How to Install and Use Freqtrade for Automated Trading 🚀

Saturday, Dec 14, 2024 | 8 minute read

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Revolutionize Your Trading Game! 🌟

Experience a robust, open-source automated trading bot that enhances efficiency, supports diverse platforms, offers intelligent strategy optimization, and prioritizes user security—all while granting full customization for savvy investors! 💹

“In the current wave of the digital economy, cryptocurrency trading is entering a more intelligent and personalized stage.” 🌊

With the rapid development of the digital currency market, an increasing number of investors are focusing on and participating in cryptocurrency trading. However, faced with complex markets and frequent trading demands, manual trading can no longer meet user needs. This is where a powerful trading bot emerges—Freqtrade! It not only enhances trading efficiency but also offers users a flexible and intelligent automated trading solution. 🤖

1. What is Freqtrade? An Open Source Cryptocurrency Trading Bot 🤖

Freqtrade is a free and open source cryptocurrency trading bot developed in Python, designed to provide users with a flexible trading platform. ✌️ It can seamlessly interact with several major cryptocurrency exchanges and supports a range of features, including strategy development, backtesting, and optimization. 📊 What’s even more impressive is that Freqtrade can be managed via Telegram or a web-based user interface (webUI), making the operation more convenient and the user experience simply excellent! 🌐

2. Unique Features of Freqtrade 🌿

1. Cross-Platform Support: Freqtrade is compatible with Windows, macOS, and Linux operating systems, using Python 3.10 or higher, ensuring broad availability! 💻
2. Robust Backtesting Capabilities: The platform allows users to simulate trades based on historical data, evaluating and validating the results of trading strategies, providing strong data support for decision-making! 📈
3. Machine Learning-Based Strategy Optimization: Utilizing machine learning technology, Freqtrade offers comprehensive support for fine-tuning and optimizing trading strategies, boosting performance! 🔍
4. Adaptive Modeling and FreqAI Integration: With FreqAI integration, trading strategies can self-improve based on actual performance, enhancing effectiveness and increasing win rates! ⚙️
5. Data Management and Risk Analysis Tools: Using SQLite for data persistence, it provides risk analysis and portfolio management tools to help users better manage their assets! 📉
6. Diverse Selection of Trading Pairs: Freqtrade supports multiple trading pairs and offers a blacklist mechanism to exclude specific pairs, providing you with ultra-personalized trading settings! 🤹‍♂️
7. Trading Risk Protection Measures: Various protections are in place to reduce trading risks, such as cooldowns and maximum drawdowns, helping users better safeguard their investments amidst market volatility! 🛡️

3. Why Developers Prefer Freqtrade? 🥇

1. Open Source Advantage and Community Support: Being an open-source project, Freqtrade boasts a strong community support, allowing users to share experiences, optimize strategies, and greatly enhance learning and growth! 👥
2. Learning and Practice Opportunities: Freqtrade allows users to learn algorithmic trading and strategy development quickly through practice, especially suited for enthusiasts with some coding background! 📚
3. Incremental Optimization and Feedback System for Successful Strategies: It encourages users to continuously refine and adjust their strategies based on actual trading feedback, enhancing trading outcomes and creating a positive feedback loop! 🔄
4. Empower Users with Coding Background to Take Control: It gives users more agency, greatly facilitating developers who wish to customize trading strategies, unleashing limitless creativity! ✍️

As a powerful trading tool, Freqtrade also provides a flexible learning platform, making it an ideal environment for both developers and traders to deepen their understanding and involvement in the cryptocurrency market! 🌈

4. Installing Freqtrade 💻

Before using Freqtrade, some basic installation preparations are necessary. Below, we’ll illustrate the process using Ubuntu as an example. 🚀

1. Update Package Repository 🔄

First, ensure that your package repository is up to date by running the following command:

sudo apt-get update

Note: sudo is a command for superuser permissions, and apt-get update updates the information of all installed packages in the operating system.

2. Install Required Packages 📦

Next, you’ll need to install some essential packages that are critical for running Freqtrade:

sudo apt install -y python3-pip python3-venv python3-dev python3-pandas git curl

- python3-pip: Python package management tool for installing other libraries
- python3-venv: Used for creating virtual environments
- python3-dev: Required header files and static libraries for Python development
- python3-pandas: A library for data manipulation and analysis
- git: Version control system for cloning the Freqtrade repository
- curl: Command-line tool for interacting with servers

If you are a macOS user, don’t forget to install the additional libraries:

brew install gettext libomp

Note: These two libraries provide extra functionality needed by Freqtrade.

