Introduction: Futures Martingale

Concerned about missing lows or short-selling opportunities during market pullbacks? The Martingale strategy could be a key asset in your crypto investment toolkit.

1. What is Futures Martingale?

Futures Martingale is a flexible Dollar-Cost Averaging (DCA) strategy, offering more control over entry costs compared to the traditional method of buying tokens at set intervals. The strategy involves trading in a single direction in a two-sided market. If a trade doesn't go as planned, you open a larger trade in the opposite direction. This approach helps you recover from losses and potentially make additional profits by buying low and selling high.

KuCoin's Futures Martingale supports both long and short trading. This allows you to profit from market reversals using customizable leverage, increasing your trading opportunities and flexibility.

2. Futures Martingale Use Cases

An important thing to note is that the Futures Martingale is most effective in mid to long-term volatile markets, not one-sided markets.

E.g. In a volatile market, if you're trading long, the Martingale bot buys dips continuously. For instance, if you start with a BTC futures order at $30,000 and the price drops, the bot places further orders at reduced prices. As the price of BTC drops by 1%, the bot automatically places another order at $29,700, $29,403, and so on. The average entry price is thus reduced gradually.

When BTC rebounds to your set take-profit level, the bot sells, completing the trade cycle. The take-profit price will be adjusted based on targets that you've set.

E.g. If you set a 10% take-profit target, the take-profit price will adjust to the average entry price of your previous orders. The bot then sells when the ROI hits 10% to complete one trading cycle.

This strategy is also available for short trading, with the bot selling high and buying back when prices fall. 

Long Futures Martingale: Best for users who are bullish on after-market but expect the price to drop before rising. After opening long, the margin will be implemented according to the pre-set intervals and fill ratio when the price falls.

Short Futures Martingale: Best for users who are bearish on after-market but expect that the price may rebound. After opening short, the margin will be implemented according to the pre-set intervals and fill ratio when the price falls.

3. Advantages of Futures Martingale

Versatility: Ability to long or short, making it ideal for dip-buying or profiting from reversals in both bullish and bearish markets.

Customizable Risk Management: The bot's settings are fully adjustable to suit your trading approach and risk comfort. This includes setting your desired take-profit targets and choosing how much to increase your position by.

User-Friendly for Beginners: Should you opt for AI mode, the bot automatically sets the parameters for you, eliminating the need for manual inputs.

Enhanced Profit Potential: With up to 10x leverage, you can maximize your investments while controlling only a small amount of initial funds.

4. Setting Up Your Futures Martingale Bot

i. Select Your Mode

• AI: Get parameter recommendations based on current market conditions. Simply set your investment amount.
• Custom: Adjust the bot's settings according to your preferences, trading habits and risk appetite.

ii. Create Your Bot

• Your initial order is crucial. Subsequent orders depend on price movements and your pre-set thresholds.
• Once it's completed, should the price rise or fall beyond the set percentage required to add to your position, your first incremental order will be made.
• The size of the initial order and the multiplier for the incremental amount will affect each subsequent order. The larger the multiplier, the greater the difference between each order. This way, the average entry cost of each position is continuously reduced.

iii. Run Your Bot

The bot buys or sells in batches based on market trends and rebounds.

• As prices fall, the long Martingale bot will buy in batches at dips and sell once the price rebounds.
• As prices rise, the short Martingale bot will sell in batches at highs and buy again when the price falls.

iv. Stop Your Bot

• Upon stopping, all orders are canceled. You can either sell the base currency with a market order once the bot is terminated, or hold it in your account.

5. Risks to Consider

Market Volatility: In the event that the market continuously moves against you, the Futures Martingale may also add to your position indefinitely. Always consider the potential for substantial losses and set up prudent stop-loss orders.

High Leverage Risks: Trading on high leverage can increase losses in unfavorable conditions. Make sure you're fully aware of the risks associated with leveraged trading. 

Liquidation Risks: Trading with high leverage in volatile markets may result in liquidation should your account fall below the maintenance margin. When this happens, positions may be liquidated, and your funds lost. Setting up proper stop-loss orders can help to mitigate liquidation risks.

 

Disclaimer

Futures Martingale is a trading tool. The information provided in this article is intended solely to inform, and should not be considered financial or investment advice from KuCoin. Given the inherent market risks, this trading bot strategy does not guarantee capital preservation. Traders themselves are responsible for controlling their own risk exposure. Any returns from the Futures Martingale bot may be impacted by one-sided market conditions or abnormal price intervals. Adjust your bots based on market conditions to manage risks effectively.