Automated trading platforms powered by configurable crypto trading bots are on the increase. Which are the advantages and disadvantages of those platforms, who are the market leaders – and should you use one?
The slow maturation of their 24/7 global crypto markets, the rapid development of new technologies, and also much-improved crypto user encounters are a number of the most popular trends driving the increase in automatic crypto trading platforms. In international financial markets, approximately 75% of trading is algorithmic, and the crypto markets are no different. The last 18 months have seen a gain in the number of automated crypto trading platforms which use bot-driven cryptocurrency trading strategies.
These crypto trading bot platforms unite the benefits of bots (automated, algorithmic 24/7 trading) using multiple customization options, user-friendly interfaces, along the ability to maintain some human supervision.
That gives today’s crypto traders the capacity to make nuanced, 24/7 trading approaches that can be corrected and refined as needed. There are currently a huge variety of platforms that cater to the various needs of their diverse crypto trading and investor community. Some programs are designed for seasoned traders and offer a selection of trading bots that may be linked to some index and connected to the leading crypto exchanges through API. These platforms make it possible for traders to create complex automated approaches that can be backtested against historical crypto market data.
There’s also a new wave of platforms developed for less experienced dealers, and also those crypto investors trying to create a return out of their crypto assets without the strain of needing to make trading decisions themselves. These platforms provide replicate trading and social trading, and automated crypto trading according to algorithmic strategies. With the increasing interest in DeFi and the return farming happening, crypto consumers are now able to place their resources to operate to create a return. Whether you are a passive investor, or even an active trader, there are many choices available, in addition to their own risk profile.
This report will look at some of the very popular crypto trading bot platforms available on the industry.
What is a crypto trading bot?
A trading bot is a bit of software that employs an API to interact with a user’s exchange account and automatically execute trades according to its own interpretation of market information. The bot will perform a trade when market conditions meet a set of programmed standards. Trading bots can interpret and combine conventional market signals like orders, volume, cost, and time, with technical analysis signals like moving averages, Bollinger bands along with the Ichimoku Cloud, and increasingly, along with other things like social media sentiment.
If I use a crypto trading bot or a platform?
There are lots of simple, off the shelf automated crypto trading bots out there for sale, subscription, or free download. Their value proposition is simple. They give dealers the ability to automate their own trades, and then wait for the bot to make a profit. This isn’t necessarily always the case, however. When these bots can be connected to a user’s exchange account and may implement buy/sell orders automatically, the user has limited control within the bot’s strategy which makes them useful for sophisticated traders. These bots provide a prepared to move’blackbox’ alternative with few alternatives for additional customization. The user needs to rely on the programming abilities and approach of this often anonymous creator. The quality of the trading robots varies from great, to fair, to bad, to the numerous scams that are blatant. Discovering which crypto trading bot has the potential to function as intended, which are able to develop a profit, and also which are failed experiments, or even worse, are intended to steal the user’s cash is an overwhelming job. Though a completely free crypto trading bot appears to be a fantastic bargain, free does not mean quality, and also what the very best crypto bot will be, will vary based on individual user’s needs and experience.
Another issue is that off-the-shelf bots are restricted in scope and do not think about all the things which may produce a market move. They can be caught out with a variety of unexpected facets like a flash crash, exchange hack or even major news event. Events of this sort make the crypto markets that the most volatile on earth, and with no human supervision, these robots can create unprofitable transactions that result in consumer losses. As a result, at 2020, the trend is towards customizable trading platforms that give traders granular control of their trading strategy with automatic rebalancing strategies to protect gains. These programs offer a selection of other features such as social integrations, back-testing, paper trading, a neighborhood, support, replicate trading, portfolio tracking, auto-portfolio more and more.
Reasons to Think about having a trading bot system
Individuals can transact in the modern global digital economy 24/7. Unlike traditional markets, the crypto markets never really sleep. For traders that this presents a dilemma — nobody can see the market all of the time. Crypto market participants will be familiar with the thrill of waking to a portfolio gain, and the reverse is equally true — dealers with open positions risk waking up to some negative news event that has affected a situation resulting in a reduction. Few of the advantages of utilizing a crypto trading bot system include:
This is the number one advantage that automated trading and crypto robots provide: efficient, rules-driven trading without having to watch the markets. Even busy crypto dealers are sometimes unable to dedicate the time to the markets. Automated trading strategies offer the means to create trading profits without even being tied into a display.
Find new opportunities
A bot is consistently online and certainly will hunt the markets to get a chance to make again 24/7. The explosive crypto markets can change very fast, and robots are almost always prepared to exploit a shift in market requirements. Depending on what parameters are set, once the bot sees the opportunity, it will execute.
Take the emotion from trading
Conventional day trading is one of the most stressful occupations on the planet. The volatility at the crypto markets stipulates this stress more. Crypto trading can be a rollercoaster of emotions, characterized by intense highs and lows. Humans are emotional creatures and prone to many biases that affect decision making. This can result in costly miscalculations from the high-stakes world of crypto trading. Even a rules-based, crypto bot trading approach will help protect a trader out of their own worst enemy — somewhere.
