Understanding Automated Trading and How to Make Use of Crypto Trading Bots?
In recent years, cryptocurrency market has exploded in popularity, and has created a range of opportunities for traders to earn good profits. Cryptocurrencies are known for their volatile nature, and prices for crypto assets fluctuate in the space of seconds/minutes. Isn’t it?
As the market is open for 24 hours per day, and 7 days in a week, the investors have the opportunity to trade all the time, wherever they are. The combined effect of all such factors limits the effectiveness of manual trading in many ways. In many cases, investors are unable to react quickly to the fluctuations in prices in the market to achieve the optimal trades. And, we human beings cannot spend as much time to speculate the crypto markets as required to achieve the best trades. This requires round-the-clock monitoring of the crypto exchanges all over the world.
And, this is not possible in case of manual trading. This is where; automated/algorithmic trading or crypto trading bots come into the picture. These bots are the robots or the automated tools which use specialized software to trade automatically. Recently, automated trading platforms and crypto trading bots have also gained huge popularity in cryptocurrency market for the benefits they offer to the investor.
Before moving further, let’s know about automated trading and its benefits:
Automated trading is a software program that is programmed in such a way that it can trade on your behalf without your presence. It lets you trade cryptocurrencies without constantly monitoring your system/computer.
Automated trading software uses algorithms to buy or sell crypto assets at certain time as per set parameters. Depending on the kind of strategy that you use, trades are executed smartly based on asset price and other technical indicators. If you are new to crypto trading, or you don’t have time to trade cryptocurrencies, and don’t want to buy and hold, considering automated crypto trading is the better option.
There are several automated crypto trading platforms available which has their own set of features, and trading strategies. TrailingCrypto is one such platform that allows automated trading on different exchanges. To use automated trading, you need to open an account on the platform with a trading bot and select a strategy to trade.
Once you have selected the bot, it will buy and sell cryptocurrencies based on your set parameters. Most crypto trading platforms work as APIs and they work as an intermediary that trades for you on another exchange you connect. TrailingCrypto is the best crypto trading terminal that you can use on exchanges like Binance, Coinbase Pro, BitMEX , and so on for automated trading.
The latest and most secured form of automated trading is crypto trading bots which operate on blockchain. These bots are like robots, so there is no room for error. They are programmed to the preset parameters, which eliminated the possibility of any errors or miscalculations.
The advantage of automated trading is that there’s no delay in trade. We all know that crypto markets fluctuate very quickly which means that you need to be ready to respond to the current market conditions. A bot can execute trade based on what’s happening in real-time in the market. The best trading bots not only track the price, but trading volume, buying and selling pressure, price trends, and more. These variables help the crypto trading bot make smart decision much like a human trader.
On the other side, the professional traders keep themselves in loop. A bot sends notifications to the trader and gives them opportunity to override the bot’s decisions.
Do I really need a crypto trading bot?
To use and not to use crypto trading bot depends whether you are comfortable with its strategy or not. Before using trading bots or automated trading, make sure to know about different trading bots and understand how they make trading decisions.
Be it Binance Futures trading or BitMEX trading, making use of crypto trading bots will automate your trading strategies.
How does automated trading work?
First, you will choose the automated trading platform and set the parameters of your trading strategy. For this, you will have to use your crypto trading experience to create your own set of rules and conditions. Now your custom algorithm will apply the criteria to place trades.
The automated trading strategy set by you will constantly monitor the market prices and trades will be executed if your set parameters are met. The main aim of automated trading is to execute trades more efficiently and faster. Some platforms have their own trading bots which are specially designed for beginners.
Automated trading strategy allows its traders to launch some set of rules for both entry and exit positions, that once set can be automatically executed. Automated trading systems typically require the use of software i.e. crypto trading bot linked to different crypto exchanges.
TrailingCrypto is an API that one can use for automated trading on popular exchanges like Binance, BitMex, Kraken, Coinbase Pro, and more. The most secured form of automated crypto trading is making use of crypto trading bots that operate on Blockchain technology.
What are the building blocks of a crypto trading bot?
Most of the trading bots have the following features:
2. Strategy implementation
4. Job scheduler
Let’s understand step by step, how to automate your trade using a trading platform that works on your behalf in your exchange account like TrailingCrypto or any other platform:
1. Choose your preferred automated trading platform and create an account.
2. To automate your trading, firstly, you have to build a trading strategy.
3. Once after creating a strategy, validate it through heavy backtesting.
4. To be on a safer side, run your strategy in demo trading until you are confident enough.
5. Connect your preferred crypto exchange and start automating your trade. The platform will run your strategy 24x7, without having to speculate the market trends continuously.
