Crypto Trading Bots 2023: Automated Money Machines?
A dream many people have would be to find a money printing machine and never have to work again. However, we all know that’s not possible. Still, driven by our desire to make the amount of money to never have to work again we look for high yield investments.
Crypto is one of these and many who enter the space are looking for a quick way to get rich. This results in people actively trying to trade the markets and while some may be profitable the majority lose money. But despite that more and more people want to do it. However, a problem for many is the lack of time to sit staring at price charts. This is where cryptocurrency trading bots come in.
What are Crypto Trading Bots?
Simply put, crypto trading bots are algorithms programmed to follow certain crypto trading strategies. The simplest follow rules like “buy 1 bitcoin if the price hits $40,000”. The most complex search for different patterns and signals and then trade if all the criteria are met. To use crypto trading bots, you connect the trading bot to your exchange with something called an application program interface (API).
This means that the program has access to make trades on your behalf depending on what the code says. This is a reason you must be careful with trading bots and only use trusted ones. You don’t want a trading bot to withdraw all your funds due to a malicious code hidden within the bot. However, you can put API restrictions like limiting it to only be able to buy or sell, and not withdraw. You can also limit by IP address, this means that you can set it so that only orders coming from your IP address are put through.
A common misinterpretation that I also fell for is that crypto trading bots are only for short-term trading. This is completely wrong since the strategies you can use with bots are completely up to you. A common use case for long-term hodlers is a bot that automatically rebalances your portfolio. cryptocurrency trading bots can also be categorized based on the underlying crypto trading strategies they use. There are three categories.
First, we have signal bots. These are created by so-called experts and are based on their trading strategies and patterns. Another possibility is a signal bot created by a computer that has gone through mountains of data to distinguish different buy signals. The next feature of these bots is risk allocation, the trading bot analysis the risk and then decides how much to allocate to various positions. If you use signal bots you need to be careful since certain signals can basically be based on thin air, and it just happens that it has worked several times in the past.
The second category of trading bots is arbitrage bots. These are basically bots that take advantage of the difference in prices offered by different exchanges. If you didn’t know, the prices shown on Google or CoinMarketCap are only the average price of what is offered by different exchanges. The price difference from exchange to exchange opens the potential to make money by buying lower on one exchange and selling higher on another.
However, it isn’t as easy as it sounds. First of all, to find major differences you need to either look at low liquidity coins or low liquidity exchanges. Large-cap cryptos tend to have about the same price on high-quality exchanges which makes it unprofitable to do this when trading fees and other fees for using a bot like this are accounted for.
This results in people trying to take advantage of low liquidity exchanges which can offer vastly different prices. But, naturally using low liquidity exchanges has its own risks which is why many only lose money on this. Arbitrage bots might sound like money printing machines but just remember that they aren’t really, otherwise everyone would use them to get rich.
The third category is programmable bots. These are simply trading on your behalf and you can program them to conduct trades based on a certain set of rules. It can either be simple rules like the Bitcoin example used earlier, or it can be based on multiple complex indicators. If you use these right, they can work just as you would do, with the difference being that they work 24/7.
Another excellent feature with these, that many sites offer, is the possibility of backtesting. Basically, it takes the strategy that you’ve created and applies it to historical price data. And while it’s said that past performance is no indication of future success, it’s still a safe way to start.
Crypto Trading Bot Pros and Cons
We humans must sleep. This results in us missing what’s going on in the markets for about 8 hours a day. This is a significant amount of time for crypto markets, and many of us would like to capitalize on what’s going on while we’re asleep. Therefore, using these tools, which work like automated trading tools, is a brilliant way to keep us in the game while not physically being there.
For active traders, bots can take a huge burden off their shoulders. Instead of having to stare at 10 different screens at the same time to find what you’re looking for, you can just have one laptop and let the bot do the searching. If you have the bot set to do exactly the same thing you would do then what’s the difference if you do it or if you let the bot do it? And believe me, the bot will be even better than you would since we humans tend to make more errors.
One of those primary errors is that we have emotions. Many times, we do irrational things, especially when struck by fear or greed. Bots, on the other hand, are cold-hearted and only follow the instructions we gave them, which for this particular purpose is perfect.
On the con side of this list, there is quite a lot to talk about. To start with, signal bots are something that Guy commented on in his Coin Bureau YouTube video on trading bots with these words “They scare the bejesus out of me”. This is because many tend to be scammy and simply don't work.
Just think about it, if these so-called experts truly found a strategy that works like a money-printing machine, why would they have to sell it for a few hundred bucks? If you have a way to make unlimited money, I doubt if you need to sell it for insignificant amounts, not to mention how pure a heart you need to have to even think about revealing your unlimited money hack. Therefore, be careful when you see these bots being advertised as a guaranteed way to make money.
