Crypto Trading Bots: Either The Best Or Worst Decision You’ll Ever Make

Last Updated July 23rd 2021
7 Min Read

Crypto Trading Bots

Given the rapid automation of digital services worldwide, it’s no surprise that crypto trading bots are also increasing in popularity.

Trading bots are defined as automated computer programmes designed to trade different cryptocurrencies.

If you want to know why crypto trading bots can be either the best or worst decision you’ll ever make, simply keep reading on.

Also, do not hesitate to sign up for our cryptocurrency trading course to become a pro in cryptocurrency trading.


The History of Trading Bots

Blockchain technology can reshape our world to a point of no return, with cryptocurrency trading being one of the most popular financial markets. In fact, there are more than 47 million Blockchain wallet users across the globe, as of March 2020.

Believe it or not, the history of trading bots dates back to the 50s. It was Richard Donchian, known as the father of trend following, who introduced the idea of an automated system to follow certain trend rules. A few decades later, rule-based trading became highly popular.

Today crypto trading bots have the potential to reshape the whole industry. These computer programmes are capable of processing high volumes of data in order to maximise profits when buying and selling cryptocurrencies.

Interestingly enough, figures show that around 75% of trades around the world are done via automated platforms.


Crypto Trading Bots: The Best Decision You’ll Ever Make

advantages of crypto trading bots

Cryptocurrency trading is an expanding field that is known for its high volatility. As trends keep changing all the time, trading bots can be more than handy.

Trading bots offer numerous advantages as they are programmed to analyse complex data, including market volume, prices, trends, and trades. 

Moreover, crypto trading bots don’t need their beauty sleep. So, no need to worry about your holdings all the time - simply enjoy the company of your loved ones and get some rest!

Once programmed, trading bots are there to analyse the market 24/7, which makes them ideal for busy traders. With cloud-based bots, you can even turn your computer off while still trading.

Crypto trading bots benefit not only traders who do not have the physical time to monitor the market 24/7, but enthusiasts who do not trade full-time.

Trading bots also allow users to explore different market strategies and trading ideas. Backtesting, for instance, can help you analyse historic market data in order to explore possible outcomes in the past.

Moreover, trading bots do not stress over the volatility of the cryptocurrency market, they’ll never trade out of greed or disappointment; they are simply programmed to execute operations in an effective manner.

By eliminating emotions from trading, crypto trading bots facilitate large and repetitive tasks and reduce human errors.

In other words, trading bots can be the best decision you’ll ever make:

  • They are able to analyse pre-defined criteria and complex metrics in a timely manner.
  • Crypto trading bots facilitate the monitoring of market data 24/7.
  • They guarantee high-efficiency and multi-tasking.
  • Trading bots are immune to the emotional aspects of trading and human errors.


How Do Trading Bots Work?

Despite the wide range of crypto trading bots available on the market, we should note that all crypto trading bots have a few features in common.

Trading bots implement the following aspects: backtesting, strategy implementation, execution, and job scheduler.

Backtesting, as stated earlier, allows users to collect different historic market data, including slippage and fees, in order to analyse it.

Strategy implementation is critical in the world of cryptocurrency trading. We’ll discuss possible strategies in a bit.

Execution, on the other hand, allows users to test their ideas and strategies in real-time.

After the execution stage, it’s time for the complete automation of the process and set-up of a job scheduler.


What Are the Best Crypto Trading Bot Strategies?

crypto trading bots strategies

Cryptocurrency trading is a complex and changing field, so traders must invest a lot of time in research and practice in order to establish a successful trading strategy.

Here we’ll discuss some basic trading strategies that can help traders become pros in cryptocurrency trading.

Note that different strategies can be implemented in different crypto trading bots.

