DeutschAre you interested in trading cryptocurrencies and want to learn more about trading with bots? Then you’ve come to the right place. The cryptocurrency market is unpredictable due to the volatility of crypto coins. Therefore, it is important to include a detailed and reliable strategy for trading. One of the best things about crypto trading is that it doesn’t stop like traditional trading. For this reason, keeping track of market fluctuations is quite difficult. That’s why you need trading robots for cryptocurrencies to automate your trading.
What is a Crypto Trading Bot?
Before we go any further, let’s explain what a trading bot is. It is a simple program that works on the internet and performs certain tasks better than humans. A recent study has shown that half of the traffic on the internet is actually bots that crawl content, perform tasks, and interact with websites.
Bot specifically for trading works on the same principle. A trading bot is basically a computer program that uses AI to perform certain functions. You won’t miss an opportunity while running the algorithm. It will automatically search the market, find the right place to place the trade and close it more efficiently than a human.
They come in different shapes and sizes. There are the following categories for crypto trading bots:
- Trend-Trading-Bots: As the name suggests, these are designed to find the right trend. A good judgment can help prevent loss or make a profit.
- Arbitrage Bots: These bots are designed to find price differences between markets.
- Coin-Lending Bots: If you want to lend some crypto at the lowest interest rates, then you need a coin lending bot. It makes the process automatic and helps you find the best price on the market.
- Market-Making-Bots: These bots are designed to find the difference between the bid and ask price, which is also called the spread.
How Do They Work?
For crypto trading, a person must closely monitor the market to find an opportunity. With a trading bot, you can set your own preset conditions under which a bot automatically orders with efficiency and few errors. One of the things that is not good about trading is emotions. They can push you to make wrong decisions. At the same time, a bot has no emotions and follows the rules you set.
To make a trade, you need to authorize your bot via API keys. You can grant or revoke access to a bot at any time. They work in three stages, which are as follows:
Signal Generator
First, a bot will evaluate the market to make predictions and find a trading opportunity based on market data analysis.
Risk Allocation
At this point, the bot will assess the risk depending on the parameters and rules you set. You can set different rules, such as a trading limit.
Execution
It is the last stage where it becomes whether to buy or sell the crypto based on the signals. The bot communicates with the exchange via the API key required to process a trade.
Advantages of Trading Bots
Why you should invest your time in a bot while you can do it manually, because there are many advantages, and current reports suggest that such programs make 80% of the trades, it is also true that few traders use this approach due to complexity and cost.
It is also true that not many people are programmers or financial experts. But there are some platforms available that you can use to start trading as a beginner. There are the following advantages:
Emotionless Trading
We explained earlier that most people make a loss when they make a trade based on emotions. Cryptocurrencies are volatile, which makes them work emotionally. For this reason, many traders make irrational decisions. We can’t help but it is the case in human psychology.
So why waste time learning how to control your emotions. At the same time, you can use trading bots.
Trading Speed
For traders, time is money and every second wasted in manual trading can be mitigated with trading bots. They are faster and can perform calculations, multiple transactions and market analysis instantly.
