The massive increase in the popularity of cryptocurrency over the past year has led to a large interest in cryptocurrency trading robots or "bots".
Some of these robots are offered as free software, whilst others charge a monthly fee to registered customers.
Whilst crypto trading bots are becoming increasingly sophisticated and demonstrate improving functionality, not all bots are created to the same standards.
Therefore, traders need to look for reputable auto trading software, which incorporate a number of different signals and indicators.
One has to be careful when dealing with such software though.
In our experience, many of the cryptocurrency auto trading bots are aimed at scamming users into signing up and depositing money into some scam broker's accounts.
For example, you should be highly suspicious of any Bitcoin auto trading bot promising guaranteed riches, that will make you money without any interferance.
There is also a risk of the software being faulty because of poor coding, resulting in traders losing their money. Don't let this deter you however as there are plenty of good bitcoin auto trading robots out there with verifiable historical returns.
Reputable crypto auto trading software enables traders to select from a broad range of trading strategies. Moreover, the most popular crypto auto trading software allows beginners to test automated trading strategies with a free demo account.
These demo accounts are greatly useful to beginners as they will allow the user to get a better sense of the signal indicators as well as those settings that work and those that don't.
Why Use a Bitcoin Auto Trading Bot?
Crypto auto trading software was developed as the answer to challenges presented by manual trading. Essentially, traders are always looking for the easiest ways to track price movements at cryptocurrency trading platforms.
Unlike other established markets, crypto markets are notoriously volatile, responding erratically to news and financial reports churned out by news outlets. Therefore, tracking market movements, as well as keeping an eye open for crypto news reports, can be tedious and exhausting.
We are all to aware of the situation in which someone wakes up in the morning only to be greeted by massive losses on their cryptocurrency portfolio.
All these challenges facing crypto traders make auto trading bots quite desirable as an effecient trading tool. Most of these cryptocurrency trading bots are able to trade a number of different cryptocurrency markets.
Of course, the automated software will mostly be effective on those crypto assets that tend to have more volume.
It is important to note that many of these bots will use CFDs as a way to trade cryptocurrencies, which means that the range of supported coins is narrower than with the regular exchanges.
The benefits of CFDs, however, is that they can be leveraged and they will allow the trader to also short the cryptocurrency asset in question
How Does Crypto Auto Trading Software Work?
Crypto trading software are essentially computer programs built with mathematical algorithms.
The software can be basic or sophisticated, but it is only as good as the underlying code that is programmed into it by the developers. By interacting with the APIs of financial exchanges the software then interprets the info and trades on behalf of the software user.
The bot is pre-programmed to collect data about market actions, including changes in price, the volume traded over a specified time and the kinds of trading orders made on the various exchanges.
Of course, the most important characteristic of the bot is that it will trade 24/7 and will monitor the markets at times when the trader is away from his accounts.
Similarly, it can’t think for itself and is not emotional. Emotions tend to be one of the biggest shortcomings of human traders. Traders could be in a position where they will give up a lucrative position becuase they let fear of greed kick in.
The way that an auto trading bot is set up is that the trader will select the parameters that they would like the bot to trade with. These parameters are usually in the realm of technical indicators and trend analysis.
The trader will then instruct the bot to trade on these rules based on numerous conditional parameters. For example, if there is positive momentum behind the coin, the bot will enter a long position. If there appears to be a reversal the bot will close out the trade.
Trading logic can be simple, but executing trading logic and handling the various permutations of how events can play out can be complex. Let us take a look at an example of a trading platform that makes bot development easy.
If you are interested in exploring trading bots further, I recommend checking out 3Commas, you can learn about them in our Trading Bots article. Feel free to take advantage of our 3Commas sign-up link, which gets you a 3-day free trial and a 50% discount if you choose to sign up.
Cryzen Algorithmic Trading
The Cryzen Trading Platform is essentially an online bot development environment. Everything from data to machine learning models are put at the fingertips of users.
Cryzen will pull price data from a range of different exchanges including but not limited to: Binance, Okex, Gemini and Coinbase Pro. They will also pull data from a range of social media sources and even from the blockchain itself. Users can then utilize this data on the Cryzen platform to test particular indicators and trading strategies.
Based on the results of the backtested strategies, a user can decide on whether they would like to implement the algorithm in a live environment. This will, in essence, be their own bot that they have coded that they can adapt based on the ongoing returns.
While crypto trading bots are quite a complicated piece of software, they are no doubt quite useful in chasing returns in an automated fashion.
They are helpful as they remove the emotional aspect of trading and leave one with a purely statistical and calculated strategy. Elimination of human emotions can prove profitable in the long run.
It is also important that you make sure that you are not being presented with a cryptocurrency scam. There are numerous "trading systems" that claim to merely be money making machines capable of being engaged with the flick of a switch.
As long as you understand the mechanics involved with a cryptocurrency trading bot and you are able to implement the most profitable signal indicators then robot trading can be worth your while.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.