Best Crypto Trading Bots of 2021
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What Is a Crypto Trading Bot?
Crypto trading bots are essentially a set of programs that automate crypto trading on your behalf.
Essentially, the trader needs to pay attention to market statistics which are crucial in trading, then decide which cryptocurrencies they would like to buy or sell at what time.
The crypto bots automate the analysis and interpretation of the market statistics. That's because the bots can acquire market data, analyze it, measure market risk and purchase/sell crypto assets.
Having a crypto trading bot is like hiring an expert trader to execute trades on your behalf while you sit back and watch your profit grow. With the bot, you can, for instance, set it to buy more Bitcoin if the price goes below a specific limit.
For that reason, crypto bots are more time and cost-effective than hiring an actual human expert.
The basic principle that applies to crypto trading bots is that they are artificial intelligence-based software programs that perform specific functions based on pre-defined parameters.
Therefore, you no longer have to worry about missed trading opportunities.
Using a set of algorithms, you may purchase, sell, or hold assets in a fast, efficient, and automated manner at any time of day or night, from anywhere on the planet.
What are the Different Types of Crypto Wallets?
Cryptocurrency wallets are available in various formats, each with its own set of advantages and disadvantages in terms of trading convenience and security.
Different Types of Crypto Trading Bots
This section will now delve into the various types of cryptocurrency trading bots in the market today. The bots are widespread in cryptocurrency markets today, and they are designed around popular buying and selling strategies.
Currently, many companies are vying for market supremacy in the realm of automated bitcoin trading. Bots that interact with the most prominent exchanges are available in both downloadable and cloud-based versions.
Cryptocurrency trading bots come with a wide range of products. They include signals, indicators, and features for risk management that fit the specific trading methods. But still, how do you know which bot is ideal for your needs?
Trend Trading Crypto Bots
These sorts of cryptocurrency trading bots work by analyzing an asset's momentum and placing buy/ sell orders based on the results. Trend trading bots will take long positions when prices rise, while short bets are accepted when prices are falling.
Essentially, trend trading assumes that assets will move continuously in one direction, and these bots take advantage of this to make money for traders. Bots can use trend lines, price action momentum indicators, and other indicators to detect trends. When putting up new bots, traders should include indicators to guarantee that they execute activities related to the owner's goals.
Coin Lending Crypto Bots
One way to benefit from cryptocurrency trading is lending coins to the margin traders on the condition that they would pay them back with a higher percentage, resulting in a genuine return. This option is available on some exchanges, such as Poloniex, albeit it can be a time-consuming process. When margin traders pay back the coins and new loans are approved, users must manually define a set of parameters.
Using coin loan crypto trading bots, investors may automate this time-consuming process, cutting down on time it takes to discover the most significant interest rates and at the same time take advantage of any opportunities that emerge.
When using one of these bots, traders can create their strategy, continuing lending until interest rates reach a given level, choose from a variety of currencies, and set a deadline for the loan to be returned.
There are several free coin lending cryptocurrency trading bots accessible, and traders can locate more on exchanges that offer margin funding.
This bot makes use of the idea of arbitrage. Arbitrage is a deal that takes advantage of a pricing imbalance in different marketplaces or formats. This is especially true in inefficient bitcoin marketplaces. You can profit from the existing imbalance by buying and selling an asset at the same time.
Arbitrage crypto bots are thus configured to follow the price difference between the currency in several markets. Later, buy the coin at a lesser price and sell it at a higher price.
Arbitrage bots were particularly popular before the crypto craze of 2017. Still, they are becoming more difficult to exploit now that the Margin between exchanges is considerably narrower than it once was.
Market Maker Bots
Market maker crypto trading algorithms use order book spreads to grow returns for investors. As assets are traded more, their spreads will widen, allowing market maker bots to make more money.
Market maker bots generate revenue for their owners by executing orders at a higher rate than the market.
They keep an eye on activity to locate markets that could possibly have a wider spread all day, every day, in order to provide investors with volume, pricing, and time advantages.
The key here is constantly selling to investors at a value that's higher than the stipulated selling prices.
How Do Crypto Trading Bots Work?
Trading bots offer great speed and efficiency, fewer errors, and emotionless trading.
