Crypto trading bots are computer programs that follow predetermined strategies to automate buying and selling of cryptocurrencies. Exchanges use these bots to execute trades based on predetermined market conditions or technical indicators. Bots help investors make more sensible decisions by eliminating the emotional factor out of the trading. They can work on a given set of rules consistently all hours a day.
Bots have the tendency to execute trades faster than humans. This can be beneficial for investors in fast paced markets. They can also be available in the market all the time unlike humans. This can be useful in grabbing trades at odd hours of the day.
Top 5 Trading Bots
- Haasbot:
Supports multiple exchanges and has various trading strategies.
- Gunbot:
Offers multiple customizable settings.
- Cryptohopper
Cloud-based trading bot that allows for automated trading strategies.
- Gekko
Open source trading bot that is easy to setup and customize
- Zenbot
Another open source trading bot that allows advanced trading strategies.
How does a Crypto trading bot work?
Haasbot:
Haasbot is a highly advanced bot that supports several exchanges and is equipped with various trading strategies. Haasbot executes trades automatically using complex algorithms and technical indicators. It allows users to execute trades at several platforms at once. It is loaded with features that provide more authority and convenience for traders in the trading process.
- Traders are required to feed a set of strategies which includes technical indicators and market conditions that will trigger a purchase or a sale.
- An API is used to connect the bot with an Exchange, the bot will later retrieve information about prices, volumes and order book data.
- Bot will now study the market conditions based on the pre-defined strategies, and as per the market analysis, the bot takes the call whether to purchase or sell a cryptocurrency.
- Bot connects with the Exchange through the API to execute any trade when required. It sends the order to exchange and the trade is completed.
- Bot then goes back to monitoring the market and completes trades when required in the same way.
Haasbot is filled with complex algorithms, the user must have sound knowledge about crypto market and technical indicators. It is advised that investors do a detailed research before using Haasbot with real money.
How to build a Crypto Trading Bot?
- Decide the trading strategy on which your bot will work. The strategy can be set from the simplest to complex algorithms.
- Choose a programming language. Popular choices for programming language can be Python and Javascript.
- Bots have to be connected to an Exchange using an API to retrieve market information and execute trades. The Exchange can be Binance, Coinbase, Kraken etc.
- Use data from the past and test your strategy to see how it would have performed in those conditions.
- Write a code to implement that strategy and connect the code to Exchange’s API.
- Constantly study the bot performance to see if there’s any adjustments needed. If it does, make the adjustments and monitor its performance again.
How does Crypto trading bots help investors achieve their goals?
- Crypto trading bots allow investors to automate their trading. Investors can buy/sell crypto at a certain price or under specific conditions using Bots.
- Speed is another edge that a bot provides to its investors. Bots can execute trades much faster than human beings which helps them grab blink and miss opportunities.
- Bots allow backtesting, where Investors can try their strategies in the past to see how it performs. Judging from the outcome they can decide if they want to use their real money on such a strategy.
- Bots also allow scalping. Scalping is a technique that day traders use to earn quick profit over a number of trades. Investors can automate this technique in the bot to earn maximum profit.
- Bots eliminate the probability of mistakes based on human emotions and can operate all 24 hours a day. Making it the most efficient trading method for investors.
- Investors can execute a high volume of trades with bots which is impossible manually. This way investors can trade more and earn more profits.
Risks associated with Crypto trading bots
- Bots work on pre-defined strategies, so if market conditions change drastically, this may resukt into significant loss for investors.
- Using trading bots without a thorough understanding might turn into fatal loss for investors if the strategies aren’t set properly or if market conditions change suddenly.
- Bots have to connect to Exchange through an API, which makes it prone to hacking and vulnerable to cyber crimes.
- Due to the lack of market regulation for crypto, traders are not protected against fraud and financial crimes.
- There are dramatic fluctuations in the crypto market so it can be difficult for the bot to execute profitable trade.
It is important to understand that crypto trading bots are not a guarantee for profit. You can also buy and sell newly launched tokens with the brains club. However, the Crypto market can be extremely volatile so it is important that investors do their own research before deciding to trade with bots. One must be careful about the risks associated with crypto trading bots. A thorough research of market conditions and complete awareness about technical indicators is a must before implementing your strategy on bots.
