A Crypto trading bot is just an automated program that works on the Internet and executes repetitive tasks more effectively than humans. Some estimates suggest that more than half of internet traffic is made up of bots that interact with web pages and users, scan for content and perform other tasks.
Crypto Trading Bots operate under the same basic principle. They are software programs that perform functions using artificial intelligence based on pre-established parameters. Whether you want to buy into the most undervalued cryptocurrencies in the market, or you can simply add new crypto coins to your portfolio, you can buy, sell or hold your digital assets in an efficient and automated manner day or night from anywhere the world, simply by using crypto trading bots.
How do Crypto Trading bots works?
To trade with a crypto bot on an exchange platform, you must authorize the trading bot to access your account with the help of API keys which means Application Program Interface, and access can be granted or withdrawn at any time.
So what about the actual workism of a profitable crypto trading bot? By directly coordinating with crypto exchanges, and placing orders automatically according to your own pre-defined conditions.
Broadly, crypto trading bots work in four essential stages they are,
- Data Analysis
- Signal Generation
- Risk Allocation
-> Data plays a king role that making a success of crypto trading bots. Not like humans, machine-learning integrated software can identify, collect and Data analyze mountains of data faster, smarter and better.
-> After the completion of data analysis, Signal generation in the trading bot essentially does the works of a trader – making predictions, and identifying potential trades based on market data and technical analysis indicators.
-> Risk Allocation – where the trading bots allocate the risk, based on the explicit set of parameters and rules set by the investors or traders. That typically contains how and to what extent capital is allocated during trading.
-> Execution – the stage in which cryptos are bought and sold according to the signals, generated by the pre-configured trading system. In this stage, the signal will generate buy/sell orders, that are sent to the exchange through their API.
Advantages of Crypto Trading Bots
Why should you care about Cryptocurrency trading bots? The answer is in two words: Wall Street. Many reports indicate that around “80% of trading on the stock market is done through algorithmic-based automated programs”. The upper echelon of the economic world has been using automated trading for decades. But private investors have been locked out. Because of the technology’s intense cost and complexity.
So that’s why relatively few private traders make use of algorithmic trading. Not everyone is an experienced coder or economic expert. There are ample amounts of crypto trading bot development solution providers available in the marketplace. Choose the best solution maker who offers cutting-edge research in artificial intelligence and machine learning that renders users the very best crypto trading bots.
Now let’s see the most important advantages included in Crypto trading bot Development.
Due to a variety of aspects, you will frequently read that more than 80% of private traders lose money. Fluctuating crypto trading is emotional work and with emotions come errors while making a decision. More than 39% of manual trades are influenced by our emotional states, which can drive us to make unreasonable decisions. Just a simple human psychology.
Instead of that, 20% of smart traders earn money by harnessing the power of crypto trading bots to ensure a non-emotional, systematic trading approach.
More increased trading speed
Time is precious, When comes to speed, these trading bots are quite faster – Millions of calculations & thousands of transactions across different time zones and markets almost instantly. Trades occur in a fraction of a second – far faster than anything each trader can achieve. This time, it brings you to read the sentence, a Crypto Trading bot could have made numerous profitable trades for you.
Back testing and paper trading
Are you a pilot who wants to learn to fly? – Flight simulators can help. Right! Same Are you the trader who wants to learn to trade? – Market simulators can assist you. Even a pro player in the trading world can reap the benefits of trading simulators. With crypto trading bots, backtesting and paper trading permit you to harness the power of historical data to simulate the viability of a particular trading strategy or pricing model.
Armed with a trustworthy backtesting tool and a proper set of data, you can explore new techniques, add expertise and build confidence before you are ready to put your money on the line.
Crypto Trading Bots are about minimizing the risk factors not setting all of your eggs in one basket. We all know that crypto markets can be highly fluctuating, which is why a prudent trading technique should include risk diversification. One way to diversify your risk is to execute numerous trading bots.
And while a diversified portfolio is certainly not foolproof, it can balance risk and reward to reduce exposure to any one certain asset. Age-old suggestion still tingles true with advanced technology like crypto trading bots.
Consistent trading discipline
Becoming a Zen master in this particular field is quite difficult right? learn a language, finish the marathon, and then become a zen. But the required thing is one – Discipline. There is no difference in trading. By automating the crypto trading process, however, trading bots ensure consistent trading discipline even in fluctuating markets when fear can lead you to sell or luck can cause you to purchase.
Because of pre-determined trading rules, trading bots optimize long-term performance without the short-term costs of emotional human intrusions.
Choosing the Right Trading Strategy
With more people beginning to trade cryptocurrency, there are now more ways to make your hard-earned money, which is why it is crucial to understand the diverse types of crypto trading bots. Whether coin lending bots, Arbitrage bots, Margin Trading Leverage bots, or market maker bots, traders have an array of approaches at their disposal. Here are a few to consider as a beginner trader.
It involves trying to profit from price volatility that happens over a short or medium term such as a few days or weeks. Given the inherent fluctuations of cryptocurrencies, the use of swing trading bots has proven to be adorable, though complicated to master, the process for many traders.
Examples of momentum indicators include the Relative Strength Index (RSI), Stochastic Oscillator, and On-balance volume (OBV) while Moving Average Convergence Divergence (MACD) and Bollinger Bands (BB) that is perfect examples of trend indicator and a volume indicator.
Day Trading bots can facilitate your trading life by relieving some of the need and stress of sitting in front of a computer throughout the day. And since bot trading is impassive, it can also mitigate some of our psychological handicaps, such as Fear of missing out(FOMO).
There are several subtypes – One of that is scalping. While day trading is one particular trading strategy. A popular short-term trading strategy, traders who use scalping attempt to profit from small price movements, which can yield significant returns.
Currently, the world is dominated by automation, and private investors are still pierced between inflexible and manual investment options. When comes to the best providers of crypto trading bots, Maticz is the leading blockchain development company that offers prolific crypto projects at a high-quality level.