Unlike shares, crypto-assets do not pay dividends. From an investment standpoint, crypto-assets can be viewed as commodities. However, in a bear market, there is no reason to continue to some commodity since it does not provide a return aside from price appreciation, and it will be improbable in bearish conditions. Trading robots can provide crypto holders using a passive income, by leveraging their crypto assets through trades. This income stream isn’t as secure or reliable as compounding dividends, but it is among the few alternatives available to crypto investors who wish to hold their assets for the long term. If a trader can create an automated trading system that works well over a consistent period, it may generate a long-term passive income. Duplicate trading platforms make it possible for investors without trading expertise to ‘copy’ the transactions of specialist traders, or even to replicate preset algorithmic trading approaches run by the platforms.
Benefits to trading the crypto markets vs stocks
Crypto markets are open 24/7
Low barrier to entry
Anyone can combine an exchange and start trading
You can start trading with $100 or less
Volatility means you can earn quick gains (or losses)
Trading is often in contrast to poker, and in poker, there’s a concept referred to as’Table Selection’. This simply means a player can select whom they play against. In case the goal is to create a profit, given the option, a fair poker player may decide to play at a table of poorer, less experienced gamers. Trading in the conventional financial markets is like sitting at a table of specialists. It is likely to win but you’ve got to become one of the finest on the planet. Cryptocurrency traders, however, are usually not as experienced. There are some professionals, however, the majority are retail traders.
This is just another way of saying that crypto traders are less sophisticated than traders. This awkward truth, together with several things specific to this crypto markets, has the capability to give savvy crypto dealers an edge. Combine that advantage using a backtested, algorithmic trading plan (a crypto trading bot) and dealers can give themselves the best opportunity to be successful. The crypto marketplace is often called the’wild west’ because the marketplace is largely unregulated. Every country and trade has different requirements, and there are no global, standardized regulations. There’s not yet an agreed-upon version for its dependable evaluation of crypto assets. This regulatory uncertainty, the prospect of market manipulation, and ongoing price discovery make the trader’s best friend – volatility.
What are the risks of Crypto Trading Bot Platforms?
Trading bots and algorithmic trading strategies are just a tool and there is no assurance of profit. Additionally, there are a number of risks related to trading robots and automated platforms. It is important to realize that trading robots are generally created for traders, not traders, and some are not appropriate for people brand new to crypto or new to trading.
Are you an agent or a crypto trader?
If you are a casual investor intending to get and hold crypto assets, then a complex black-box trading bot plan might not be appropriate. Investors without a trading experience might choose to copy’ additional traders’ or use present algorithmic strategies on a trading platform. While platforms vary in their complexity, users together with some financial literacy, analytical skills, and trading understanding will get an edge over the ones that don’t.
Beware of scams and concealed charges
Unregulated, emerging flourishing markets, and new technology have a tendency to attract bad actors. A few crypto trading robots are intended to exploit unsophisticated traders by concealing personal data and money. Do your due diligence. How? Ask yourself how credible is the staff that created the bot or stage? Do they really have a public profile? A support staff? Could they be contacted? Do they have a community of satisfied clients?
Are the charges clearly explained and easy to comprehend? Are there any hidden charges?
A bot is just another tool in the trading tool kit
Though you may place and forget most cryptocurrency trading bots, the very best solution is a mix of automatic trading using ongoing human supervision. Crypto marketplace conditions can vary extremely quickly so it is important for traders to ensure they are continuously adjusting the parameters of their strategy to signify this.
There are unknown unknowns
All trading is insecure and the volatility in the crypto markets makes crypto trading the riskiest of all. Bots may be buggy, they could suffer from poor programming, and they are sometimes caught out by uncommon market conditions like a flash accident or a significant news event. Expect the unexpected.
Crypto trading bot plans
Automated trading robots are designed to be configurable to allow for a wide variety of trading strategies. From a straightforward trend-following strategy to more complex approaches that evaluate a broad range of data points, today’s bots are highly customizable. Common strategies include:
A trend following approach aims to identify the directional movement of an advantage and gain in the momentum of the movement. The strategy will go long when the asset is trending upward or go short when the strength is trending downwards.
Arbitrage trading looks to exploit the difference in the price of an advantage between different markets or trades. As a brand new and emerging economy, the spread between various crypto exchanges may fluctuate, though that has tightened as the market develops.
A market making strategy is based on always buying and selling crypto assets (on both sides of the purchase book) to catch the spread between the buy and sell cost as the price varies.
Duplicate trading is a developing trend which allows users to automatically replicate another trader’s trade. The large Forex and crypto trading system and community eToro has helped reevaluate copy trading. Copy trading frequently entails a social network and gamification components such as a leaderboard. As the copy trading consumer experience evolves, it is now feasible to replicate other traders at the click of a button. The development of DeFi as well as the development of non-custodial platforms such as TokenSets means it’s now feasible to copy other traders, or take advantage of algorithmic trading strategies without giving up control of your keys.
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