3Commas Practical Guides: How to use Smart Cover to increase profit during a trend
How many times did you catch yourself thinking that you should have bought more of a certain asset while watching its rapid growth? In this “3Commas Practical Guides” article, we will discuss how you can conveniently increase and compound your position to gain even more profits while following a trend with the help of 3commas.io tools.
Take advantage of price pullbacks; while in a trend, we often want to buy an asset and start building a position in anticipation of further upward price moves. The Smart Cover function, introduced by 3commas.io, allows you to sell an asset during areas of anticipated price pullbacks and then re-buy it once price starts trending again.
Not only will this allow you to lock in profits made already, but you can release equity to increase your position size should a next wave up occur.
You can analyze the chart of the desired asset and configure all the settings in the Smart Trade section of the side menu. First, you need to choose an exchange to trade on. You can always try the functionality first with a Paper Trading account:
For example, we saw that the Bitcoin price is in an uptrend and has reached a local correction point. We have also determined that the BTC price will undergo a correction to $9520. We take our risk management into account and set the following parameters in the Smart Cover tab:
- size of the position and the price at which we want to sell and buy back the BTC (Take Profit);
- price at which the asset will be bought back if the trade plan fails, and the price continues higher (Stop Loss).
After we create and confirm the deal, our trading plan will be automatically executed:
All orders, depending on the selected type and quantity, will be triggered according to the specified settings. When this trade completes, we can then use the Smart Sell tool and create a new trade plan if we believe the price will continue trending up. It is at this point, we can decide if we will increase the position size, by reinvesting the profit into the asset, or trade with the same amount of capital when we initiated the first trade.
Good luck, everyone! See you in the next 3Сommas Practical Guides!