Making use of Crypto trading bots is the great way to automate your trading so that you can get more time to focus on other things.
What are the advantages of automated crypto trading?
Automated crypto trading can benefit traders in several ways. Let’s have a look at these:
1. More powerful- There is a specific limit to the amount of data that a human trader can process at a time. And, if the data is processed, it is tough to seek insights based on that data. The automated trading bots can handle bulks of data
2. Efficient- Trading cryptocurrencies using a crypto trading bot or an automated trading platform is always considered more efficient. You need not to worry about delays, and most importantly, there is no human error. As long as the bot works on suitable platform, it can trade asset with profits. These bots can work 24x7.
3. Minimize emotions- Automated trading systems minimize emotions since trade orders are executed automatically.
4. Improve order entry speed- Since computers respond immediately to the changing market conditions, automated trading allows its traders to generate orders as quickly as the trade criteria is met.
5. Diversifying trading- Automated trading allows its users to trade multiple accounts or different strategies at the same time. It is quite challenging for human to accomplish a trade, but the computer executes trades in milliseconds.
When you should use a crypto trading bot?
If you think that a certain strategy will work and can beat the market trend, then you should use that particular trading bot. Using a bot doesn’t guarantee that it will beat the market rather it depends on the preset strategy or algorithm
Types of crypto trading bot
The best crypto trading bots use time-tested strategies set by the most successful traders. Bots can specialize in specific types of trading from arbitrage to technical analysis. Here are the main and most popular automated crypto trading software/bots available in the market:
1. Arbitrage bots
Arbitrage is a kind of strategy which refers to exploiting price differences across multiple exchanges and profiting off of the inefficiencies of market. Usually, arbitrage bots compare the crypto coin across different exchanges. Every exchange has a slight variation in prices and the only way to check price variations among exchanges, and earn profits is by using arbitrage crypto trading bots.
2. Trend trading bots
As you can understand from the name of bot, this type of bot takes into account the momentum or trend of a particular crypto asset, and after analyzing it properly, it executes trade. If the trend shows an upsurge in the crypto asset price, the trend trading bot will enter the long position. And, similarly, if the price drops, then it will enter into the short position. In order to determine the market momentum, bots can use the price action or other technical indicators before placing the trade.
3. Coin lending bots
One of the most exciting ways to trade cryptocurrencies is to use coin lending bots. This means you can lend some coins as a margin and later you will return the loan with the set percentage. Some popular exchanges like Poloniex offer the margin funding option. These bots automate the process, and spend lesser time while looking for the right interest rate. While setting up the bot, traders can customize their trading strategy.
4. Market maker bots
The market maker bots uses orderbook spread feature to bring profits to the traders. The more actively any particular asset is traded, wider will be the spread, and more profits the bot will return. The market maker bots place an order with a price that is different from the market price, and thus earning profits for the trader. It scans markets 24x7, and give advantage to the trader.
How do these bots work?
Most of the trading bots have the following key components in common:
· Market data analysis
This is the first module of bot where it will saw the raw market data from multiple resources, and interpret it accordingly. Based on this fact, it will decide whether to buy/sell a specific crypto asset. The best trading bots allow its traders to customize which type of data will go to the signal generator to get the best and refined results.
· Risk prediction
This module uses market data to calculate the risk. Based on this information, it will decide how much to invest in the trading. This is the most critical aspect of the bot trading.
· Buying or selling assets
This part of the bot uses APIs to buy or sell cryptocurrencies. Sometimes, you may wish to avoid buying coins in buy and on the other side, there might be some situations that call for immediate purchases.
Using the best crypto trading platform like TrailingCrypto provides the best ways to automate your trades. Choosing the right crypto trading bot also depends on the type of cryptocurrency you want to trade, what exchange you use, and your risk tolerance. The platform also supports crypto copy trading where traders can copy the trades of successful traders and set the same strategies used by them.
Here, you can link all of the exchanges you use, your wallets, and manage your money without bouncing around the internet. It is an advanced crypto trading terminal built for the professionals. Currently, the platform supports 10 plus crypto exchanges like Binance, Binance Futures, Coinex, Kraken, Bitstamp, Polenix, KuCoin, HitBTC, BitMEX, Bittrex, and more. It has the best crypto trading bots that trades on your behalf on your preferred exchanges as per the set strategies.