Nowadays, when lots of people trade crypto, automation has become understandably popular with experienced traders and newbies alike.
People use crypto trading bots to save time and relieve themselves from routine activity, including making some decisions.
The number of beginners who feel like trying, say, bitcoin auto trading, is constantly growing. But there are some tips everyone had better know before they start.
Well, what is crypto automation? In a nutshell, this term stands for employing special software known as ‘a crypto automation bot’ that is able to take a number of pre-set actions, which traders otherwise would have to do manually. A modern bot is based on specific algorithms; often it’s built using such sophisticated technologies as artificial intelligence and machine learning. Simply put, it is capable of spotting favorable opportunities on the market and placing orders to buy or sell a particular asset on your behalf, using the money from your trading account.
No Magic – Just a Tool
There exist numerous cryptocurrency trading bots from lots of developers: free and paid, created years or days ago, widely advertised, and little-known. But before you install one, you should remember one thing: they aren’t magic money-making devices, as somebody might think after viewing their ads. If some program of this kind is described as 100% efficient and risk-free, it’s an exaggeration… or, better say, a plain lie.
A trading bot is nothing more than a tool. It is you who uses it, who sets it up, and chooses the strategies, i.e., determines what exactly this software will do. Your success depends on how effectively you configure this tool.
No magic – and no guaranteed success. It’s as simple as that.
It’s no secret that the cryptocurrency market is volatile indeed, which means it is really hard to predict whether the price of any of the numerous assets will go up or down in a minute. They all oscillate.
Such high volatility gives numerous opportunities, but there are risks of losing money if you take the wrong position. Fortunes could be made – and lost – very quickly. Even experienced crypto traders armed with properly configured bots can’t be sure that the strategies they applied will work at all times.
What’s more, there is no such thing as a good-for-all, always-winning strategy. It’s all about statistics: there are strategies that work more frequently than others, and you’ll never tell whether you’ll succeed.
There simply can’t be any guaranteed profits. So, the rule of thumb is to take inevitable risks wisely and not spend money you can’t afford to lose.
A Helping Hand
Nevertheless, a crypto trading bot will help you automate certain steps in crypto trading – of course after you set it up very carefully.
This software can come in handy because it is capable of the following:
- Sending notifications/signals when the price of the particular asset hits the pre-determined level, enabling the trader quickly make the decision and take action themselves;
- Automatically buying or selling the asset when the specific conditions are met – e.g., the price hits a certain point. You’ll have to pre-select the asset, set the price, the volume, and trading position (buy/sell), etc. It’s really handy for active traders who manage multiple accounts.
- Track trading volume, moving averages, demand, price movements, the relative strength of the particular trend (judging from buying or selling pressure), and plenty of other parameters.
The Tree Main Features
Although modern crypto trading bots are extremely diverse, there are three main features most of them share. Each one is based on its own distinct algorithms and needs optimization if you want it to perform well.
1. Analyzing Market Data
First, the software gathers huge volumes of raw marketing data from a variety of sources. Then, these data are processed and analyzed in order to spot patterns and trends. As a result, trading signals are generated and sent to the trader in the form of notifications.
2. Calculating the Risk
The majority of crypto trading bots have a feature that calculates the level of risk; it’s done by processing the raw data using certain pre-programmed algorithms. It results in the recommendations about which asset is better to buy or sell, and what volume of trade is optimal.
3. Executing the Trade Automatically
This feature executes trades using the bot’s API without the user’s interference.
