Understand What Are Crypto Trading Bots?
Crypto trading bots is a widely talked about topic for cryptocurrency users across the world. Crypto trading bots are most useful for people looking to automate their strategies and outperform their competitors. They are software programs that trade on exchanges automatically. Instead of entering every trade manually in the exchange, a bot can access data from the user’s exchange account and place trade automatically. The entire process is handled by computers that offer a high level of precision and speed that is impossible with humans.
These trading bots can buy and sell cryptocurrencies on your behalf. The bot generally tries to interpret the market data, examine price moves, and then react based on the rules that the creator of the bot has defined.
How Do Crypto Trading Bots Work?
A crypto trading bot communicates directly with the cryptocurrency exchanges and places orders based on your present conditions. It can offer exceptional efficiency and speed along with emotionless trading and fewer errors. Most crypto trading bots work in three parts:
- Signal Generators: Here, you can make predictions. Some data goes into this signal generator to create a buy/ sell signal.
- Risk Allocation: It is where the trading bot takes the sell/buy signal and says OKAY. It then decides how much it should buy. Should we allocate all your capital to the trade or only a portion? Should we average in, or should we purchase all of it in a go? Now it knows the direction and how much you want to buy/sell.
- Execution: If you want to buy a lot in one go, you do not wish to do so in one trade because you will unlikely get a favorable rate. You can hence dribble it in the market and get the best possible price. Therefore, execution requires careful consideration and planning while creating the bot.
What Are the Advantages of Using a Trading Bot?
Although there are many benefits of using crypto trading bots, let’s highlight the main ones here:
24/7 Trading: Humans can be highly skilled and experienced in cryptocurrency trading. Hence, they can achieve great success while trading. However, humans cannot work continuously like trading bots. Crypto trading bots can work 24/7, daily. They work even on weekends to catch the top trading opportunities while you sleep or hang out with your friends or family.
Makes it Simple to Enter the Crypto Industry: Entering the crypto trading industry is taxing for most people. Crypt trading bots can make starting more comfortable and straightforward as it assists novices with the trading basics. Newbies can learn by watching the bots do their job and benefit from the history of the market.
No Involvement of Emotions: Emotions are the cause of mistakes humans make while trading. Traders and investors make decisions based on emotions which generally results in losses. Trading bots eliminate such issues as they do not have emotions.
Speed and Efficiency: Crypto trading bots are highly efficient and can execute trades faster than humans. You may be the fastest and the best trader, but you cannot beat a bot ever. If the bot is coded correctly, it will execute trades more proficiently and faster than you could ever do it manually.
Saves time: Crypto trading needs lots of screen time, energy, and patience to become a successful crypto trader. The best method to save your time while trading cryptocurrency is using a crypto trading bot that will do the work on your behalf since it is automated. You will. Thus get more time and energy to do other activities.
How to Build Your Own Bot?
Do you want to reap the rewards of making a smart and multi-faceted trading bot do all the work for you? It is the right time to create a crypto trading bot. You do not need any coding knowledge for the same:
- Register a New Free Account: Make one with a known platform to help you create and invest using an automated cryptocurrency trading bot.
- Make a New Bot: On the dashboard, click on “Create new bot.” On most platforms, a box will turn up, asking you for a few specifics. They include:
- Bot Name: Here, you will have to name the bot.
- Bot type: Choose “Rule” as your bot type.
- Exchange: It is where you have to decide the exchange your trading bot will work on.
- Quoted Asset: Choose the “quoted asset.” It refers to the cryptocurrency against which will execute every trade.
- Color: Theme your trading bot using your favorite color.
- Choose Your Assets: In this step, you have to tell your trading bot what it must buy or sell. You should be able to choose from the list of base assets. Assets that are only available on your exchange will pop up in the list.
- Select The Parameters And Change The Settings: Now, you need to enter the fine details like how much capital it can use to trade or how much it can sell or buy. Here, you can also define how long your order can remain open before it gets canceled or the timing between making orders.
- Select Your Strategy: Choosing your trading strategy is the key to creating your crypto trading bot. By far, it is the most vital step. A few crypto trading strategies are more complicated, while some are simpler. Ensure to research which trading strategy is the best for you.
- Backtesting: Backtesting is another essential step of each bot-building interaction. It helps test how nicely your bot can do in the future. You can test your bot by running it against the last six or twelve months. Once your backtest gets completed, you will get all the vital information to find if your bot is performing its work well or not. This information includes gains, returns, fees paid, number of executed trades, and more.
If the bot’s results are not what you thought or if your bot is not working in a manner that gets you profits, you should then go back and add new strategies to complement your existing trading strategies or adjust your trading strategies.
Start the Bot Now it is time to launch the bot on the chosen exchange. Follow the instructions given there to launch the bot, and you will be good to go!
Are Crypto Trading Bots Profitable?
A crypto trading bot can help you make well-educated trades and remove the emotions that can result in losses. But, it would be best if you remembered that trading bots are software programs only. They cannot guarantee profits for investors and traders. They can also be of no use during the high volatility periods.
The Best Crypto Trading Bot in 2021
Below is the list of the best crypto trading bots in 2021:
Before you pick a trading bot click here to know about the crypto trading platform, or you should look for the following:
- The professional experience levels of the leaders of that company.
- Whether their algorithm is openly available and widely known to everyone or not.
- Does the company align its success with your success or not.
Crypto trading bots will go an extended way to enable traders and investors to interact with the cryptocurrency market. Moreover, they help get rid of emotions and stress linked with trading in the volatile market. Be ready to learn and stay open to the latest information. Successful crypto bot trading does not come with foolproof recipes. You will need to develop your methods and strategies without becoming tangled in the complexities.