It is no longer a secret that you must keep your eyes on your charts when trading to be profitable. However, this is where the problem lies, especially if you aren’t a full-time crypto trader. You have sleep to battle with, emotions that are part of being human, and many other challenges that highlight the limitation of humanity.
What if you could delegate the task to reliable software or artificial intelligence? The good news is that you can, and profitably too, provided you employ the right trading strategies. This is the current trend in the financial market, crypto and forex trading alike, and a whopping 38 percent of traders have hopped on it, moving more than fifty percent of the money in the financial markets with this technique.
What are crypto trading bots?
Crypto trading bots are mechanisms that allow you to enter trades, or they look for the perfect entry points and execute them for you based on your desired trading strategies. That’s right, you dictate when and where your entry positions are, the analysis to employ, and every other detail you fall back on in the usual trading scene.
In other words, crypto trading bots are automated software that executes trades on your behalf. Don’t fret – you are entirely in charge, but smarter and more efficient. This algorithm helps you beat the inefficiencies of the human mind.
On days when you’re down or distraught, you probably won’t trade, as it should be. But there is a way out of this, and that is the assistance of your bot. It would enter and exit positions just as you would, except that it lacks the emotional fluctuations humans are prone to.
That way, you will never miss out on a sweet entry, and neither will you relate to ever getting stuck in a position because of the high volatility of the crypto market.
Some of the emotions your crypto trading bots eliminate on your behalf include greed, fear, and even everyday ups and downs experienced by humans.
To be a profitable trader, you must follow a trading plan, but let’s face it and admit that it is difficult.
You can use crypto bots to control your greed. They always stick to your trading plan even when the market appears to move in or against your favor. Overtrading or revenge trading, an infallible way to blow your account, will be a thing of the past.
There are days when you make massive profits and losses because of humans’ innate nature. We are greedy and always want to make more, which may ultimately bring losses to your account. However, if you have tweaked your trading bot to target 70 pips and risk ten, that is exactly what you get at the day’s end.
Crypto trading bots have been around almost as long as the foremost cryptocurrencies like bitcoin and Ethereum. But they are now becoming more popular because traders are newly realizing the software can be used advantageously to trade the crypto market’s massive price movements and unpredictability.
They have been designed to check price movements and compare the history of the charts to give you the most favorable setups. You can make your API compare prices on different exchanges if you are an arbitrage trader. You are assured that the system rarely makes mistakes, even though it is not always a hundred percent accurate because of the inevitable machine error.
But you will always be present in the market, whether asleep or busy with indispensable activities like work, if you are not a full-time crypto trader.
The first crypto trading bot was designed for bitcoin trading, but several more software in the market can send trading signals and execute trades on hundreds of legitimate crypto projects.
How do crypto bots work?
Crypto bots work the way you want them to. They are akin to an advanced version of every trader. Input the strategies you want to use into the Application Program Interface or API, which will execute trades on your behalf.
However, it is even more profitable because this technology employs artificial intelligence and machine learning in entering positions for you. Machine learning is beneficial because it adapts easily to changing trends, which is the weak point of most traders. Best believe that the system will detect an error in patterns and stay out of trades you may have taken.
In other words, crypto bots take your trading strengths and magnify them with computers’ advanced knowledge and adaptability.
You can choose a trading bot that employs already laid down strategies or modify it to implement your own. Some developers or coders create and sell crypto trading bots, and you may also implement or launch yours by buying a computer program and aligning it with your trading strategies, whether technical analysis, supply and demand trading, or indicators.
Crypto trading bots are programmable interfaces you can use to be more successful in your trades. Suppose you use Relative Strength Indexes, reversal and continuation patterns, or supply and demand zones to enter and exit trades. In that case, you make these inclusions into the software, and it trades that way going forward.
These applications have been designed to adapt your trading strategy and optimize it for you. They compare algorithms across trading platforms, look through tons of charts, consider their history, and detect trading patterns to make you more successful.
If you are a low-risk trader, you can set your trading API to imitate your low-risk entries and exists. And if you prefer high-risk trading, the algorithm will consider high-risk setups and trade using this style.
However, you need to permit it to access your wallet. This is safe, though; you have nothing to worry about, especially if you already use a reliable trading platform and secure wallet.
Trading bots are available in different forms and offer various services that can be modified and personalized. They offer trading signals and enter and exit trades using strategies you provide them. Leveraging is also possible, and details that skip your notice will be caught by them.