Many trading bots promise returns that are too good to be true, and they normally are, so it is good to have a healthy dose of scepticism. More people have lost money using trading bots than have profited as the high return promises also come with high risk and more accounts are blown than fortunes made.
Then when you do use a trading bot there are a few additional points of concern. To be able to use these you need to keep money on an exchange, and those of you who follow Coin Bureau on YouTube know that Guy is not a fan of this. This is because exchanges can be hacked and if they do there’s no guarantee you get your money back. On top of that, you’re giving a coded algorithm access to your exchange accounts. And yes, as mentioned earlier you do have the opportunity to restrict certain features. However, I myself fear that these may not be enough if you happen to use the wrong bot.
Lastly, one thing that’s overestimated with trading bots is how passive they are. While they may sound like passive machines that you never need to check on, they’re not. To be profitable you’ll have to constantly tweak your strategy and actively follow what’s going on. It’s not enough to once set it and then forget it. Don’t get me wrong it’s not like you have to sit and stare at a screen 10 hours a day, but you have to be alert.
Kucoin is one of the top crypto exchanges out there. According to some studies, ¼ of all crypto holders have an account on Kucoin. Being an excellent exchange, they offer a lot more features than just buying and selling, including trading bots. These bots include the following features; spot grid, DCA, futures grid, and smart rebalance. These features are extremely popular since on Kucoin there have been almost 3.4 million bots created, and the growth is not slowing down.
The reason I included Kucoin in this list is because if you’re already using the exchange and are interested in trying a simple bot to ease your workload then Kucoin is perfect for you. It’s extremely simple to set up and it shouldn’t take more than a couple of minutes if you already have funds available on the exchange.
On top of that, it’s completely free to use these bots which is another reason this is perfect for beginners. You can also simply choose from existing trading bots and mimic those. However, be aware of falling for the trap of seeing a bot that made thousands of percent in one month. For those of you who do not use Kucoin, or want to learn more about it, I would recommend heading to the Coin Bureau YouTube channel and watch the video where Guy offers a guide on how to use Kucoin.
Shrimpy is a social trading platform that offers a variety of unique features like backtesting, automated trading, tracking, and much more. However, what Shrimpy doesn’t offer is signal driven trading or arbitrage. It’s more of a tool for long-term players who want to make it easier to manage their portfolios.
This is done by the features of automated trading and portfolio tracking. You can set up Shrimpy to automatically rebalance your portfolio along with dollar-cost averaging into a certain crypto. This is something that many long-term investors do and in crypto, it can be quite time-consuming to rebalance your portfolio when altcoins can soar hundreds of percent in one week.
The good thing with this tool is that it allows you to have most of your coins in cold storage. Instead of keeping all of your portfolio on the exchange you can keep smaller amounts since that will be enough to rebalance your portfolio. Shrimpy also supports over 30 different exchanges and wallets so you should find some that you’re comfortable using.
Another tool that Shrimpy offers which can work great for the lazy investor is copy trading. Shrimpy has a socials page where you can track both people and popular funds. You can even set it up so that you automatically copy the trades they do. This allows you to kick back and relax while others do the work. However, remember that the trader's past performance you see on the socials page doesn’t mean they’ll make the same amount next month, so be careful, and I wouldn't trust too much of your overall portfolio to a stranger's hands.
When it comes to pricing Shrimpy offers three different plans. For the majority, I would recommend the starter plan, which will set you back $19 a month. This includes everything I mentioned earlier, and paying for the higher plan will be unnecessary for many. The professional plan is $79 and you won’t get much more compared to how much extra you’re paying. Basically, you’ll get the opportunity to link 10 exchange accounts instead of 5 and manage 5 portfolios instead of three. The last plan is an enterprise plan, naturally for businesses in need of a service like this. The cost for the enterprise plan is $299 a month.
Coinrule has been in the game since 2017 and it was founded by a group of crypto and trading enthusiasts. Their team has impressive resumes and there shouldn’t be any issues whether they know what they’re doing or not. The platform is suitable for those who trade according to well-known plans.
This is because Coinrule offers trading based on your selection from over 150 trading rules. This includes trend trading, where you’ll automatically sell coins in a downturn for coins that are trending higher. This has, according to their calculator, made their fictional investor a whopping 200% gain in just 12 months.