  • Arbitrage bots are based on the idea of cryptocurrency arbitrage trading. Bots are programmed to track different exchanges and execute tasks simultaneously. For instance, trading bots can buy when the price is low and sell the second the price goes up.
  • Market making bots are also popular. They are based on the so-called market making strategy in which traders buy and sell continuously. Profit is made from the difference between the buy and sell prices. If X is trading at £200, bots can make a trade for £199 and sell for £201, making a profit of £2.
  • Trend trading is another strategy that allows bots to execute trades based on specific trends and movements. The use of technical indicators here is crucial.
  • Portfolio automation bots, on the other hand, can help traders maintain their portfolio flawless and automate burdensome repetitive tasks, as opposed to active trading.
  • Mean reversion bots allow users to analyse the currency in relation to its historical fluctuations and average, assuming there’s always a stable trend and prices will reverse back to the mean.
  • Last but not least, automated crypto trading bots allow you to learn from the pros in the industry and mimic their strategies.


 Crypto Trading Bots: The Worst Decision You’ll Ever Make

disadvantages of crypto trading bots

Though trading bots have numerous advantages in the constantly changing world of cryptocurrency trading, the truth is that they can become the worst decision you’ll ever make.

First of all, crypto trading bots are extremely expensive. Thus, traders should do their research and make sure the bot they are using is reliable and profitable.

Transparency is another important factor to look for when choosing a trading bot. It’s not a secret that reputable developers can provide higher standards and transparency compared to dodgy platforms.

Inexperienced users are not encouraged to use crypto trading bots. After all, trading bots require expert-based configuration and monitoring. Without monitoring, the use of automated systems can lead to large losses, especially in volatility times.

Note that failing to set stop-loss limits can also play a bad joke on inexperienced traders.

On top of that, when it comes to crypto trading bots, many security concerns arise. Bitconnect, for instance, was one of the biggest cryptocurrency scams and claimed to use a trading bot. 

Though blockchain systems are hard to hack, hackers often target bots as these systems have access to your currency. That’s why users must always keep their keys safe and switch off automated withdrawals.

In other words, trading bots can be the worst decision you’ll ever make:

  • Crypto trading bots can be highly expensive.
  • They require configuration and monitoring.
  • Automated systems are not suitable for inexperienced users.
  • Trading bots come with various security risks and poor quality software concerns.


Crypto Trading Bots: Which One to Choose

choosing crypto trading bots

The cryptocurrency market is expanding constantly, with more and more crypto trading bots being developed every day.

Different trading bots support integration with different cryptocurrency exchanges (for example, Kucoin) and are available at different rates.

Though there’s no one-size-fits-all approach to trading, good crypto trading bots should come with a large set of strategies and user-friendly interface.

Though you have to do your own in-depth research, recent searches show that the most popular crypto trading bots you could consider when investing in cryptocurrencies are:

  1. Cryptohopper
  2. Gunbot
  3. Haasbot
  4. 3Commas
  5. NapBots
  6. Zenbot
  7. Gekko
  8. Crypto Trader
  9. CoinBot
  10. CWE

Note that we are not affiliated with any of the above, so always check user reviews for further details and user experience.


Key Points

  • Crypto trading bots are software programmes based on different trading strategies and algorithms.
  • Trading bots allow traders to make trades based on profound analysis and technical metrics in order to make a profit.
  • They can monitor market trends 24/7 eliminating emotions and human error.
  • Additionally, these systems can operate on the cloud.
  • Around 75% of cryptocurrency trades are executed via automated platforms.
  • Crypto trading bots, however, require configuration and monitoring.
  • Such automated systems can be extremely expensive.
  • Security risks should be considered before using a trading bot.
  • Though there are different crypto trading bots available on the market, trading bots should guarantee high efficiency, reliability, profitability, and transparency.
  • User-friendly design principles are also important, especially to help inexperienced users to get started.
  • Some of the most popular crypto trading bots are Gunbot, 3Commas, CoinBot, and Haasbot.

To sum up, trading bots have different advantages and disadvantages. They can be either the best or worst decision you’ll ever make. While trading bots can help you tame the volatility of the cryptocurrency market, they can lead to huge losses without proper monitoring and security. Thus, do your research before choosing a crypto trading bot.  

If you want to learn more about crypto trading bots and become a pro in cryptocurrency trading, then do not hesitate to sign up for our course.

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