3. Clone the Freqtrade Repository 🥳

Now, let’s clone the Freqtrade GitHub repository and install its dependencies:

# Install other dependencies
sudo apt-get install python3-venv libatlas-base-dev cmake curl

# Create pip configuration for faster installations
sudo echo "[global]\nextra-index-url=https://www.piwheels.org/simple" | tee /etc/pip.conf

# Clone the Freqtrade repository
git clone https://github.com/freqtrade/freqtrade.git
cd freqtrade

# Run the installation script
bash setup.sh -i

Note: git clone copies the entire repository to your local machine, cd freqtrade navigates into the cloned directory, and bash setup.sh -i runs the installation script to configure Freqtrade and its dependencies.

4. Switch Branches 🔄

After installation, you can choose to switch to different development branches:

# Clone the development branch
git clone https://github.com/freqtrade/freqtrade.git

# Enter the downloaded directory
cd freqtrade

# Switch branches
git checkout stable  # For beginners
git checkout develop  # For advanced users

Note: Use the git checkout command to switch to your desired branch. The stable branch is suitable for beginners, while the develop branch is aimed at advanced users needing new features.

5. Activate the Virtual Environment ✨

Once the installation is complete, you should activate the virtual environment for clear management of the project dependencies:

# Create and activate the virtual environment
python3 -m venv .venv
source .venv/bin/activate

Note: python3 -m venv .venv creates a virtual environment named .venv, and source .venv/bin/activate activates it. You’ll see a change in the command line prompt indicating that you have entered this environment.

6. Update or Reset Freqtrade 🔄🔄

To update Freqtrade, you can run the following commands:

# Update
./setup.sh -u

# Reset
./setup.sh -r

The first command will update your Freqtrade installation, while the second will restore it to its initial state.

7. Install TA-Lib Dependencies 📊

If you plan to use the technical analysis library TA-Lib, please follow the instructions below to install it:

# Install TA-Lib dependencies
sudo ./build_helpers/install_ta-lib.sh

Note: This will install TA-Lib for you, enabling more complex technical analyses.

5. Usage Example 🔧

With the installation complete, you can start using Freqtrade to generate user directories and configuration files! Next, let’s look at the specific steps! 🤖

1. Initialize User Directory 📂

First, you need to initialize a user directory to store configurations and other data:

# Step 1 - Initialize user directory
freqtrade create-userdir --userdir user_data

Note: This command creates a directory named user_data for all Freqtrade settings and files.

2. Create a New Configuration File 🗂️

Next, create a new configuration file to define trading strategies and settings:

# Step 2 - Create new configuration file
freqtrade new-config --config user_data/config.json

Note: config.json is a file automatically generated by this command, and all strategies and settings will be stored in this file.

3. Start Trading 💰

After the configuration file is created, you can use it to start trading:

# Start trading
freqtrade trade --config user_data/config.json --strategy SampleStrategy

Note: In this command, SampleStrategy is the name of your predefined trading strategy, while user_data/config.json is the path to your configuration file that defines the specific trading rules.

6. Sample Strategy Configurations 📊

Next, let’s look at some strategy configuration examples to help you better utilize Freqtrade’s features! 😊

1. Setting Asset Pair Blacklist 🚫

Suppose you want to set an asset pair blacklist; you can add the following content to the configuration file:

"exchange": {
    "pair_blacklist": ["DOGE/BTC", "BNB/.*"]
}

Note: This configuration prevents specific asset pairs (like DOGE/BTC and all BNB pairs) from participating in trading, protecting capital from unnecessary risks.

2. Using a Static Asset Pair List 📋

If you wish to trade using a static list of asset pairs, you can configure as follows:

"pairlists": [
    {"method": "StaticPairList"}
]

This setting allows you to manually specify the asset pairs without needing to select them dynamically.

3. Choosing Asset Pairs Based on Trading Volume 📈

If you want to select asset pairs based on trading volume, you may use the following configuration:

"pairlists": [
    {
        "method": "VolumePairList",
        "number_assets": 20,
        "sort_key": "quoteVolume",
        "refresh_period": 1800
    }
]

Note: This configuration selects the top 20 trading pairs based on trading volume from all pairs available on the exchange and updates every 1800 seconds to ensure trading opportunities are maximized.

4. Strategy Protection Mechanisms 🛡️

To better protect your investments, you can configure strategy protection mechanisms like so:

{
    "method": "ProtectionName",
    "stop_duration_candles": 4,
    "lookback_period_candles": 24
}

Note: This configuration ensures that during market volatility, the strategy makes necessary adjustments based on historical data.

5. Maximum Drawdown Protection Example 🚫💸

Within your strategy class, you can define a maximum drawdown protection mechanism:

@property
def protections(self):
    return [
        {
            "method": "CooldownPeriod",
            "stop_duration_candles": 2
        },
        {
            "method": "MaxDrawdown",
            "lookback_period_candles": 48,
            "trade_limit": 20,
            "stop_duration_candles": 12,
            "max_allowed_drawdown": 0.2
        }
    ]

Note: This code ensures that if the maximum drawdown level is reached, the system will automatically halt trading, thereby protecting your funds from further losses.

With the above examples, you can quickly get started with Freqtrade and flexibly customize your trading strategies! 🎉