Individuals, organizations, and companies are all looking for creative ways to improve profit margins and efficiency. One way of doing this is by automating manual trading strategies that have historically proven to be profitable. In its most basic form, the platforms used for most Bitcoin trading bots allow a user to configure variables that exist inside the scripts, which are typically thresholds for values generated by technical indicators. Other features found in trading bots might include features like copy trading, external signals, scripting languages, charting, and more.
An Introduction to automated trading software
In our review guide, we will take a look at our top 5 Bitcoin trading bots for 2020, features we like (or don’t), supported exchanges, and other features necessary for a day trader to grow new skills with trade automation.
What is automatic trading?
As previously mentioned automated trading has been around for quite some time and goes by several different names, including; algo-trading, high-frequency trading, system trading, mechanical trading, and so on. Automated crypto trading allows traders to recreate manual trading strategies at scale. Once a trader has settled on one or more trading strategies they can input those variables into a framework that allows computers to trade on their behalf.
It’s estimated that around 80% of all US stock exchange trading originates from automated trading systems like HaasOnline Trade Server. If you were trading on cryptocurrency exchanges prior to 2018 it’s more likely than not that you were trading against trading strategies deployed from our automated trading software as it were the only Bitcoin trading bot that was widely available to the public.
These automated trading systems vary in complexity and will generate signals from a single technical indicator or use several combined with other complex rulesets that can enable or disabled new trading strategies based on market movement. It’s wise to choose a platform where you are a little out of your depth and can learn to leverage more complex trading skills.
What are crypto trading bots?
Cryptocurrency trading bots are a byproduct of trade automation software, which execute manual trading strategies and are typically integrated into one or more cryptocurrency exchanges. Trading bots have existed in the markets like Forex and have proven themselves time and time again. With cryptocurrency, these trading bots are no different and are able to take advantage of markets 24/7 with an efficiency that cannot be matched by manual trading.
These trading bots vary in price, complexity, and expandability. We’ve taken the time to list beginner-friendly, intermediate, and advanced crypto trading products (like us). There are also free and open-source options available for the more determined and technically savvy traders.
How do crypto trading bots work?
Crypto trading bots are able to execute buy and sell orders as defined by their specific strategy or script. Typically these orders follow proven trading strategies that have existed successfully on traditional trading market and can include Ping Pong, Scalping, Arbitrage, etc. Once the trading bot has determined the buy and sell orders, they are then executed on the exchange’s API resulting in high-frequency automated trading.
Depending on which product you’re using, a trade bot’s functionality can be as rudimentary as setting limit orders or something more complex like performing triangular arbitrage. A trade bot will use a combination of technical indicators and other signals to calculate buy or sell orders for your automated strategy.
Once you’ve properly configured a trading bot with your desired strategy it is typically vetted by using a technique called backtesting. This uses historicals exchange data to determine if your trading strategy has the potential to be profitable or not. Traders also use another method called paper trading or simulated trading which uses real time exchange data. Backtesting and simulation both have their flaws, but generally it’s a good indicator of what to expect from your trading bot.
What to consider when choosing your trading platform
This is a priority for any serious developer of trade automation software or products. As a trader you’re trusting third-party software to not only do what was advertised, but also reliably. The majority of the companies listed have a track record of being able to reliably execute proven trading strategies on cryptocurrency exchanges. Look to make sure the companies are developing a product that continually receives updates, new features, and exchange integrations.
It should be no surprise to you that there are people and companies out there willing to do unscrupulous things to steal from you at any cost. Companies like Bitconnect had all the signs of a Ponzi-scheme, however, a lot of people were still lured into investing in the project and ultimately got rekt. You should be able to identify key people from the company and determine whether or not they’re creating trustworthy products for the long-term.
There’s two options when it comes to picking trade automation and that’s on-premise or cloud-based. With each option comes their own set of unique security challenges. Do you trust that the infrastructure housing all your trading data is secure and actively combats against bad actors? Do you have the ability to manage your own virtual private server and implement safeguards to prevent unauthorized access?
