A crypto trading bot, or robot trading, has received a lot of attention from crypto traders over the past year. The possibility of automated trading signals, 24/7 trading, and almost 100% uptime is enough to make any serious crypto enthusiast curious. There are many competitors that supply trading bots for bitcoin and cryptocurrency, and the quality of the players in the market can vary greatly.
Robot and algorithm trading may sound very alluring, but you should always consider very carefully whether such a product will be suitable for you and your trading style.
What is a bitcoin trading bot
Briefly, such robots are computer programs that generate buy and sell signals for bitcoin or other cryptocurrency. Also known as trading algorithms, these programs can be linked via the API to your user account on a stock exchange or trading platform. The idea is to automate your transactions to the greatest extent possible, eliminate human and subjective decisions, and exploit opportunities in the market that arise when you yourself are not present – for example, when you are sleeping or at work.
Choice of bot
Cryptotrader.org, BTCRobot.com, Cryptohopper.com, Gimmer.net, Gunbots.com, and at least dozens of other companies market their automated trading bots online. It is important to examine the potential benefits and disadvantages of the companies you are considering. Here are some tips to help you get started choosing the right supplier of trading bots:
- Make sure the bot is running in the cloud and not on your local computer. If you have an internet or power failure, computer crash or other technical accident, you will be very happy that your bot will continue to operate without interruption.
- Confirm that the provider offers a comprehensive range of technical indicators to ensure that you have the freedom to optimize your strategy.
- Make sure the provider also offers the opportunity to test the algorithm on historical course data. Never use an automated trading strategy until you have tested thoroughly.
- The supplier should also offer a simulated trading function. This is something you have to do, especially if you are new to the world of automated algorithm trading. This way you can test the strengths and weaknesses of your strategy at real-time exchange rates, but without risking your own money.
Gimmer offers a wide range of trading bots for cryptocurrency. You must purchase and keep a certain amount of their own token (GMR) to use the service. Image: Gimmer.net, March 6, 2019
Scalability, support and user groups
Your choice of supplier should also stand out in these critical areas:
- The vendor must provide API connectivity to as many reputable exchanges and trading platforms as possible. This is especially true if you are going to trade arbitration that exploits price differences across different currency pairs and exchanges.
- Explore the opportunities for support and customer service. If your bot forgets what to do or performs outside of what it is programmed to do, your capital could be in great danger. Good support and customer service and knowledgeable agents when this happens will be absolutely invaluable.
- If the provider offers a dedicated user group, you can often shorten the learning curve drastically to get started. It is even better if they offer a marketplace for buying and selling trading bots. This way, you might be able to buy or rent a winning trading algorithm instead of having to build one yourself.
You must always measure the cost-effectiveness of your trading fine. Make sure the fine will usually deliver more in profits than the inevitable costs that commissions, slippages, software costs and capital gains taxes will eat up. If you can’t program a consistently winning bot, there’s no need to use one either.
Is a trading bot right for you?
Maybe. Maybe not. It all depends on your trading style, size of capital, trading experience, and personal goals. If you have solid experience in developing trading systems, you can probably easily build or find a trading bot that suits you. If you know how to deal with software issues quickly or have good access to people who can help you diagnose and correct errors, it may be that robot trading is for you.
If you naively believe that making money from bitcoin or other cryptocurrency is a simple process that only requires the push of a button, you will probably be very disappointed. Successful trading is hard work. If it were possible for a beginner to buy a trading bot, let it trade for $ 100,000 and return $ 50,000 annually in profits, year after year, the market would gradually make such a strategy ineffective.
Advantages and disadvantages
- A automatic bot can make purchases and sales based on trading signals faster than you can.
- Taking advantage of the market being open 24/7. You can therefore trade based on signals that occur while you are not available to make purchases and sales yourself.
- You don’t have to be a skilled programmer to build a bot. It is possible to buy or rent potentially effective bots from other developers.
Artificial Intelligence (AI) will become very prominent in the bitcoin and cryptocurrency market in a few years. It is also conceivable that future robots will be able to optimize your trading signals in real time. AI can also help you choose an ideal mix of different trading strategies for your portfolio.
- As more people perform short-term trades based on automated strategies, the volatility of the cryptocurrency market can be reduced. This may occur due to increased market values and increased liquidity.
- Short-term trading has high commission and release costs.
- Lack of liquidity in the cryptocurrency market at certain times of the day.
- Risk of flash crashes. Ironically, these are usually caused by institutional trade penalties.
- Downtime at exchanges, technical problems with the cure, communication or computer problems.
- Cost of your chosen supplier.
- Need for continuous monitoring of the cure’s performance and reliability.
- You need to know how to effectively optimize your cure continuously.
- Hard work, education and self-discipline
- Education in systems trading, risk management, trading psychology, and a comprehensive education in technical analysis are a must for becoming profitable over time. It is not possible to build a simple system with simple indicators and press the “run” button, and then expect to generate positive returns every day. However, it is possible to become a consistently profitable bitcoin trader if you work hard to develop the skills and skills required and successful.
A final word of wisdom to consider when making the choice to run a fully automated bitcoin trading bot:
Never take your eyes off the screen completely. Ever. Don’t have 100% confidence in your trading bot, software or hardware. Market conditions can change quickly, and scenarios can potentially arise that your bot was never designed to handle. You will need to constantly monitor or you will wake up to an unpleasant surprise one morning. Always be ready, able, and willing to step in to override your fine when it encounters hypervolatile market conditions.