Risk Management for Automated Trading

Automated trading is powerful, but without proper safeguards, a single bad signal can cause significant losses. This guide shows you how to use SignalBee's risk management features to protect your capital while still capturing trading opportunities.

Why Risk Management Matters

Automation amplifies everything — including mistakes. Consider these scenarios:

• A typo in your TradingView alert sends a sell signal for the wrong pair
• Your strategy misbehaves during unusual market conditions and fires rapid signals
• A signal provider you follow sends an unexpected large position signal
• You accidentally enable trading before your strategy is fully tested

SignalBee's risk management features act as a safety net, preventing these scenarios from becoming costly mistakes.

Step 1: Whitelist Your Trading Pairs

The most important safety feature. Whitelisting ensures only pre-approved pairs can execute trades.

How Whitelisting Works

1. Go to Configuration in SignalBee
2. In the Whitelisted Pairs section, add the pairs you want to trade
3. Enter pairs in the exchange's native format (e.g., BTCUSDT, ETHUSDT)
4. Click Save

What Happens to Non-Whitelisted Signals

Tip: Start with a small whitelist. You can always add more pairs later, but you can't un-execute a bad trade.

Recommended Whitelist Strategy

• Conservative: 3-5 major pairs (BTC, ETH, and a few others you actively trade)
• Moderate: 10-15 pairs that match your strategies
• Aggressive: 20+ pairs (only if you have strategies that require variety)

Most traders do well with 5-10 pairs. More isn't always better.

Step 2: Set Maximum Order Limits

Prevent any single trade from being too large, even if a signal requests it.

Configure Max Order Size

1. Go to Configuration
2. Set Max Order Size for each pair or globally
3. Choose a limit in quote currency (e.g., $500 USDT max per trade)

How Max Order Limits Work

If your max limit is $500 USDT and a signal requests a $1,000 trade:

Choose based on your preference:

• Reject is safer — forces you to review unusual signals
• Cap ensures you don't miss opportunities but limits exposure

Recommended Limits by Account Size

Rule of thumb: Never risk more than 2-5% of your account on a single trade. Your max order limit enforces this automatically.

Step 3: Use Percentage-Based Position Sizing

Instead of fixed amounts, size positions as a percentage of your available balance.

Signal Format for Percentage Sizing

{
  "action": "buy",
  "ticker": "BTCUSDT",
  "quantity_type": "percentage",
  "quantity": "25"
}

This buys BTCUSDT using 25% of your available USDT balance.

Why Percentage Sizing is Safer

Fixed amounts can accidentally become your entire account. Percentages scale automatically.

Recommended Percentage Ranges

Step 4: Implement Stop-Loss Orders

Automatic exit points limit losses when trades go against you.

Stop-Loss Signal Format

{
  "action": "sell",
  "ticker": "BTCUSDT",
  "order_type": "stop_loss",
  "stop_price": "45000"
}

Stop-Loss Strategies

Fixed Percentage Stop:

• Set stop at 2-5% below entry
• Example: Buy at $50,000, stop at $48,500 (3% loss max)

ATR-Based Stop:

• Use TradingView's ATR indicator to set dynamic stops
• Wider stops in volatile markets, tighter in calm markets

Support Level Stop:

• Place stops below key support levels
• Requires chart analysis but often more effective

Warning: Stop-losses can be triggered during flash crashes and then price recovers. Consider using stop-limits instead of stop-markets in volatile conditions.

Step 5: Use Take-Profit Orders

Lock in gains automatically when targets are hit.

Take-Profit Signal Format

{
  "action": "sell",
  "ticker": "BTCUSDT",
  "order_type": "take_profit",
  "limit_price": "55000"
}

Take-Profit Strategies

Fixed Risk:Reward Ratio:

• If risking 3%, target 6-9% gain (2:1 or 3:1 ratio)
• Mathematically, you only need to win 33-50% of trades to be profitable

Scaled Take-Profits:

• Sell 25% at +5%
• Sell 25% at +10%
• Sell 25% at +15%
• Let 25% run with trailing stop

Step 6: Use Per-Exchange Trading Toggles

Each exchange connection has its own trading toggle -- your instant safety switch for that exchange.

When to Disable Trading on an Exchange

• Market crash in progress -- halt trading until you assess the situation
• Strategy misbehaving -- signals firing unexpectedly or too frequently
• You're going offline -- vacation, busy period, need a break
• Exchange issues -- API errors, delayed fills, suspicious behavior
• Any uncertainty -- when in doubt, turn it off

How to Enable/Disable Trading

1. Go to Exchanges
2. Find the exchange you want to control
3. Toggle Trading Enabled on or off
4. Changes take effect immediately

When trading is disabled for an exchange:

• Incoming signals targeting that exchange are logged but not executed
• Other exchanges with trading enabled continue to operate normally
• You can review what would have happened
• Re-enable anytime to resume trading

Best Practice: Start with trading DISABLED on each exchange. Send test signals, review the logs, confirm everything works, THEN enable trading.

Step 7: Monitor Your Signal History

SignalBee keeps a 2-year history of all signals and orders. Use it to catch problems early.

Regular Review Checklist

Daily (if actively trading):

• Check for rejected signals — are they expected?
• Review executed orders — correct pairs and sizes?
• Verify no unexpected signals

Weekly:

• Review win/loss ratio
• Check if any pairs should be added/removed from whitelist
• Analyze order sizes — are they appropriate?

Monthly:

• Export data for deeper analysis
• Review overall strategy performance
• Adjust risk parameters if needed

Warning Signs to Watch For

Risk Management Checklist

Before going live with any strategy, verify:

• Whitelisted pairs — Only pairs I intend to trade are enabled
• Max order limits — No single trade can exceed my comfort zone
• Percentage sizing — Positions scale with account balance
• Stop-losses — Every entry has a defined exit point
• Trading toggle tested — I know how to disable trading on each exchange instantly
• Test signals sent — Strategy works as expected in logs
• Small live test — First real trades are minimum size
• Monitoring plan — I know how often I'll check signals

Common Mistakes to Avoid

1. No Whitelist

Problem: Any pair can execute, including typos or malicious signals. Solution: Always whitelist. No exceptions.

2. Oversized Positions

Problem: One bad trade wipes out weeks of gains. Solution: Max order limits + percentage sizing.

3. No Stop-Losses

Problem: Small losses become account-destroying losses. Solution: Every trade needs a defined exit point.

4. Testing in Production

Problem: Bugs discovered with real money. Solution: Test with trading disabled, review logs, then enable.

5. Set and Forget

Problem: Strategy conditions change, but settings don't. Solution: Regular review of performance and risk parameters.

Summary

Risk management isn't about avoiding losses entirely — that's impossible in trading. It's about ensuring no single mistake, bug, or market event can cause catastrophic damage.

SignalBee gives you the tools:

• Whitelisted pairs → Control what can trade
• Max order limits → Control how much can trade
• Percentage sizing → Scale with your account
• Stop-losses → Define your maximum loss
• Per-exchange trading toggles → Instantly disable trading on any exchange
• Signal history → See everything that happened

Use them all. Your future self will thank you.