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<h1 id="freqtrade-basics">Freqtrade basics<a class="headerlink" href="#freqtrade-basics" title="Permanent link">&para;</a></h1>
<p>This page provides you some basic concepts on how Freqtrade works and operates.</p>
<h2 id="freqtrade-terminology">Freqtrade terminology<a class="headerlink" href="#freqtrade-terminology" title="Permanent link">&para;</a></h2>
<ul>
<li><strong>Strategy</strong>: Your trading strategy, telling the bot what to do.</li>
<li><strong>Trade</strong>: Open position.</li>
<li><strong>Open Order</strong>: Order which is currently placed on the exchange, and is not yet complete.</li>
<li><strong>Pair</strong>: Tradable pair, usually in the format of Quote/Base (e.g. XRP/USDT).</li>
<li><strong>Timeframe</strong>: Candle length to use (e.g. <code>"5m"</code>, <code>"1h"</code>, ...).</li>
<li><strong>Indicators</strong>: Technical indicators (SMA, EMA, RSI, ...).</li>
<li><strong>Limit order</strong>: Limit orders which execute at the defined limit price or better.</li>
<li><strong>Market order</strong>: Guaranteed to fill, may move price depending on the order size.</li>
</ul>
<h2 id="fee-handling">Fee handling<a class="headerlink" href="#fee-handling" title="Permanent link">&para;</a></h2>
<p>All profit calculations of Freqtrade include fees. For Backtesting / Hyperopt / Dry-run modes, the exchange default fee is used (lowest tier on the exchange). For live operations, fees are used as applied by the exchange (this includes BNB rebates etc.).</p>
<h2 id="bot-execution-logic">Bot execution logic<a class="headerlink" href="#bot-execution-logic" title="Permanent link">&para;</a></h2>
<p>Starting freqtrade in dry-run or live mode (using <code>freqtrade trade</code>) will start the bot and start the bot iteration loop.
By default, loop runs every few seconds (<code>internals.process_throttle_secs</code>) and does roughly the following in the following sequence:</p>
<ul>
<li>Fetch open trades from persistence.</li>
<li>Calculate current list of tradable pairs.</li>
<li>Download ohlcv data for the pairlist including all <a href="../strategy-customization/#get-data-for-non-tradeable-pairs">informative pairs</a><br />
This step is only executed once per Candle to avoid unnecessary network traffic.</li>
<li>Call <code>bot_loop_start()</code> strategy callback.</li>
<li>Analyze strategy per pair.<ul>
<li>Call <code>populate_indicators()</code></li>
<li>Call <code>populate_buy_trend()</code></li>
<li>Call <code>populate_sell_trend()</code></li>
</ul>
</li>
<li>Check timeouts for open orders.<ul>
<li>Calls <code>check_buy_timeout()</code> strategy callback for open buy orders.</li>
<li>Calls <code>check_sell_timeout()</code> strategy callback for open sell orders.</li>
</ul>
</li>
<li>Verifies existing positions and eventually places sell orders.<ul>
<li>Considers stoploss, ROI and sell-signal.</li>
<li>Determine sell-price based on <code>ask_strategy</code> configuration setting.</li>
<li>Before a sell order is placed, <code>confirm_trade_exit()</code> strategy callback is called.</li>
</ul>
</li>
<li>Check if trade-slots are still available (if <code>max_open_trades</code> is reached).</li>
<li>Verifies buy signal trying to enter new positions.<ul>
<li>Determine buy-price based on <code>bid_strategy</code> configuration setting.</li>
<li>Before a buy order is placed, <code>confirm_trade_entry()</code> strategy callback is called.</li>
</ul>
</li>
</ul>
<p>This loop will be repeated again and again until the bot is stopped.</p>
<h2 id="backtesting-hyperopt-execution-logic">Backtesting / Hyperopt execution logic<a class="headerlink" href="#backtesting-hyperopt-execution-logic" title="Permanent link">&para;</a></h2>
<p><a href="../backtesting/">backtesting</a> or <a href="../hyperopt/">hyperopt</a> do only part of the above logic, since most of the trading operations are fully simulated.</p>
<ul>
<li>Load historic data for configured pairlist.</li>
<li>Calls <code>bot_loop_start()</code> once.</li>
<li>Calculate indicators (calls <code>populate_indicators()</code> once per pair).</li>
<li>Calculate buy / sell signals (calls <code>populate_buy_trend()</code> and <code>populate_sell_trend()</code> once per pair)</li>
<li>Confirm trade buy / sell (calls <code>confirm_trade_entry()</code> and <code>confirm_trade_exit()</code> if implemented in the strategy)</li>
<li>Loops per candle simulating entry and exit points.</li>
<li>Generate backtest report output</li>
</ul>
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<p class="admonition-title">Note</p>
<p>Both Backtesting and Hyperopt include exchange default Fees in the calculation. Custom fees can be passed to backtesting / hyperopt by specifying the <code>--fee</code> argument.</p>
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