However, when compared to the profit of just buying and hodling Bitcoin for 12 months which is about 300% (on the 28th of September) it sounds less impressive. This is not because Coinrule is bad it’s just rather because hodling tends to win over short-term trading. But if you’re interested in automated trading based on different rules then Coinrule might be something for you.
Coinrule supports many reputable exchanges including Coinbase Pro, Binance , and Kraken. The pricing on Coinrule isn’t bad either. If you only want to try the service then lucky you, Coinrule offers a free plan for those who trade under $3,000. Then after that, you’ll have to pay $29.99 until you break the $50k mark from where you’ll start paying double the amount. However, I would recommend you start with the free plan and see whether you can turn your trading strategy into a comfortable profit.
I would argue that Cryptohopper is one of the most comprehensive platforms out there. First of all, they support almost all reputable exchanges. Secondly, from Cryptohopper you’ll find every bot you’ll ever need, including arbitrage. This makes it a perfect tool for more experienced traders too since you will find valuable tools here.
Perhaps the most used feature on Cryptohopper is automated trading. With this, you automate your trading based on 130+ indicators and candlestick patterns. Most of these are perfect for traders using technical analysis. You can also set up multiple indicators to be tracked at once to further improve your strategy. If for some reason you don’t have a strategy then no worries.
In Cryptohopper there’s a marketplace where you’ll find top traders you can mimic. The good thing with Cryptohopper's marketplace is that pro traders found there have all had to submit applications to be allowed on the marketplace, this makes it a lot safer to use. Also, to test out strategies Cryptohopper offers both back-testing and paper trading so make sure to give those a try before heading into the market.
Other extremely popular features on Cryptohopper include the trailing features. This includes trailing stop-loss, trailing stop-buy, and trailing stop-short. The most used here is trailing stop-loss. When using this it will automatically change your stop-loss level so that it follows the upwards movement of the market.
This means that only if a coin makes a drop of 10% of the most recent price will you sell your coin, rather than the traditional way of setting a certain price on where to sell. This makes it possible for you to ride the upwards trend without having to worry about being left without any profits if you don’t manage to sell at the right price.
The only negative, but understandable thing about Cryptohopper is that you’ll have to pay to use all the features. However, there is a free plan available that doesn’t include automated trading, which I believe many of those who start using Cryptohopper will want and need.
To access this, you will have to pay a minimum of $19 a month. Luckily though, there is a free 7-day trial that I recommend you to use before making up your mind. Then if you need a shorter time frame TA or more open positions you’ll need to upgrade to either their Adventurer plan for $49 a month or their Hero plan for $99 a month. Be sure to check out our dedicated Cryptohopper review for more information about this platform.
Last but not least there is 3Commas which some of you might have read about in the Coin Bureau article about top crypto research tools. In the article, 3commas was chosen because of their good platform for paper trading, which I strongly suggest for those wanting to try out their strategies. However, 3Commas offers much more than just paper trading which is why it’s included in this list too.
**Important Security Notice** In December 2022, 3Commas users reported unauthorized transactions on their exchange accounts, resulting in unauthorized trading and there have been claims of stolen funds. At first, 3Commas stated that the result was likely a large-scale phishing attack that customers fell for, but further investigations show that there was a hack and users' API keys were leaked. 3Commas is recommending all existing users review and update their API keys.
3Commas has since upgraded its security, but users were left upset and demanding apologies after the 3Commas team handled the event very poorly and were criticized for "gaslighting" and falsely blaming users.
Despite the above-mentioned blunder, 3Commas is still one of the most popular and widely used crypto trading bot platforms in the world, which we explore in more detail in our detailed 3Commas review.
3Commas has largely all the same things Cryptohopper has including automated trading, trailing orders, a marketplace, and the already mentioned paper trading. Therefore, for many of you, it might simply be more of a personal preference on which one you want to use. However, if you ask me, I would personally trust 3Commas a bit more.
This has to do with a few things. First, 3Commas has received funding from Sam Bankman-Fried, the founder of FTX. Secondly, the volume on 3Commas is extremely impressive with $22.5 billion in monthly volume. Thirdly, their supported exchanges list is a bit longer than what Cryptohopper has. And finally, there is one especially useful strategy they have that is suitable for my own portfolio management.
The strategy I’m talking about is stepwise profit-taking. This means that the bot will automatically sell a certain percentage of the coins when certain prices are met. I like this because it allows me to take profits while still being in the market if the bull market continues. I would also argue that this is one of the best ways to exit a crypto position since exiting all at once might leave you without those last hundreds of percent.