That's because they communicate directly with crypto exchanges and execute trades automatically depending on your own defined parameters.
Therefore, you must provide a trading bot access to your account using API keys (Application Program Interface) in order to trade on an exchange, and you can revoke access at any moment.
Trading bots will essentially work in three main stages. We have the first step, which is the signal generator, then risk allocation and finally execution.
- The Signal Generator: Essentially performs the functions of a trader, making forecasts and identifying potential trades using market data and technical analysis indicators.
- Risk Allocation: as the name implies, this is when a bot allocates risk based on a set of parameters and regulations established by the trader, which often include how and to what extent capital is allocated when trading.
- Execution: This is the process of actually buying and selling cryptocurrencies based on the signals given by the pre-configured trading system. The trading signals are usually converted into API critical requests that the crypto exchange can quickly process in the execution stage.
Choosing the Best Crypto Trading Bot
Undoubtedly, crypto bots are crucial elements to any trader's life. That's because they reduce your screen time while also removing emotional trading into your strategy. But just as well as these bots are, finding the best trading bot is equally essential.
Typically, choosing the wrong bot will likely cause catastrophic effects on your trading capital. Thankfully, this piece is for you. We will highlight some of the things you should have in mind when picking a trading bot.
Security is one the most crucial elements of cryptocurrency trading, even more so when dealing with a trading bot. I mean, how else would you get a huge profit if your capital is not safe and secure? That's why security is one of the first things you need to consider when picking a specific crypto bot.
Take your time and find out the level of security of the bot before you invest in it. More importantly, you can also check out the online reviews from their previous clients and see if there's any security issue. That will potentially help you make a wiser decision.
Another crucial thing to consider is if the platform offers free trials. That's the only way to verify that the bot is working effectively fully. It will also help you get acquitted to it before you consider purchasing the item.
In most cases, trading bots are not free. You will have to pay a monthly subscription or a one-time fee. Either way, you will have to part with some cash to use this bot. More importantly, even the free versions have a paid feature that could potentially improve your trading experience. So before you fully commit to a given bot, it would help if you tried out their free version first. That will help you determine if the bot can help you achieve your goals or not.
Social trading allows you to check on other traders and their strategies. Of course, you will want to develop your signals within the bot to personalise it. But it's always good to countercheck your work with other advanced traders in the same field. As such, always go for bots that have social trading so you can get help from other traders in the same area.
You will need to change a few settings in your bot to ensure it works according to your liking. Trading bots are handy tools, but you will have to take your time to ensure it fits your expectation and trading strategy. In truth, these items always need constant monitoring to ensure their effectiveness.
More importantly, you also need to have some bit of experience with trading before you go for trading bots.
Otherwise, you might end up picking the wrong type of bot since you can't comprehend its features.
That said, before you purchase a bot, ensure you have the chance to customise it depending on your trading strategy.
One of the most attractive parts of a trading bot is that it keeps trading for you around the clock, 24/7. And thankfully, the crypto market is always open, so this bot can continue working throughout.
That said, if the bot goes offline or has some glitches, you will miss out on great opportunities in the market.
Therefore, it's best to check online on the reliability of this bot.
Typically, you will get reviews about a particular bot online. These reviews represent the experiences other traders have had with the bot.
Ease of Use
Undoubtedly, most users are looking for a bot that's easy to use and doesn't have a steep learning curve.
The more complicated it is, the higher your chances of misinterpreting certain features within the work.
That said, look for a crypto bot with an intuitive interface that suits your specific level of expertise.
More importantly, you should check customer support. That's because if you hit a snag, you'll need the customer support team to help you out.
Above all, check out how the platform rolls out updates and whether they are sufficient to check for bugs promptly.
It will help if the trading bot aligns perfectly with your trading strategy since you will already anticipate what is happening.
Frequently Asked Questions
Investors can use cryptocurrency trading bots to gain an advantage over other traders.
Automating procedures and actions gives you a better chance to compete with those who want to generate more money.
Crypto trading bots that focus on momentum possibilities are a helpful tool, and arbitrage bots can be used to react to price imbalances across various marketplaces. Coin lending bots can take care of tiresome manual input, while market makers profit on spread changes.
Traders can significantly simplify their processes by combining all bots.