Trading markets have always been lucrative for those willing to study and develop winning strategies. Stock and Forex have long been at the forefront, but with the advent of Crypto, a whole new set of trading opportunities are on the table. And with Cryptocurrency becoming bigger than ever, this market is showing no signs of slowing down.
In recent years, trading has been augmented by a very exciting addition – automated crypto trading. The question begs – can you really replace a human touch with automation? It seems so. Below we’re going to be taking a look at how this technology works, and what you should consider when making the jump to automated trading.
What is Automated Crypto Trading?
Automated trading gives traders the opportunity to buy and hold cryptocurrency automatically. With the use of robotic scripts, information can be sourced directly from markets and used to execute trades based on collected data – all without any human interaction.
The concept of Robo-Trading is not entirely new, but it has never been applied to digital currencies until now. Prior to this, crypto markets were not mature enough to support this kind of technology. With crypto exchanges now global, having reached massive volumes, automated trading has finally started gaining momentum in non-fiat markets.
What to Look for When Choosing a Robo-Trader?
There are a number of factors to consider when looking at automated crypto trading platforms. Consider your own personal requirements and weigh them up against what these platforms offer. We’ve listed a few things that you should take a look at before making a decision:
Experience And History Of The Team Behind The Project
The team behind a robo-trader can tell you a lot about its effectiveness. See what past projects the team has worked on, how long they’ve been working together, and if there are any notable clients under their belt.
Compatibility With Your Trading Style
The most important factor to consider when choosing a trading bot is if its strategy matches your own style. Each robot has its own selling points – they use different strategies, look at different technical indicators and apply different fundamentals. Some of them even use machine learning taken from historical data.
Initial Deposit Amount Limit
Each trading bot has its own minimum and maximum limits for opening an account. This is because some bots work with larger amounts (from institutional investors), while others are designed for casual users building investment portfolios.
Fee structures will vary depending on what unit is being bought by which trading bot. Hence, certain bots will be better for certain types of coins. A coin may have a small fee attached to it, whereas a different coin with much smaller liquidity may incur a larger fee.
The most obvious way to decide if a bot is for you is to simply look at reviews. Not only will they give you a better idea of a bot’s quality and reliability, but user feedback can be very helpful in making a final decision.
Pros and Cons of Automated Crypto Trading
Before deciding whether to use an automated crypto trading bot, it is important to weigh up the pros and cons of doing so.
Huge potential profits
Auto trading bots are programmed to enter and exit trades very quickly. Their speed, along with a high frequency of trades, allows them to make the most out of market fluctuations that last for only a few seconds or minutes. Their quick reaction times ensure that losses are minimized during short-term periods when markets are moving sideways.
Trading bots require almost zero effort once they have been programmed correctly, working around the clock without breaks or holidays. Trading bots can trade your account into substantial profits while taking advantage of reduced market spreads due to low overall market volume at opportune times.
Control over security
An auto trader will manage your crypto portfolio automatically based on pre-set parameters. But what many don’t realize is that they can also allow you to automate other aspects of crypto security – including withdrawals, two-factor authentication, and trade alerts.
No need to watch the market
Whether you love or hate staring at charts all day, there are only so many hours you can sit in front of a screen! By using automated crypto trading, you’re free to do as you please while your bot trades for you.
Risk of implementation errors
Trading bots need to be implemented correctly. High-frequency crypto bots are very powerful tools when used correctly – but they can also be dangerous when not monitored regularly. Being aware of how your bot is performing is imperative to maintaining profit.
As mentioned above, implementation errors can result in substantial financial losses. Money can also be lost if a trading platform suddenly disappears or becomes unreliable. Many people still remember the case of BTC-E – one of the biggest crypto exchanges back in the day that mysteriously disappeared overnight.
Loss of control
With no emotions, trading bots are very effective at making practical trading decisions. However, in doing so, they can take away the fun of trading manually – as well as the opportunity for more unorthodox trades. For this reason, some traders prefer to use trading bots in conjunction with manual trades for maximum profitability.
High learning curve
While most automated crypto trading bots are fairly easy to set up and get running, their configuration can be difficult for beginners. While you don’t have to be a coder to trade cryptocurrencies successfully, it can help if you know a little programming. This is why experienced coders tend to make better traders than those who don’t understand code at all.
Different Kinds of Crypto Trading Bots
There are many flavors of Automated Crypto Trading Bots. They can be categorized into various types, some of which include:
Trend trading bots
These bots frequently buy and sell cryptocurrencies in order to profit from an overall trend. This is likely to be a more profitable strategy than some other bots due to the fact that they make use of an algorithm that assesses multiple currencies simultaneously. Trend trading bots are similar to scalping strategies where all assets, across different exchanges, are monitored. The bot only trades when set price patterns occur.
These bots automatically identify arbitrage opportunities across different exchanges and ensure that all trading fees are kept to a minimum. These types of automated crypto trading bots help traders gain profit from market inefficiencies.
Arbitrage bots can be programmed to gain a profit from a spread or a buy/sell difference between two markets. They do this by buying on one market and selling on another at the same time. The program will look for arbitrage opportunities 24/7. Arbitrage strategies make use of price differences between two cryptocurrency exchanges.
Coin lending bots
Coin lending bots allow you to loan cryptocurrency for a profit. Said profits are unlimited – but there is always a risk people may default on agreements. The coin lending bot will automate the process of finding the best interest rates, and store collateral coins in its own wallet. If a person defaults, the coins are automatically sold in order to recover any loss made.
Market maker bots
This type of crypto trading bot facilitates the creation of a market by placing limit orders. Once a buy order has been executed, the bot immediately places a sell order at a higher price and vice versa. This allows the bot to make a profit from the difference in buying and selling prices.
5 of the Best Crypto Trading Bots
Ready to pick your first Automated Trading Bot? Below, you can find 5 of our favorite’s, all with different focal points. Take a look for yourself and see which one you think is best.
CryptoHopper is designed with simplicity in mind. It’s a very easy-to-use automated Crypto Trading Platform, allowing you to set up simple or complex trading strategies.
Coinrule enables you to create and test your strategies with one click. Their platform provides a mix between manual trading and fully automated bots, making it an excellent platform for both beginners and experienced traders.
Trality is great for flexible, scalable automation. With the ability to build bots either graphically or by code, Trality lessens the gap between professional and amateur traders. Trality also prioritizes learning, with a focus on community, as well as back testing using historical data.
Bitsgap allows you to create your own fully customizable bot. It’s a cloud-based platform that lets you define strategy using an easy-to-use interface, without requiring any programming knowledge.
As one of the Best Crypto Trading Bots for Exchange Rates, Wunderbit enables you to link all your crypto exchanges and manage them from a single interface. It offers a wide array of features, including creating trading strategies using advanced technical indicators or even by creating custom graphical objects.
Trading Using Automated Crypto Bots
Automated crypto trading can be very lucrative for traders looking to streamline their trading process. By leveraging the power of automation, traders can spend less time monitoring markets and more time planning their next move.
These types of automated crypto trading bots vary in terms of features – some are designed for beginners, whilst others require a lot more skill to get the most out of them. But the verdict is clear – these bots can be very useful for people who want to multiply their profits!
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