When it comes to paid plans 3Commas has a similar structure as Cryptohopper. There’s one free plan and three paid ones. However, the free plan on 3Commas does allow you to have one of each of their different bots, which gives you the perfect opportunity to try out the platform before paying. Then if you decide to purchase a paid plan, you’ll have to pay $14.5, $24.5, or $49.5. I again would recommend starting from the cheapest one and then deciding what you truly need. Luckily, 3Commas also has a 3 day free trial for their most expensive plan, the pro plan, so make sure to use that too.
Furthermore, another reason I didn’t mention earlier which makes me trust 3Commas more is that Guy from Coin Bureau has also used 3Commas. In fact, it’s the only trading bot platform he has used, and he was impressed enough by the platform to swing a sweet deal for our Coin Bureau readers. Users who sign up using our 3Commas sign-up link will enjoy an exclusive 50% off deal!
Crypto Bots: Conclusion
Hopefully, you now understand both the benefits and the risks of using an automatic cryptocurrency trading bot and how they can help with your crypto trading strategies. As with everything in life you need to address the risk/reward ratio. Using scammy bots from unreputable people doesn’t have a risk/reward ratio you want to be playing around with. On the other hand, using an automated DCA bot or a bot that trades based on the same strategies you use when normally trading isn’t necessarily a bad idea if you use reputable sites.
Furthermore, about the sites, these are just my suggestions. There are many other sites available and for the most advanced out there you can even program your own bots if you know how to code. The sites I listed here are simply reputable and have good and user-friendly interfaces which makes them suitable for beginners.
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And lastly, all these sites do offer much more than what I’ve listed here. So, before using any of these I recommend you head on to their websites to do some further research on whether the site truly offers what you’re looking for. After that, it’s simply to set up your bot and have a good night's sleep knowing you won’t miss any great market movements.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
Frequently Asked Questions
The resources mentioned in this article are a great place to start. These crypto bot companies are suitable for those looking to create a trading bot regardless of skill level. Alternatively, if you already have a trading strategy that you would like to automate, you could look to hire a coder from a site like Fiverr, Upwork, freelancer.com or MQL5.com. There are also programming services for hire which can be found at sites like quantmotion.com, EMET trading solutions, and tradingcoders.com
This is largely dependent on what you are trying to achieve with the trading bot. Many trading bots act as a trader’s assistant, scanning charts, looking for setups and notifying the trader, acting as a second set of eyes. Bots work great for simple dollar-cost average buying and selling strategies and portfolio rebalancing. Where trading bots tend to fall apart is when they are created to try and follow a highly complex trading strategy, or if an inexperienced trader does not know when to deploy a bot during adequate market conditions.
Trading bots tend to get into trouble when people think they can use the bot as a 24/7 money printing trading machine. Markets change and fluctuate, a skilled human trader knows when to deploy, or not deploy certain trading strategies, as no single trading strategy can work in all market conditions. Trading bots are unable to do this and will try and deploy the coded trading strategy regardless of if markets are going up, down, trending significantly, or consolidating which can seriously damage a trading account. Trading bots can be a powerful tool for experienced traders, but dangerous in the hands of beginner traders. We go into more detail on this topic in our article: Crypto Bots-Scam or Brilliant Trading Tools?
Yes from a legal perspective. As long as you are adequately filing taxes, trading bots are treated the same as manual traders in the eyes of the law. Though many trading brokerages do not allow the use of automated trading systems.
Crypto automation is the act of automating a trader’s crypto trading. This can be done through coding your own piece of trading software or using one of the plug-and-play automation solutions mentioned in this article. A trading strategy can be semi-automated or fully automated, and the strategy can be as simple or complex as the trader needs, depending on the skill of the person writing the code or the robustness of the automated trading platform selected.
Using trading bots is considered very high risk, just as trading is. There is a reason that trading platforms always have warnings stating that trading is high risk, and you should only trade with money you can afford to lose. Crypto trading bots are often considered even riskier as they are often used by users who have no previous trading experience, do not have the experience to know when to, and when not to run the bot, and have false confidence due to misleading advertising that crypto bots have a high success rate, which is untrue.
There is a sobering statistic that shows 90% of traders will lose 90% of their funds in 90 days, this is known as the 90/90/90 rule. History and statistics show that trading is extremely high risk with a high likelihood of losing funds, which is why trading platforms need to legally state that there is a good chance you will lose money trying to trade.
How you can minimize your risk is to use a trusted auto trading site such as the ones mentioned in this article as opposed to trusting a private coder found online who may not be skilled enough and may make mistakes that could make your bot not perform as intended, or could write in a back door clause for nefarious purposes. Before running a bot on a live account, it is always a good idea to run backtests to see if the bot works as expected and run it on a demo account to see how it performs before letting it loose with real money.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.