This seems like a no-brainer, however you still see it all the time with people posting about how they’re barely breaking even or from influencers saying they just closed a 9001% profitable trade. Be skeptical of companies or individuals claiming results that seem too good to be true, as these often end poorly. The number one rule for trading is to be patient with your trading methodology and refine it over time.
Advantages of using automated crypto trading
Crypto trading bots are able to analyze multiple cryptocurrency exchanges, with dozens of crypto pairs, simultaneously, and execute trades based off those generated signals with speed and precision.
Using brain power with manual trading for this type of scaled trading is not efficient and can lead to more missed opportunities due to the lack of ability to execute the desired trades. This is why trading bots are a far more efficient way to trade with scale.
It’s well known that computers are more efficient at producing a result for complex calculations in real-time. This is something that we cannot replicate as humans by placing manual buy or sell orders on exchanges from the result of processing dozens of signals at once.
While trading cryptocurrency, the markets never sleep and they’re extremely volatile making every second matter, especially since there’s much larger delays in executing orders than with traditional markets.
Reduce Emotional Trading
Using automated trading system can help to minimize or eliminate emotional trading. This is because you’re trusting your trade bots to execute known repeatable strategies that have track records of profitability in specific market conditions.
Trades are only executed once the technical indicator signals have been processed and meet or exceed the threshold, instead of relying on emotions to trigger buy or sells.
Create Trading Systems
Any profitable trader will agree that you need to stick with a crypto trading strategy that has higher odds of winning than losing. With automated bot trading you are given the tools to create trading strategies that win more often in your desired market conditions. Some platforms, like HaasOnline, will allow your Bitcoin trade bots to manage multiple strategies, so as the markets change so can your trading styles.
Using crypto trading bots allows traders to monitor markets and deploy automated trading strategies while being absent from the trading terminal. This allows competent traders to take advantage of crypto markets while they sleep or manage daily obligations.
Disadvantages of using automated trading
Depending on which cryptocurrency trade automation product you’ve chosen, you will need to learn the intricacies of that platform as well as have a basic grasp on trading fundamentals.
Some of the beginner focused trading bots offer great preset trading configurations, but don’t allow you to reconfigure with more advanced techniques as your experience increases. If you chose an advanced trading platform as a beginner then you will quickly realise you’re out of your comfort zone and may feel overwhelmed.
If you’re not capable of reading and understanding trading strategies such as crypto arbitraging or crypto scalping then you should reconsider leveraging trade automation until you understand the basics.
You often see trade automation being a maintenance free way to generate passive income and that’s just not true. Traders need to maintain active strategies by optimizing for current market conditions and overall market sentiment. There’s also other factors to consider like hardware or server maintenance, broadband connectivity issues, and other technical gremlins.
Security & Privacy
There’s been a recent increase in providers being hacked, which have resulted in compromised API keys, funds lost, and in some cases leading to massive exchange manipulation.
While using web-based cloud products like one of the ones mentioned above, there’s a much greater risk of compromising security threats due to the central hosting of thousands of trader’s account and API information being stored in a single location.
Using an on-premise self managed solution you run a smaller risk of being caught up in a large scale coordinated attack than with a cloud-based automated trading platform. This is partly due to installations being configured separately across different hosting platforms and networks.
- Never use platforms that require full account access
- Don’t allow withdrawal permission on your API keys
- Keep API keys confidential
- Use built-in security features like 2FA, IP whitelisting, and strong passwords
A trader’s privacy is also equally as important, some of the centralized trading platforms monitor user’s trade activity and strategies. This data is shared with third-parties and is often used to build marketing strategies or promotions to encourage desired behaviors.
The Best Trading Bot Of The Week
|Official Website URL||
|Support Types||Email, Chat|
|Minimum 1st Deposit||$250|
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Open FREE Demo: BitCoin ERA
|Deposit & Withdrawal Methods||Visa, Master, Paypal,WebMoney, Qiwi Walet, OK Pay, Perfect Money|
|Number of Assets||80+|