Automated trading platforms operated by crypto trading bots are rising in power. The crypto market needs 24/7 attention and is highly volatile, which is why bots are becoming prevalent. Bitcoin storm auto trading is catching the attention of investors.
The cryptocurrency trading market allows a high opportunity for traders to gain. However, it is not always humanly possible to react quickly enough to the changing price chart. There are moments where the exchanges slow down, and transaction times are delayed. As the market is always active, it becomes challenging to dedicate so much time to the market to achieve the best trades.
The immediate solution to this is bots. These automated tools are programmed to conduct trades as per a set of trading rules given by the user. They are capable of executing transactions on behalf of humans. But whether to use automated bots remains a controversial topic.
The cryptocurrency trading market allows a high opportunity for traders to gain. However, it is not always humanly possible to react quickly enough to the changing price chart. There are moments where the exchanges slow down, and transaction times are delayed. As the market is always active, it becomes challenging to dedicate so much time to the market to achieve the best trades.
The immediate solution to this is bots. These automated tools are programmed to conduct trades as per a set of trading rules given by the user. They are capable of executing transactions on behalf of humans. But whether to use automated bots remains a controversial topic.
Advantages of Automated Systems
Cutting back on Emotions
The market minimizes the chances of emotions overlapping throughout the trading process if you have a computer monitor. As the feelings are kept in check, traders find it easy to stick to the initial plan. Every trade order is set to execute automatically, and once the trade rules are met, there is no way traders can hesitate or question the trade. Not only traders who are not confident to “pull the trigger”, but also people who overtrade benefit a lot from automated systems.
Backtesting
Backtesting is a way of testing a strategy according to historical market data. For automated trading to be successful, all rules need to be definite as there is no room for guesses. Traders can tally the precise set of rules with historical data to gain confidence in the strategy before live trading. Backtesting proves to be of great help to traders as it helps evaluate the plan and rectify if necessary. It also predicts the system’s expectancy, meaning the average amount that a trader can gain or lose per unit of risk.
Maintaining Discipline
In automated trading, trade rules are established in advance, and the responsibility of execution is automated; hence Discipline is preserved even in most volatile situations. Sometimes people get carried away in the desire to earn a little more profit from the trade, and at other times, Discipline is compromised due to the fear of bearing a loss. Automated trading helps in maintaining a balance because the trading plan is supposed to be followed precisely.
There are also fewer chances of “pilot error.” You will never hear cases where an order to buy 100 bitcoins has been incorrectly entered as an order to sell 100 bitcoins.
What traders often fail to do is ‘plan the trade and trade the plan.’ Despite a trading plan having the potential to gain money, traders divert from the rules, dodging any expectancy the system had planned. Automated trading systems allow bitcoin traders to achieve consistency.
Generate Income
Crypto assets are very different from stocks. They will not earn you dividends. Investors think of crypto assets as commodities. Hence, there is no point in holding onto a commodity in a bear market as you will not receive any return apart from price appreciation, which has no possibility in bearish conditions.
Trading bots allow crypto holders to have a passive income by leveraging their assets through trades. It is evident that this way of Income is not very safe and reliable than receiving dividends, but it is one form of Income for people planning to hold their assets for the long term. Automated trading depends on the strategy a trader designs. If it succeeds to perform well over a consistent period, the trader can earn a long-term passive income. For freshers who do not have experience in trading can use ‘copy trading platforms’, allowing them to take inspiration from professional traders and set their algorithmic trading strategies.
Risks of automated trading
Trading bots are only another tool.
They cannot promise you a guaranteed profit. Automated trading needs human supervision. Crypto market conditions are extremely volatile, so the traders need to closely examine where the market is headed and adjust the parameters accordingly.
Mechanical failures
The system is not infallible. Sometimes trading platforms only allow a trade order to be stored on a computer and not a server. In case the internet gets disconnected, the order will not get sent to the market. Bots can sometimes get bugged, or suffer from poor programming, and they might also get confused by unusual market conditions. A flash crash or a major news event can change the Bitcoin market drastically in moments. It is better to start with small trade sizes.
Scams and hidden fees
Bitcoin trades being unregulated and the prices booming, can attract hackers. There are unethical crypto trading bots specifically designed to exploit traders by hacking their data and stealing funds. Hence, check the credibility of the platform you are using, check reviews, and connect with the support team.
It is essential to have a background check. Many bots only provide marginal returns even when programmed correctly. Many bots are not designed well. The crypto bot space, or for that matter, the whole cryptocurrency world is not regulated.
The use of bots can be tricky. A successful utilization would require intricate knowledge of the cryptocurrency market and a supportive investment plan. The bot is a beneficial tool to assist cryptocurrency trading for investors. But for some, it might only prove to be an inadequate service.
Over-Optimization
There are chances that the strategy employed through backtesting can give a good impression on paper but perform terribly during live trading. Excessive scrutinizing can produce a trading plan which is not applicable in a live market.
Strategies for Automated Crypto Trading
Automated trading bots allow you the scope to change configurations when needed to implement different trading strategies. Whether it’s a simple trend-following strategy or a more complex one that deals with a wide range of data points, these bots are highly customizable.
- Following the trend
This strategy aims to follow the directional movement of an asset and make a profit from the momentum. If the asset is trending upwards, this strategy can take you far, and if it is pointed downwards, you go short.
- Arbitrage
Arbitrage trading takes advantage of the difference in the price of an asset among various markets and exchanges. The discrepancies are huge for a new market that is just emerging, but prices are tight when the market grows.
- Market making
It is a strategy to vigorously buy and sell bitcoins to gain from the difference in the buying and selling price.
- Copy-trading
Anyone who wishes to step into an automated crypto trading world with minimal experience can benefit from this trending strategy. Copy-trading exposes you to a social community where people with experience help you and improvements are noted in a leaderboard. When a copy trading user gains experience, it becomes easier for them to avail this feature.
When to use Crypto trading bots?
- Repetitive task
Trading often involves repetitive steps that consume a lot of time and effort. A trading bot will automatically copy and paste specific tasks so that the trade can be conducted smoothly. Period rebalances the best way to make use of bots.
- Timing
It is necessary to set the time to achieve a higher degree of accuracy during business. Every trade you make will determine your potential earnings. Let’s face it, the price of Bitcoin is declining and you are planning to sell your position at the moment the price hits the 8,750 support line. Doing this manually is a lot of effort and anxiety as you have to observe the price chart patiently. There are chances you might miss the price. But a bot that is programmed to execute at the correct time will not fail.
- Day trading is a full-time job.
It allows you to sit 24/7 in front of the computer & monitor to evaluate the price chart. This kind of research is a difficult task when done single-handedly. The trading process also needs repetitive tasks to be carried out. A trading bot can take away those responsibilities from you.
- Complications are handled well.
Processes like ‘smart order routing’, need to go through numerous trading pairs. Every pair needs to be checked according to its timing, asset quantity, and trading price. The whole process needs to be finished within a specific time limit before the market conditions can change. Performing such complex strategies is humanely complex. Trading bots make things easier.
Cryptocurrency trading bots allow inexperienced traders to try their luck. They make the process of generating profit from your investment a lot easier. It takes away the stress, repetition, and boredom that trading involves. However, it is very important to choose the right kind of platform.
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