What does "Protection" mean when mentioned by Diamond Pigs in relation to their strategies and bots?
"Protection" refers to a safety feature designed for the highly volatile crypto market. While some bots exit after a minor market dip of 5-10%, other Diamond Pigs' bots are equipped with different parameters tailored for long-term trading, leading to diverse responses within a strategy that includes various types of bots. This means that some positions may close quickly, while others may remain open longer. However, during significant market declines, all bots are triggered to exit to prevent larger losses.
The "Protection" mechanism in our strategies is aimed at avoiding substantial losses that could result from unpredictable events in the crypto or financial markets, such as sudden shifts due to changes in macroeconomic conditions or geopolitical events. Our bots are not designed to work on very short (1 or 2 hour) dips.
Many expect our bots to quickly close all positions during every market correction. However, in a scenario where all bots have tight Stop Losses set for a small correction (5-15%), missed opportunities can occur as the market often rebounds before the bots can re-enter, since the bots first seek confirmation. This situation can increase trading activities without improving performance, resulting in higher fees. Employing a variety of bots with different strategies helps reduce losses and enables strategic re-entries. In positive market conditions, most bots use looser Stop Losses to maintain positions and capitalize on rebounds.
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