Aside from employing your desired trading strategies, crypto trading bots also work in two major ways – arbitrage and market making.
Arbitrage is a crypto trading style many traders adopt. This is a technique of buying cryptocurrency from one exchange platform and selling on another.
It is profitable because of the price variations. However, it is often challenging for traders to discover these differences because they are often insignificant or minor, and time is essential if profit is to be made.
A failure to sell at the precise moment can cost you. it can also be tasking and time-consuming to peruse the diverse crypto exchange platforms.
In this trading style, you profit by comparing prices across platforms, buying at the lowest offers, and selling where the highest value is.
Because of the existence of many crypto exchange marketplaces, there are often price variations. These little differences will make you rich if you play your cards right.
This is a safer venture than trading price movements if you have the right techniques. This is because charts sometimes move against you. They always say that profitable traders are profitable because of risk management, especially when the candles move against your prediction.
However, even APIs are susceptible to these unexpected circumstances, except that they have lesser chances of errors.
When trading as an arbitrage trader, you are not trading price movements but price differences. So, it does not matter if the market goes against you; you buy at a low price from one platform and sell higher on another.
But crypto charts change in the blink of an eye. Do you see why time is of the essence?
With an API, you don’t need to compare these value differences yourself because you can condition it to do the job. Do you know why this is better?
Efficiency is one reason, and speed is another.
Efficiency means that a machine is better at comparing and identifying more significant trades and maximizing profit for traders. The time you spend comparing can be cut in half by the software.
But even better, the software is not impeded by the limits that hold humans back. The crypto market is notorious for swift changes in price, so you need a system that executes the trades even faster, and that is where the API comes in.
It compares fast and chooses the best option almost faster. It gets better because there is no delay in trade execution – it enters and exits the market at the required speed to help you make a profit.
The market does not stop moving when you are asleep, so your API will continue amassing profits on your behalf.
Computerized trading is better for arbitrage trading because timing is essential in this crypto trading technique. APIs are swift because they are machines and are, therefore, in the best position to buy and sell tokens before significant movements in the charts.
There are different forms of arbitrage trading, but the API masters them all and uses what you choose. Do research before adopting this trading strategy, and use a crypto bot to optimize your profits.
Market making is another way to use crypto trading bots to your advantage. Here, you trade the market based on spreads, which is more efficient when the software does the job for you.
Advantages of using crypto trading bots
The primary advantage of using crypto trading bots is that they are devoid of human weaknesses. Let’s explore this in broader terms:
Crypto trading bots lack emotions
Have you ever lost a trade because you got greedy or didn’t enter that position with a clear head? Scratch that – this is a phenomenon every crypto trader has been through, at the beginning stages of their career or down the line.
This is where you and the trading bot differ. Where you would place a trade because human emotions like greed and fear blind you, the software remains level-headed and executes them without these feelings getting in the way.
Where you would be tempted to revenge trade because you believe the market has gone against you and owes you, the bot stops, accepts the loss, and continues another day.
With a trading bot, you can return to your wallet to discover you are in profits even after the market has gone against you several times. This is because these bots are designed to maximize profits and stick with trading plans, a more difficult feat for human traders.
Crypto trading bots work nonstop
The crypto market waits for no one. It operates all night and all day because of the differences in time.
You can be profitable at all periods by delegating the trading task to your API. When you take a nap, it remains active.
Nighttime may bring some of the most profitable positions, and the bot will catch them. It is no secret that spreads change periodically; there are more profits to be realized at certain periods of the day, and the differences in the bid and ask can also go lower in some moments.
Your API will catch the most profitable periods in the market, ensuring you don’t get cheated out of your profits because you fell asleep or missed out on a key detail.
Crypto bots don’t get tired, so this feeling will not affect trades they enter on your behalf. You don’t need to watch your charts nonstop because you are afraid of missing a key signal or entry position.
Crypto trading bots are precise
Precision is another key and exclusive feature of using crypto bots. They enter trades at the precise moment, which is important for profitable trading.
Market volatility often makes it difficult to enter a position at a precise moment. But a bot will easily bypass this restriction.
Is it profitable?
A crypto bot may be profitable compared to human trading, but it depends on who you ask. As a trader who has had more experience in the crypto market, you may desire to enter your positions yourself because of the familiarity you have.
But again, you can delegate the task to your trading bot and trust that it will stick with your chosen strategy. Trading with the software is more profitable because it eliminates the limitations of the human experience and maximizes the ability of the computer or machine learning.