> For the complete documentation index, see [llms.txt](https://docs.dextrabot.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.dextrabot.com/copy-trade/methodology/method-2.md).

# Method 2

### Introduction

Method 2 is Dextrabot's latest copy trading strategy that provides granular control over individual order sizes and position limits. This method offers a balanced approach between the fixed allocation strategy of Method 1 and the proportional scaling of Method 3 (Mirror).

### How Method 2 Works

Method 2 operates on a per-order basis with defined maximum limits for both individual orders and total position size. Unlike Method 1, which distinguishes between initial positions and increases, Method 2 treats all trades uniformly - whether they're opening positions or adding to existing ones.

The key innovation of Method 2 is its non-proportional approach: when a source trader makes any trade, the bot applies fixed dollar amounts based on your configured parameters, regardless of the source trader's position size.

<figure><img src="/files/dV0vsBxlaIAWvbENl3It" alt="Method 2"><figcaption></figcaption></figure>

### Key Parameters

#### Max. Margin per Order (Required)

Sets the maximum amount allocated per individual trade execution. Applied to every order regardless of whether it's opening a new position or adding to an existing one.

**Validation**: Must be greater than or equal to Min. Margin per Order and less than or equal to Max. Margin per Position.

#### Max. Margin per Position (Optional)

Defines the total maximum exposure allowed for any single token position. Acts as a safety cap to prevent overexposure.

**Validation**: Must be greater than or equal to Min. Margin per Order, greater than or equal to Max. Margin per Order, and greater than or equal to Initial Margin Cap.

#### Min. Margin per Order (Optional)

Sets the minimum threshold for order execution. Orders below this threshold will be executed using the Min. Margin per Order amount.

**Validation**: Must be less than or equal to Max. Margin per Order and less than or equal to Max. Margin per Position.

#### Initial Margin Cap (Optional)

Defines the maximum amount for the very first order when opening a new position. Once set, subsequent orders follow the Max. Margin per Order limit.

**Validation**: Must be less than or equal to Max. Margin per Position.

### Trading Behavior

#### Position Opening

When the source trader opens a position:

1. The system checks if an Initial Margin Cap is set
2. If set, the first order uses the Initial Margin Cap amount
3. If not set, the first order uses the Max. Margin per Order amount
4. The order is executed only if it meets the Min. Margin per Order threshold (if configured)

#### Position Increases

When the source trader adds to their position:

1. Each increase is treated as a separate order
2. Every order is limited by the Max. Margin per Order setting
3. The total position size cannot exceed the Max. Margin per Position limit
4. Orders continue until either the position limit is reached or the trader stops adding

#### Position Decreases

When the source trader reduces their position:

1. The follower position is reduced proportionally using scaling-based calculation (similar to Method 3 Mirror)
2. The reduction maintains the same percentage as the source trader's decrease
3. The decrease amount is calculated as: `(Source Decrease / Source Position) × Follower Position`
4. Margin limits do not apply to position reductions

### Comprehensive Trading Scenario

<figure><img src="/files/N90XqHSVUE2G7Hrsts6M" alt=""><figcaption><p>Trading Scenario - Method 2</p></figcaption></figure>

### Bot Decision Logic

#### For Source Trader Increases:

1. **Intent**: Bot attempts to add Max. Margin per Order amount
2. **Position Check**: `Current Position + Max. Order ≤ Max. Position?`
   * **If Yes**: Execute Max. Margin per Order
   * **If No**: Calculate remaining capacity = `Max. Position - Current Position`
3. **Minimum Enforcement**:
   * **If Remaining Capacity ≥ Min. Margin per Order**: Execute remaining capacity
   * **If Remaining Capacity < Min. Margin per Order**: Execute Min. Margin per Order (if it fits within position limit)
   * **If Min. Margin per Order > Remaining Capacity**: Block trade (position limit conflict)

#### For Source Trader Decreases:

* **Always Execute**: Proportional decrease using scaling formula
* **No Limits Applied**: Margin parameters don't restrict decreases
* **Formula**: `(Source Decrease ÷ Source Position) × Follower Position`

### Configuration Options

#### Copy Current

* **Function**: Allows copying existing positions from the source trader
* **Behavior**: When enabled, calculates appropriate entry size based on current position and defined limits

#### Copy Increase as Open Position

* **Function**: Treats position increases as new position openings
* **Use Case**: Applies Initial Margin Cap to every increase, not just the first trade

#### Stop Loss & Take Profit

* **Format**: Percentage-based thresholds
* **Application**: Applied to all positions opened using Method 2
* **Execution**: Automatically triggered when specified profit/loss levels are reached

#### Direction Filter

* **Toggle:** On/Off
* **Function:** Controls which trade directions are copied from source traders, allowing you to filter trades based on whether they are long (buy) or short (sell) positions.

#### Include TWAP Orders

* Enables copying of Time-Weighted Average Price (TWAP) orders from source traders

#### Future Listed Tokens

* **Function**: Enables automatic copying of trades on newly listed tokens
* **Risk Consideration**: New tokens may exhibit higher volatility; configure appropriate position limits

#### Asset Management

* **Include**: Specify which tokens to copy from available list
* **Exclude**: Define tokens to avoid copying
* **Management**: Use dropdown interface to configure asset selection

### Key Differences from Other Methods

#### vs Method 1 (Fixed Allocation)

* **Method 1**: Distinguishes between initial position amount and increase budget allocation
* **Method 2**: Treats all orders uniformly with consistent per-order limits

#### vs Method 3 (Mirror)

* **Method 3**: Uses proportional scaling based on wallet equity ratios between source and follower
* **Method 2**: Uses fixed dollar amounts per order regardless of source trader's position size

### Risk Management Considerations

#### Validation Guidelines

Ensure your configuration meets all parameter relationships:

* `Max. Position ≥ Max. Order ≥ Min. Order`
* `Max. Position ≥ Initial Cap`
* `Min. Order ≤ Max. Position`


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