Cryptocurrencies are known to be very volatile. There are days when you can easily double or triple your investment, but there are also days when you lose everything in a second.
As the cryptocurrency market is still unregulated, it is easy for traders to rig prices and influence the market in their favor. This is why it is easier to make money by trading cryptocurrencies than to risk losing your money by investing directly in them. However, unlike the traditional stock market, the cryptocurrency market does not have a closing time; it is open 24/7, and it is rather difficult to trade manually throughout the day. After all, who has the time or the energy to do it?
Crypto trading robots
Crypto trading robots are computer programs that trade cryptocurrency for you automatically. They even work while you sleep and aren’t overwhelmed by greed and emotional doubt, which improves their accuracy. Estimates reveal that 70-80% of the global volume of cryptocurrency trading is done by trading robots. These bots can monitor multiple exchanges at the same time and perform trades based on predefined rules.
The most popular types of bots include arbitrage bots (they compare prices and give you marginal returns), trend trading bots (they study momentum and trends to determine the right trading strategy) and Lending bots (they allow you to grant loans in exchange for high interest rates), a little less known in the market.
Most bots are paid, and the more sophisticated ones can be quite expensive. But if you really want to trade cryptocurrencies, the robot fees are worth it. Also keep in mind that most bots aren’t perfect, and you’ll still need to monitor your account and make rule changes if necessary.
How do crypto bots work?
The robots analyze data, predict risk, and buy and sell assets based on their algorithmic calculations. They monitor the market and make trades when certain market conditions are met. Most crypto trading bots work by connecting directly to a cryptocurrency exchange platform . After the robot successfully connects, it starts monitoring the market and waiting for certain events or price changes.
As soon as it detects an event that matches its rules, it sends you a signal for you to act or makes a decision according to the rules you have defined or performs the required action itself (buy/sell). Some bots can even adapt over time and take historical data into account to make more accurate decisions.
The disadvantages of cryptocurrency trading robots
First, most only offer marginal returns, which makes them disadvantageous for experienced traders who can use their knowledge to increase their earnings. Secondly, they may experience multiple programming errors, like acting on old information, which can lead to huge losses. Finally, exchanges themselves tend to use bots for their trades, so in most cases you won’t be able to ditch them entirely.
Are Crypto Trading Bots Worth It?
It depends on many factors, such as your trading experience, how much time you have to trade manually, and the size of your portfolio . If you are a newbie trader, then a crypto trading robot can be a great way to learn the ropes. They can help you make more informed decisions and prevent you from making costly mistakes. On the other hand, if you are an experienced and knowledgeable trader, you will not find much use in crypto trading bots. This is because you already know what conditions to look for and when to trade.
How to start using cryptocurrency trading bots?
You can start using cryptocurrency trading robots in two ways:
Use a trading robot service
You can choose any of the suitable crypto trading robots in the market. These trading robot services integrate with multiple cryptocurrency exchanges and charge you a monthly or per-trade commission.
Here is a review on crypto trading robots , comparing between two well-known services on the market, Cryptohopper and 3Commas.
Create your trading robot
If you need full control over custom rules, you can build a cryptocurrency trading robot. You can either develop it from scratch or use a platform that lets you customize the bot to suit your needs. Either way, you need to schedule it according to your strategy.
This method will require a substantial investment from you to be able to develop your own high-performance trading robot.
Although not perfect, crypto trading bots can help you trade better and better understand the trading world. Bots are a great choice for those who can’t spend 24/7 inspecting and tracking market activity.