In this article we’re going to take a look at Crypto Currency Trading Bots, What they are, the associated Pros and Cons, What’s available on the market, How you should be using them and whether or not you should be using one. I’m going to make the assumption that at least most of you reading this article have already attempted some form of day trading and those of you that are new to this base are probably contemplating giving it a go and who can blame you, there is such a huge potential for profits out there. Even in a sideways market there is profit to be had.
Crypto Trading Bots Overview
We all know the cryptocurrency market is global, it’s 24 hours a day, 365 days a year. It just does not quit and there is absolutely nothing worse than going to bed sleeping soundly all night. When you wake up and find that there’s been a massive move or a flash crash in the middle of the night. You have missed out on a huge opportunity to make some serious money. This is the reason that most people look at cryptocurrency trading BOTS. Now before we get into crypto currency trading BOTS, there are a few other ways to approach day trading and make the most of it without missing opportunities.
You could set alarms on your favorite portfolio tracker for a price, if hit your target and the alarm goes off and you can wake up at 2:00 in the morning or bleary-eyed to execute. The trade could convert your funds back into your main trading pair whether that’s Bitcoin, a Etherium or USD and just wait it out for another opportunity to present yourself and let’s face it.
Opportunities in Crypto Trading with Bots
This is the cryptocurrency market, there are plenty of opportunities out there, it’s not such a big deal if you miss one. You can leave your funds on the exchange and set your buy and sell orders and hope them to be triggered overnight and when you wake up in the morning, you can have your fingers crossed that all your money is still there and the exchange hasn’t been hacked and you’ve lost all your funds. Exchanges are regularly being targeted by hackers and it is just not safe to keep your funds on an exchange so I do not recommend this to anyone.
Finally stop day trading, just do your research find a company or a start-up, you believe in that, you believe in the tech, you believe in the team, invest the amount that you decided you want to invest in this company and leave it alone, just wait, play the long game after you’ve read all those options we can start to think about trading Bots.
what a trading bot is
So those of you that have never heard of what a trading bot is. In simple words trading bot is a computer program which do trades on your behalf on given set of instructions. You would connect this trading bot to your exchange through an API. This basically gives the computer program permission to act on your behalf whilst you are not logged in. It sounds scary, because you have given over access to your account but what happens if this code is compromised in the program.
You can tell in exchange what actions it will allow the API right to undertake, so you can allow buy and sell orders but disable withdrawal actions you can also limit an IP address, only allowed access if it comes from your own personal IP. Now there are issues that you may run into with this but that’s not important right now, anyhow back to the program. The program will read an exchange and when it’s set, parameters are triggered by the information it receives from the exchange. It will execute the trade automatically whilst you are asleep or away from the computer.
Also Read : Bitcoin Era
Bitcoin Trading Bots Pros & Cons
Trading Bots Pros
So let’s talk pros and cons and it’s always nice to start with the good stuff so we’ll start with the pros you can now trade 24 hours a day, seven days a week, 365 days a year without interruption which is absolutely amazing. There’s no emotion involved so there’s no FOMO, there’s no panic selling, there’s no revenge trading on a bad trade.
The parameters are met for it, to execute a trade that is exactly what it does. We have the ability to back test trading strategy this means that we can take our trading strategy and compare it to the historical data within the market to see how it would do. This gives us a level of security, without it we just would be running blind.
Plan your strategy
We can now test our strategy in bear cycles at bull markets and sideways markets so that we now know which strategy to implement given a current trend in the market. We don’t need big expensive four screen PC setups and although kicking out your desktop with four screens or fill to the bursting with different charts of different kinds on different exchanges does look badass and sure as hell, it may impress family and friends, it’s just unnecessary.
A trading bot can access and simultaneously carry out of trades across multiple trading pairs on different exchanges and all of this from a single Windows desktop or Apple Mac or a laptop in the comfort of your own home now. You can be forgiven for thinking okay this is a money-printing machine, let’s get the ball rolling and just watch that money pour in.
Also Read: Bitcoin Billionaire Review 2020
Trading Bots Cons
There are cons associated. This is not just a set and forget way of trading you probably guess the first one. it’s scams, they are everywhere, it’s really hard to find a legitimate project as everybody is out there trying to get your money for absolutely nothing, even if even some of the legitimate ones are just so poorly coded that they have no hope in hell of actually making you a single profitable trade.
I know this from experience, unfortunately now there are things that you should be looking out for because more often than not if it sounds too good to be true then it probably is and businesses and companies that are promising you guaranteed high profits for very low one-off pricing, the chances are these are scams and you are never gonna see your money again.
Learn from others experience
Have a look at other people’s experiences as well hit forums like Bitcoin talk or reddit and discuss with other users, where the fallings are or whether they’ve had success and do your own due diligence.You should also look for free trial offers because developers that know the code in their program is shoddy. They do not want to give it away for free and allow you to trade with it and learn.
to think of, if you are running on a desktop at home, you’ve got power outages, to contend with, you know the wear and tear of a desktop they do just give up and die. You have internet outages and various other things that could all prevent you from trading. We also have to be careful with back testing and although I touted it as a pro there is a negative side to it as well because we are looking at historical markets.
Experiencing the market
It’s very easy to be able to over complicate a trading strategy so that you end up with 100% gains and absolutely no bad trades whatsoever and when you take it live, you find it absolutely shocking. You will learn this with experience. If you’re tweaking it to a historical market that’s just not going to repeat in that same order again. It’s very unlikely it’s going to work the same way. Don’t be chasing 100% or 200% gains with zero losses you know you are going to execute bad trades even with the trading bot.
Look at a long period of time, this strategy is profitable over an extended period of time and of course it doesn’t need to be monitored it’s not like you can just set this thing running leave it on and comeback in a few months and just collect your gains that is not how it works.
Understanding Market Behavior Pattern & Risk
The market is cyclical, it changes all the time. Trends come and go very quickly and your trading strategies need to react as well. Computer programs are infallible they contain books. They know software has to be updated because there’s faulty code in it. Your internet connection could have a high ping on it therefore the information has been sent backwards and forwards. It’s delayed, which means you’re executing slow trades and one bad trade could snowball into a whole series of losing trades and wipe out your entire portfolio for trading. We have to remember that markets are cyclical, bear markets, sideways markets, bull markets, they will repeat although that you know the candles will be different, the cycles are the same. We should implement different strategies for different markets so keep that in mind when back testing.
Diversify your Fund to Manage Risk
Moreover you know going forward into the live trading that can change and you will need to react accordingly and of course there is the biggie if you are operating a trading bot. It means that your funds have to stay on an exchange for the Bot to be able to access them. I don’t recommend leaving any funds on an exchange and this is one of the big drawbacks for the trading bot. You do have to leave them there, if you diversify the amount across multiple exchanges so you have small amount scattered over several exchanges.
This is sort of a way of managing your risk because if one of the exchanges gets hacked, you’re only losing a small portion of what you’ve allocated for training. It’s also very important to remember, if you are successful in your trading and you start to accumulate some money, you need to take it off the exchange, store it in a cold wallet and leave it.
It’s very tempting to start leaving your profit on the exchange so that you’re then trading with higher amounts and chasing that bigger and video game but sooner or later you will get burned and you will lose that and you will only have yourself to blame if you haven’t taken your profits so please take profits on a regular basis okay so what options are on the market now there’s absolutely tons out there I’m just going to name three of the most popular. There are a lot more legitimate projects out there.