BUILDING A CRYPTO TRADING BOT

Similar to gold prospectors, cryptocurrency entrepreneurs require high-quality equipment and reliable instruments in order to obtain and sell digital money. In this regard, the most frequently asked questions in this context are: “what is a crypto trading bot?”, “what are the best bots for Bitcoin trading?”, and “how can I make my own cryptocurrency trading bot?”

Lucky for you, this article has the answers: a brief summary on the first two topics, and a comprehensive review on the latter one. Have patience and read carefully to learn how to create a profitable crypto trading bot.

DIGITAL CURRENCY: REAL DEAL OR ZILCH?

This article excludes the peculiarities of mining, such as the choice and installation of equipment and tips on increasing the performance of your farm. Instead, it focuses on trading cryptocurrency using its inherent volatility to make profits with the help of a custom-built trading bot.

Considering the hype that surrounds digital cash in recent years, you must have heard at least about Bitcoin. If you have done some research, there is a great chance that you are also familiar with its alternatives: Etherium, Litecoin, Ripple, Stellar, Verge, and many others. Digital cash became so popular that even Facebook has launched a new cryptocurrency, Libra, as part of the ambitious plan to create its own financial system.

Chart showing market capitalization of top ten cryptocurrencies

The real beauty of cryptocurrencies is that you do not need to be a technical expert in order to buy and sell them. Even if all those blockchains, hashing algorithms, and mining rigs sound like voodoo magic to most people, you can still get a digital wallet and engage in buying and selling digital money on cryptocurrency exchanges, such as Binance, Coinbase, Kraken, and others. The success of trading will be largely determined by your financial skills and experience, not computer knowledge.

What makes cryptocurrencies an attractive trading asset is their volatility. Their prices tend to fluctuate heavily, allowing traders to employ various strategies and buy electronic cash when the price drops, and sell when the price in on its peak. The trading strategies may involve both long and short trades, building an investment portfolio, market trend analysis, and other activities typical for trading valuables, such as goods, stocks, contracts, etc.

Chart comparing price volatility of various assets, including cryptocurrencies

MONEY MAKING MONEY: HOW TO INVEST IN BUILDING YOUR OWN TRADING BOT

If you plan to become a full-fledged market maker and take on professional cryptocurrency trading, you will have to invest in a specialized automatic trading program. Though some users choose free or paid bots from third-party developers, or even open-source projects from Github, the outcome of their activity may be unpredictable, and their performance – questionable.

In order to use computer algorithms for trading cryptocurrencies with maximum efficiency, you need a custom solution. It involves significant expenditures, but consider them as investments in high-quality equipment that is essential for successful work, and will eventually cover the expenses.

How much resources does it take to develop

Your time is valuable, so let’s not beat around the bush: there is no fixed price for building a crypto trading bot. There are too many variables – factors that directly influence the amount of time, money, and specialists required for the development. Thus, you need to carefully select the desired features even before you find a good team of developers who know how to make a trading bot.

Let us list five factors that define the resource costs of developing a cryptocurrency trading bot:

  • Number of implemented functions. There is a direct proportionality: more features require more time, people, and money. The general functions of a bot are listed in one of the previous sections, so feel free to revise them and consider their necessity for your particular case. For example, you may exclude reports, a scheduler, and market tracking from functionality in order to save resources.
  • Supported trading platforms and currencies. You may try and cover as many platforms as you can or only a couple of selected exchanges. Alternatively, you may focus on a single, most promising crypto exchange, for example, Binance, Bittrex, Bitstamp, Coinbase, etc. In a similar manner, you may decide to limit cryptocurrencies supported by your automatic trading software. Thus, it will be faster and cheaper to make a bitcoin trading bot than a complex program that additionally supports various altcoins.
  • Number of preset strategies and customization options. Again, your software may be focused on a single strategy; however, it will have a much higher potential if it supports several types of activities with cryptocurrencies. These activities define the type of a trading bot and will be described in more details later in this article. Besides, a properly designed trading bot should allow creating, testing, and implementing user strategies. Using this functionality, a user may perform manual fine-tuning of the bot’s behavior by adjusting strategy parameters, conditions, and rules.
  • Quality-of-life improvements. These are minor functions that may be easily omitted for the sake of reducing costs. They do not have a direct impact on the operation of the bot, and merely improve the convenience of users. For example, these optional features include a notification function and a sleek UI design.
  • Used technologies and availability of specialists. These two factors are tightly interconnected, so it is better to review them as a single unit. Existing cryptocurrency trading bots are mostly (but not exclusively) written in Python, PHP or Javascript (namely Node.js), so you will need a team of skilled developers that specialize in these technologies.

If such specialists are not available or too expensive in your location, you can outsource the development to foreign developers who know how to make a trading bot for cryptocurrencies. Thanks to outsourcing, you can save a significant amount of money, because the hourly wage of software developers, for example, in Eastern Europe or Asia is three or four times less than in the USA.

Development process and technology stacks

As it has been mentioned above, the top three technologies for developing a cryptocurrency bot are Python, Javascript, and PHP. These programming languages are supported by ccxt – the most popular library for cryptocurrency trading, which will be an advantageous addition to the technology stack equally required to create a simple bitcoin trading bot or a sophisticated automatic trading program that can handle multiple types of currencies and exchanges.

Though it is a matter of personal preference, Light IT experts would recommend using Python for a trading bot due to its numerous advantages. Our team prioritizes this programming language and accumulated considerable experience over 10+ years of providing high-quality software solutions for various challenges.

You can use the information from one of our articles to learn how much it costs to develop a custom software program. Alternatively, contact us, and our specialists will estimate the cost of your project based on your specifications, whether you wish to make a bitcoin trading bot using Python or create a multifunctional software suite that supports multiple cryptocurrencies and exchanges. Our team will also suggest the optimal technologies, create a detailed strategy, and estimate the product development timeline.

Three metal cryptocoins and a SD card

TWO PATHS TO PROFIT USING YOUR CRYPTOCURRENCY TRADING BOT

After your crypto trading bot has been developed and tested thoroughly, it’s time to use it for profit. If you have the strategies with proven effectiveness at your disposal, a cryptocurrency wallet, and a starting capital, you may use the cryptocurrency bot for its primary purpose: speculating on the difference between buy and sell prices.

However, your bot can make money in another way if you wish to share it with the world. This approach implies selling your software, part of its functionality, or using other monetization strategies. This way, a trading bot may bring two separate streams of income: from its trading activity, and from its purchase as a marketable software product.

There are several ways to monetize software, so you may select the strategy that fits your concept. Keep in mind that your target platforms do not include Android or iOS devices; that’s why certain strategies can be used with limitations. Here are the most common methods to make money with your program product:

  • Paid software. This strategy is the most obvious: users pay money to download and use your program. It is a one-time payment to get the whole functionality of the software product.
  • Subscription plans. This strategy is more flexible, since users may select the plan that suits them best, and do not have to pay for the periods when the software is not used. As a rule, subscriptions with longer periods are more beneficial for users: for example, a subscription for one year is significantly cheaper than twelve subscriptions for one month.
  • Advertising in a free or paid program. Though this model really shines in mobile apps, it may also be used for crypto trading bots that comprise a web GUI. You may use this model separately or in combination with other profit-making methods, for additional income.
  • Freemium. You may use this model to keep your software free with limited functionality and charge users who require advanced features. There may be a single payment to unlock a “Pro” or “Premium” version of the software with all features or may be separate prices for every additional function. The latter variant requires a modular structure of the trading program, so you should consider it in advance while designing your software.
Four types of cryptocurrency presented as metal coins

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