Cryptocurrencies quickly sparkle in your mind if the discussion is about volatility. Cryptocurrency trading exchanges allow investors to buy or sell orders day and night. Since they’re highly volatile, the prices drastically fall or incredibly rise within a blink of an eye.
However, the innate human nature to rest and sleep limits the opportunity to participate in the night. But what if you can trade 24/7? What if you can buy it as soon as the price drops?
It seems like the wildest expectation! Right? But this is what crypto trading bots do. They work for you 24/7 and support your trading journey. That’s not all. There’s much more to know about them.
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Whether you’re an established crypto investor or a newbie who is just entered the industry, you’ll love this article. So, let’s get in.
Understand Crypto Trading Bots
Crypto trading can be easily automated using specialized trading bots. Usually, these trading bots work based on algorithms designed to automate your whole trading game. Since these are tailored to make trading hassle-free, the investors can enjoy colossal benefits.
The trading bots work 24/7. Even if you’re wandering in your dreams, the bots take care of crypto trading. The bots buy or sell the orders automatically based on the given signals or data you assigned to them earlier.
Before getting deeper into the crypto trading bots, let’s understand a few jargon words: trading bot, API, and bot trading.
- Bot Trading: It’s simply software used to automate erratic crypto trading. Like humans leveraging their mouths to communicate, bots leverage APIs to communicate with the crypto exchanges for buying and selling orders.
- API: Application Programming Interface(Aka API) is an application interface that’s used to interact with various platforms. As said earlier, APIs help bots to interact with multiple crypto exchanges.
- Trading Bot: A trading bot is a program specially tailored to execute colossal trades automatically. For instance, the trading bot buys cryptos when their prices turn down. In contrast, they sell the cryptos when their prices touch the mountain peak.
How Do Crypto Trading Bots Work?
Now, let’s understand how bots access your trading account and work for you day and night.
Each bot requires the exchange’s API keys(Both public and private keys) to access the trading account. Once the bots get access to APIs, they tell the exchange about using your account after the successful authorization from the account holder.
Here’s the simple working procedure for bots once they access the exchange platforms.
Signal Generator
The bot receives signals to buy or sell the orders. But how and where do these signals generate? These signals come from the signal generator based on the inputs we provide.
As its name suggests, signal generators send buy or sell signals to the bot. The input data we provided earlier gets stored in the signal generator. Then it passes signals to bots to either buy or sell the orders.
Risk Allocation
Once the bot receives the signals, it decides the amount of capital or order volume to be traded.
Execution
Here comes the last step– Execution. The bot knows the trading direction(Whether to sell or buy the order). It has decided the order volume. And the remaining step is to execute the trade. The bots strategically trade based on the preset data and interpretation values.
Since you use the trading bots, you can sleep without giving a second about the extreme volatility of the crypto market. Even if the market has extreme highs or lows, you get your share of profits as your bots work for you day and night.
Are Trading Bots Really Better Than Humans?
There’s a famous adage, “Humans make mistakes, machines don’t.”
No matter whichever factor you compare, from availability to capacity, bots are far better than humans.
How?
- Bots work 24/7 while humans can’t.
- Bots buy or sell orders at lightning speed and operate faster than humans. Yet, bots simply follow the predefined commands and execute immediately. While humans think and respond even after finalizing the decision.
- Bots are free from fear and greed. In simpler words, they’re emotionless. On the other hand, humans are tied to several emotions, from fear of losing something to greed for getting more. This is why bots perform better as they trade strategically and statistically.
- Most importantly, robots process vast amounts of data in a fraction of a second, while humans don’t even blink their eyes in the same given timeframe.
If you observe the above points, the bots are clear winners. In trading, consistency and speed matter the most; that’s contradictory to human nature.
However, the only thing that robots cannot perform better than humans is “Subjective Thinking.” So, one should remember that a bot reflects the human mind.
It’s pretty similar to the concept, “As you sow, so you reap.”
The bots act in a million-dollar path if you give precise and outperforming data. On the other hand, if you provide insufficient data, the bots execute based on the illogical inputs you provided earlier.
Are Crypto Trading Bots Legal?
One-word answer: YES.
Crypto trading bots are legal, and almost all crypto platforms allow it. After all, who’d like a thin market with sparse order processing?
Since bots execute the orders effectively, it’s a win-win case for investors and crypto exchange builders.
Did you know trading bots are even legal in stock markets? Unlike crypto platforms, most stockbrokers don’t allow bot trading.
Is There Any Risk Using Crypto Trading Bots?
Nothing is 100% perfect. Similarly, one cannot say crypto trading bots are entirely risk-free. If the trader doesn’t understand the basics, trading bots aren’t an ideal choice.
The trading bots are simply an assistant and not a dictator. So, you should use them wisely to enhance the returns rate.
How To Get Started?
Well, you’ve understood everything about the crypto trading bots. But stuck with how to get started?
If yes, don’t fret. Here are two simplest ways to start trading bots: using a trading bot(effortless process) or creating your own trading bot(Bit complicated).
There are tons of crypto trading bots available from reliable brands.
Choose reliable trading bot services, either free or paid versions, and integrate them with the crypto exchange.
Do you need more customized trading bots? If you’d like to enjoy a highly tailored bot to get the desired result, you should choose the second method, i.e., creating a trading bot.
You can use various platforms to customize the trading bots or build a new one from scratch. For instance, grab “Quadency” to enjoy colossal pre-built automations, strategies, and monitoring that suits your requirements.
On the other hand, choose “Hummingbot” if you’re looking for an open-source interface that helps you build a trading bot based on your requirements.
