Cryptocurrency Trading Bots
Around 75% of trading in global financial markets is algorithmic, and the crypto markets are no exception. The number of automated crypto trading platforms has increased in the previous two years, allowing crypto traders to construct intricate, 24/7 trading strategies that can be changed and refined as needed.
What is a cryptocurrency trading bot?
A cryptobot is a software application that connects to a user's exchange account via an API and executes trades automatically when market conditions fulfil a set of predetermined criteria. Traditional market signals such as volume, orders, price, and time, as well as technical analysis signals like moving averages, Bollinger Bands, the Ichimoku Cloud, and, increasingly, new aspects such as social media sentiment, can be interpreted and combined by crypto trading bots.
There are numerous platforms available to meet the needs of the crypto trading community. Some are geared for seasoned traders, allowing them to build complex automated methods that can be backtested against previous crypto market data.
Others are aimed at inexperienced crypto investors who want to increase the return on their assets without having to worry about making trading selections. Copy trading, social trading, and algorithmic crypto trading are all available on these platforms.
Crypto holders can put their assets to work to create a profit, thanks to the growing interest in DeFi and the yield farming phenomenon. There are various options accessible, whether you're a passive investor or an active trader, each with their own risk profile. This post will examine some of the most popular cryptocurrency trading bot platforms currently accessible.
How Do Cryptocurrency Trading Bots Works?
Trading bots communicate directly with crypto exchanges and execute transactions automatically based on your stated parameters, resulting in increased speed and accuracy, fewer mistakes, and heartless trading. To trading on an exchange, you must allow a trading bot access to the account via API keys (Application Program Interface), which you can revoke at any time.
The three major steps of trading bots are signal generation, risk allocation, and completion.
- The signal generator effectively acts like a broker, making predictions and spotting prospective trades based on market information and options trading signals.
- As the title suggests, risk allocation occurs when a bot assigns risk based on the set of criteria and rules provided by the user, which most often involve whether and to what level capital is assigned during trading.
- It's time to get down to business. The practice of really buying and selling cryptocurrencies based on the indications provided by the pre-configured trading system is referred to as execution. At this point, the signals will be transformed into API key requests, which the cryptocurrency exchange will be able to understand and handle.
Benefits Of Crypto Trading Bot:
Wall Street in two words. According to many statistics, algorithmic-based computer systems account for roughly 80% of stock market trading.Although not everyone is a seasoned Python programmer or a financial expert, trading bot platforms like Omninos Solution are helping to level the playing field and provide retail traders, both new and experienced, a leg up in the crypto markets.
- Trading without emotion:It's common knowledge that more than 80% of private traders lose money owing to a number of reasons. Trading volatile cryptocurrencies is an emotional endeavour, and emotions sometimes lead to erroneous judgement. Our emotional states can affect up to 39 percent of manual trades, causing us to make erroneous decisions. Rather, join the 20% of savvy traders who make money by utilising the power of trading bots to assure a non-emotional, systematic approach to trading.
- Increased trading speed:Time is a valuable commodity.Bots are also faster in terms of speed: they can execute millions of simulations and hundreds of transactions in a matter of seconds across many time zones and markets. Trades are executed in a short moment, far faster than any one trader could.
A trading bot may have executed many lucrative deals for you in the time it took you to read this line.
- Paper trading and backtesting:For the same reasons that pilots learn to fly with flight simulators, traders should learn to trade with market simulators. If you have reliable backtesting tools and accurate data, you may try different approaches, build skill, and build confidence without putting your money at risk.
- Diversification of risks:You're better off going to Vegas if you're seeking a get-rich scheme.
Using trading bots, you can reduce risk by not putting all of your eggs in one basket. We all know how unpredictable cryptocurrencies can be, hence why systematic risk is an important aspect of any sound trading strategy.. Using many trading bots is one approach to spread your risk. While a diverse portfolio isn't failsafe, it can help to balance risk and reward so that you're not overly exposed to any one asset. With cutting-edge technology like trading bots, this is age-old wisdom that still holds true.
- Trading discipline that is consistent:Learning a new language, running a marathon, or becoming a Zen master are all goals worth pursuing. All of them necessitate one thing: discipline. And trading is no exception.Discipline, on the other hand, is difficult to achieve (how many Zen masters do you know?). Bots, on the other hand, maintain consistent trading discipline even in unpredictable markets, when fear can induce you to sell or luck can cause you to buy, by automating the trading process. Bots optimise long-term performance without the short-term expenses of emotional human participation, thanks to pre-established trading rules.
Choosing the Most Appropriate Trading Strategy:
With more people starting to trade cryptocurrency, there are more opportunities to gain (or lose) money, which is why trading methods are so crucial.
You'll need a well-defined strategy to reach your trading objectives. A well-thought-out trading strategy will bring you to your destination faster and safer than improvising. Let's take a quick look at some potential techniques and what to avoid.
- Swing trading :Swing trading entails attempting to profit from price changes that occur over a short or medium time period, such as a few days or weeks. Given the inherent volatility of cryptocurrencies, many traders have found swing trading bots to be an appealing, albeit difficult to perfect, technique.
Technical analysis (studying statistical trends involving price and volume) and fundamental analysis (determining if an asset is over- or under-valued) are both used in swing trading, as well as a good understanding of the risk/reward ratio when deciding when to enter and leave a trade (i.e. stop loss and profit targets).
Technical indicators, which are either leading or trailing, are used by swing traders. Relative Strength Index (RSI), Stochastic Oscillator, and On-balance Volume (OBV) are examples of momentum indicators, while Moving Average Convergence Divergence (MACD) and Bollinger Bands (BB) are examples of trend and volume indicators, respectively.
Take a look at our in-depth article "Best indicators for swing trading" for additional information about swing trading.
- Day trading:Day trading, unlike swing trading, entails buying and selling assets on the same day. Volatility is the crucial term here, and it can be a double-edged sword. Day trading can make you a lot of money if you play your cards well, but it can also make you lose your shirt if you make a few mistakes.
Day trading bots can make your trading life easier by removing part of the need for and stress associated with sitting in front of a computer all day. Because bot trading is dispassionate, it can help us overcome psychological issues like FOMO (fear of missing out).
Because day traders seek to profit from volatility, they place a premium on volume and liquidity, which is why technical analysis reigns supreme (e.g. identifying entry and exit points for trades). Chart patterns and technical indicators will also be used by day traders.
- Scalping:While day trading is one form of trading method, there are others, including scalping. Scalping is a popular short-term trading strategy in which traders attempt to profit from minor price swings that can result in large profits.
Scalpers, unlike swing traders, seek to profit from short-term price variations rather than broader price swings, which necessitates a solid understanding of market dynamics as well as quick thinking and even faster decision-making skills. Scalpers typically trade in shorter time frames, such as 1-hour, 15-minute, 5-minute, or even 1-minute intraday charts.
- Purchase and hold:Although not a true strategy, "buy and hold" deserves attention because it is a popular passive method among traders. Traders simply buy big amounts of a specific asset and keep it for an extended length of time, as the term implies.
Because you are not actively trading when you buy to hold, you are not profiting from the power of algorithmic trading. Technical indicators, entry price points, and timing become largely immaterial. You're simply waiting on an asset in the hopes that it will increase in value over time.
