause it had made around that profit till then).
And thats when BTC started to dry up. My bot gains from volatility and the typical strong BTC moves. And they just stopped happening. For 50 days vola was just decreasing, leading my bot into more and more DD. And with the increased risk, it hurt even more.
June was the first negative month with -15%. I hated it but cause of the increased risk it was still "to be expected" cause of the -10% months from the backtest. At least thats what kept me from stopping it. But the situation got tough.
Mid of July there was still no end in sight. The bot operates on 4 exchanges already. 2 of them were running low on equity cause of the DD so i had to stop there. Refilling took time cause of the blocked mempool and with the loosing strike i started questioning the whole thing.
On 21. of July the bot had lost all of the previous gains of the year. I questioned everything. I was ready to stop the whole thing and restart from scratch cause "it stopped working". Luckily my wife questioned my questioning. So phei analyzed deeper and realized how the whole market had changed.
I found the root cause of the DD (the ever decreasing volatility) and came to the conclusion that this won't continue forever and when it ends, will probably give a good trade for the bot. so i kept it running.
Truth be told, i still had the mental "it might go to zero and i start over again" mindset. And thats important cause my bot-account is of a size that i could do that (losing it wouldn't kill me). And then the market changed. Lucky me it did as i hoped.
Cause of the low vola, the position (across multiple exchanges) had a tight SL and therefore "big" position size (every trade has similar risk per trade here) -> lead to a massive gain in taking the run from 9500 up to 11k. In total over 70% gain in 5 days.
So in the end i went from "nice stable gains" to "loosing it all" to "lambo soon" within 5 months. And if it wasn't my bot where i know the strengths and weaknesses and can tell why the DD is happening and how to react, i would have cut it, loosing it all.
Takeaway: don't run/trade bots or strats that you don't fully know and understand. You will have bigger DDs than expected and you will have to make tough decisions. Without knowing all the details you will probably make the wrong ones and loose it all.