Cryptocurrency trading bots are little pieces of automated software tools that are used to execute trades on behalf of a trader. Recently developers have started using Artificial intelligence to power trading bots to make them smarter and more efficient. Traders have reported experiencing huge success when they deploy trading bots.
Trading bots are not new and previously they have been used by financial firms and markets to trade commodities, equities, and currencies. But the use of trading bots started in the Forex exchange sector around 2005. lately, trading bots have made its way into the Cryptocurrency sector and they offer a lot to crypto traders. Some of them are free while some are paid for and very sophisticated. There are different types of trading bots and all of them do not offer the same functionality and profitability. Some are more profitable, while others are easier to use. There are also open-source versions that can be downloaded on GITHUB and modified by developers. These bots would help you execute the most basic and advanced trading strategies in the world.
Evolution of cryptocurrency trading bots
When Bitcoin came around some 11 years ago there was nothing like a cryptocurrency bot. However, as traders started rising in numbers people thought of ways to outsmart others and so they began introducing trading bots into the cryptocurrency market. Over the years Cryptocurrency bots have continued to evolve in functionality and sophistication and today you would be at a very big disadvantage if you do not use a trading bot for cryptocurrency trading.
They operate by taking price data from the exchanges and then use the price data to calculate and estimate a range of indicators. After that, the trading bots would execute orders on behalf of the trader. Some advanced Trading bots also have built-in simulators and it gathers historical market analysis and data to test various trading strategies before implementing. Some of the advanced trading bots are cloud-based and operate 24/7, which means a trader does not need to keep their computers on every time because the bot is cloud-based and would work for you throughout the day.
Today some of the most popular and efficient cryptocurrency trading bots include
If you want to achieve success in crypto trading by doing the minimum then Crypto trading bots can do the trick for you. Trading bots helps people minimize work while maximizing returns
Like mentioned earlier, there are some free trading bots out there but most of the free bots are not so efficient.
Difference between human traders and bots
Humans are emotional and when it comes to trading money sometimes we do not make the right decision because of our emotions. This means our emotions can make us either make a good or bad decision and in most cases, we end up making the wrong decision which can ruin our potential profitability. Sometimes people don’t understand when they need to sell and make a profit and sometimes we just panic and dump everything. Whereas a well-programmed cryptocurrency bot is the opposite of humans and employs a rule-based approach. This approach means a bot would in most cases make the right decision and consistently make a profit over time. A well-programmed bot adopts a slow and steady approach thereby outdoing human traders over time
Types of Cryptocurrency Trading Bots
There are basically three types of Cryptocurrency Trading Bots and it is important to understand how they work before deploying them.
The cryptocurrency market is known for three things: Volatility, devastating bear markets, and huge bull runs. A trend system of the trading bot would capitalize on these three factors responsible for price moves. It would keep a trade open until a counter trade signal is giving and helps the trader make money off the move between these three factors. This type of bot simple sticks with the price trend and buy when the price goes up and sell when the price goes down. This strategy might sound very easy but very difficult to implement by a human due to emotional factors. Over the history of trading bots trend, bots are known to be the most profitable bots.
DCA is an acronym for Dollar-cost averaging and it works by spreading your buying over time. One of the biggest benefits with this system is that it evens out a lot of the market volatility by averaging your entry price but it could as well mean diminished returns. With this type of bot, you have to keep on putting in money because if you don’t your cryptocurrency would never grow.
When the price isn’t trending down or up it often moves forward or backward thereby creating a range. These ranges are known as consolidated periods and they can take away the profits from Trend Bots. A scalp bot is programmed to consolidate and sell off if the price gets too far above a particular set point. It is also programmed to buy if the price goes too far below. This means the trader would have to manually enter take profit points with the scalp bots.
The scalp bot does make money for traders but there is certainly more money to be made from the trend bot.
Advantages of the Cryptocurrency Trading bots
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