5 Things You Need to Know About Cryptocurrency Trading Bots

Luckily, automation is gaining traction in the field of finance, including the cryptocurrency sector. In recent years, finance has been reaping the economic benefits of AI, and it has gotten to the point that the firms are achieving company-wide revenue growth of 19%, directly attributed to their AI initiatives, as per data curated by Digitalist Mag.

Moreover, FXCM notes how systems based on automation and algorithms are becoming popular in the markets. There are now tools that offer traders a completely hands-off approach, such as forex trading bots and more recently, cryptocurrency trading bots. Developed to carry out trades and complete transactions on behalf of human investors, crypto trading bots are slowly entering mainstream consciousness.

Indeed, cryptocurrency trading bots are legal. Moreover, as it has already happened on Wall Street, over time they will become the only way to perform cryptocurrency trading, and traders who spend long hours glued to a screen will become anachronistic over time.

How do cryptocurrency trading bots work?

As we know, more and more people want to invest in crypto coins, and most of them are complete newcomers. For such people, the cryptocurrency market offers special automatic trading systems – trading bots, that are about to make your cryptocurrency trading very convenient. 

Today we will talk about the advantages and disadvantages of bots, and will shortly discuss if you need to use it. 

Why are bots better than manual trading?

First, you need to know that a crypto trading bot can’t act without the person behind it – a trader sets all the important parameters (entry prices, target prices, stop-loss, etc.). 

But all the other activities bot can do on its own. 

The benefits of crypto trading bots:

  1. The absence of emotions.

As we know, emotions are one of the biggest problems of most traders. Sometimes you are afraid to open the position because you are not sure if it will bring profit? Or you are afraid to wait and close the deal for no reason? 

Yes, it is a common picture – and the bot doesn’t think like that, fortunately. It will follow your strategy, and that is it. 

  1. Bots don’t have weekends, they don’t sleep.

People are not programs – we need to sleep, to spend some time with the family, etc. 

And, again, the bot doesn’t need it. It can trade 24/7 without stops.

  1. Quick decision-making.

I think you used to trade manually, right?

Every time you see that it is time to close the deal, for example, you need to change the pages, set the amount you want to sell, etc. 

And, as we know, the crypto market is very volatile, and prices can change every second. 

A bot reacts quickly and sells/buys everything at the price you set before.

Now you understand that crypto bots are very good and convenient – they provide you the chance to use 99% of the trading potential, saving your time. 

What rules do you need to follow to use your bot successfully?

Watch your bot

As I told you before, bots can’t work without a trader. That is why you need to set all the parameters very attentively because your mistake will mean that the bot will trade incorrectly. 

Use Stop-Loss

This is important not only with automatic trading but for manual as well. You need to set stop-loss every time you open the deal because the bot can lose a lot of your money if the price will decrease and there will be no stop targets. 

Be aware of scammers

Unfortunately, the crypto market is full of scammers that exist to steal your money. That is why you need to check every service you are going to work with. 

As we know, there are many “trading bots” that offer you high profits just after you deposit the money to the account. This scheme is impossible to exist. 

We advise you to work with popular crypto bots that are developed by experienced software development services and reviewed by crypto platforms like Safe trading. 

So, trading bots can save your time and make your trading strategy very profitable and successful, but only when you control it.

Seasoned trader Janny Kul explains that crypto trading bots are essentially computer programs developed to buy and sell cryptocurrency at the right time, all with the goal of garnering profit. They work in three stages: signal generator, risk allocation, and then finally, execution.

The signal generator phase is when they use data to make predictions, and the risk allocation pertains to deciding how much to buy. Once a bot knows the direction and how much it should buy or sell, it proceeds with pushing through with the trade, which is the execution stage. But it should be noted that these three parts require their own distinct algorithms and optimization processes in order to perform optimal work.

What are the types of cryptocurrency bots?

There are four main types of crypto trading bots: arbitrage bots, market-making bots, technical trading bots, and profile automation bots. Arbitrage bots assess prices across exchanges and conduct trades to take advantage of discrepancies, while market making bots places several buy and sell orders to make a quick profit. Meanwhile, portfolio automation bots revolve around helping users achieve their desired portfolio instead of active trading. Lastly, technical trading bots are known to be preferable to conservative traders, as they use indicators and signals to foresee price movements in the market and generate profit.

Is using trading bots legal?

The idea of a bot doing the trading on your behalf may seem fishy, but the practice is actually often welcomed. CryptoCurrency Facts points out that since a thin market is bad for everyone, the more buy and sell orders there are on the books, the better, so bots are definitely encouraged. In both the cryptocurrency and stock market, bot trading is rampant, but not all brokers allow it. What’s more, anything that would be illegal in standard trading settings is also considered illegal in crypto trading. This means that you cannot exactly make or buy a spoof bot without causing trouble; you would want to prioritize making or selecting a bot that follows indicators instead.

Time and again, we get emails with the following question: “Are cryptocurrency trading bots legal?” Our short answer is “Yes, they are”. We must bear in mind that the mere fact of using a trading bot does not mean that you are “cheating”. Let me elaborate on this. Imagine that you buy a coin worth 100, and your strategy is to sell it for a profit of 3%. You can spend 8 hours staring at a screen, waiting for the price to rise by 3%, or you can leave your trading bot monitoring the market for you. The result of the transaction is the same: you simply automate your trading and save time. This is a very simplified example. Obviously, an advanced trading bot, such as Gunbot, allows you to run automated professional trading strategies.

When should cryptocurrency trading bots be used?

There are many advantages to using crypto trading bots, but it is recommended to use them when you want to avoid time-consuming tasks that are repetitive, achieve a high degree of accuracy, and have something that can keep an eye on the market 24/7.

Trading bots are not passive income generators

Casual traders should keep in mind that while cryptocurrency trading bots can make your life easier, it’s not the silver bullet to generating profit. Brave New Coin notes that you will actively need to fine-tune your selected bot if you want it to work the way you want it to. Keep in mind that they are not “a set it and forget it” solution — the best trader is still, of course, you.


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