How does the recommendations algorithm work?

30-seconds summary:

  • It's based on a variation of Robert Lichello's AIM system, optimized on our opinionated vision of cryptocurrencies market.
  • Meaningful recommendations need to have money set both in "to invest" and cryptocurrencies. Not having enough balance in both places is running a weakened algorithm. An optimal balance could be 70% invested in crypto and 30% available to invest.
  • Our bot will send its output automatically every Monday to Premium customers, and can be requested by using /advice command.
  • The algorithm isn't infallible. The winner combo includes good knowledge of cryptocurrency market and focusing in mid & long term returns. We're here to help you with that.

When you subscribe to CryptoAdvisor.Club Premium 🎖, one of the most interesting features is receiving the conclusions of applying the bot’s recommendation algorithm. The bot will take your portfolio and tell you what you could do next, explaining why.

An algorithm is nothing more than a mathematical function that makes a series of calculations with a clear purpose and produces an output (in our case buy/sell information).

As it happens with any algorithm out there, as the input you provide to the algorithm directly affects its output, we want to explain how this works and how to get the best of it.

How does the algorithm work?

CriptoAdvisor’s algorithm isn’t magic; neither tries to predict the future.

CryptoAdvisor is based on the Automatic Investment Machine (AIM), a system invented in 1977 by Robert Lichello in response to the heartbreaking collapse of the great bull market of the 1960s. It’s been used by thousands of investors in the stock market since then, and today his ideas are more relevant than ever for the crypto market. We made some adjustments to make it work with cryptos and reflect our particular vision:

  1. The algorithm will prioritize acquiring coins (buy) when there are interesting windows (prices drop) over cashing cryptos (sell).

  2. As cryptos are quite different from the classical stock market, one of the things we have adjusted to Lichello’s algorithm is that when the crypto value goes up and up and never stops, we adjust the algorithm to reset the reference point.

How to get the most out of the algorithm?

If you want to get the algorithm’s advice, the algorithm needs to take data from the market (you have no control) and your portfolio (you are in full control). Your portfolio needs two things to make the algorithm function: cash to invest and cryptocurrencies.

👉  The algorithm does not work unless there is enough cash to invest and at least one crypto with a non-zero value.

The importance of the cash to invest

The cash to invest is the amount of money you would be willing to invest in the long term. It’s not the money you have today, or you have in your exchange, but the maximum amount of money you would introduce into the system for the whole investment period (e.g.: 1 year).

Needless to say, you can change your mind at any time and adjust this value as many times as you need. The bot will never invest it all at once but in small increments.

👉  If the cash to invest is zero or very low, the bot will never provide BUYING advice.

The importance of crypto amounts

The advice functionality needs a noticeable amount of crypto to start working. The cryptos you hold are taken as the base reference to give you proportional advice in the future. By proportional, we mean that if you have a portfolio with 1 Bitcoin, the bot will generate recommendations ten times bigger than holding 0.1 bitcoins.

Having cryptocurrencies with an amount $0 lets you receive notifications when the crypto has relevant changes (we call it the “watchlist”), but with a zero amount, you won’t have any advice for them as it represents a 0% of your portfolio.

👉  Meaningful advice will happen when you have over $300 in a specific coin. Having less than this in a coin is almost like having the coin in the watchlist, as the system usually advises no more than a 10% of the crypto value (in this example, $30).

Plus, the bot will never suggest operations under $10.

The ideal cash to invest and cryptos balance

👉  The optimal system has 50% of the cryptos in cash to invest. For instance, if you have $500 worth of cryptos, you should have at least $250 in cash to invest.

When this proportion is respected, the bot has enough margin to sell crypto when the market goes up and to buy when it goes down.

I am new to all this; where do I start?

If you still haven't done any investment in crypto, we'd recommend you to read our guide "How to start inverting in cryptocurrencies"

Anyhow, take in consideration, as an introduction, this basic tips:

  • Decide how much money you will invest in cryptos. Be cautious, don’t buy in crypto money that you might need; it’s a very volatile and high-risk market.
  • Think about in which cryptocurrencies you’d like to invest. If you have no idea, choose widely known and capitalized coins like Bitcoin or Ethereum. Do not invest in alt-coins that you are not familiar with and understand the project behind it.
  • You'll need an account in a cryptocurrency exchange to start buying crypto. Choose a widely used exchange like Coinbase, Kraken, Binance… The security they can offer today is much higher than you can do by yourself right now.
  • Put an eye on the fees charged by exchanges. Choose to deposit money by wire transfer rather than paying with a credit card: You’ll save a lot in fees and avoids impulsive purchases. 😉
  • Still, any doubts? Contact us: You can talk with us anytime from the bot itself using the /feedback command, or you can drop us an email to [email protected]

Last but not least

CryptoAdvisor’s algorithm is not infallible, neither an unbeatable system and could even perform worst than the market in some scenarios. The algorithm is focused on mid and long-term results, and you should not expect to operate every week; sometimes, the best advice is to hold your assets.

We have provided examples in this article, but we don’t have any partnership or interest in you registering to any specific exchange or buying particular crypto.

Finally, remember that today the crypto market is very volatile and considered high-risk. The only tools you have to beat this risk are time and knowledge.

Time, as the market goes up more often than it goes down, and compounding the returns during good times yields a higher overall return as long as the investment is given sufficient time to mature. And knowledge, because investment needs you to know what you are doing.

We hope we can be useful in both aspects.

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