Unlike stock markets, the cryptocurrency market never stops. It can lead to very stressful scenarios for traders in this industry.
Due to the high volatility of the market, crypto trading bots are becoming increasingly popular. Programs monitor their positions constantly.
They do not stop working even when the trader goes to sleep. When a trader does everything manually, programs make transactions automatically and. As a result, they are faster. That’s why programs are more effective.
What is a crypto trading bot?
A crypto trading bot such as Zignaly is a software designed to help investors trade automatically round the clock. These programs come in different types, including programs for dealing with Bitcoin. The best Bitcoin lending sites focusing on the market situation, time, and parameters.
Benefits of using a crypto trading bot
- Lack of emotions. Traders, like all people, may find it difficult to control their emotions. Bots follow the given strategy without panic and hesitation.
- Saving time. With such programs, there is no need to constantly check the situation on the market. They do it themselves.
- Fast decisions. It is almost impossible for a person to place hundreds or thousands of orders per second.
- Programs do not sleep. Unlike the traditional stock market, the market works around the clock and seven days a week. It requires traders to be in front of the screen 24/7. Using a bot allows you not to sacrifice sleep.
However, these programs are not an independent passive source of income. They work exclusively according to the settings set by the trader.
Principle of crypto trading bots’ work
Crypto trading bots function according to special algorithms. These trading strategies are based on technical analysis of patterns. To conduct an independent analysis, you will need historical data on changes in the exchange rate.
After determining the patterns, you need to check the strategy based on the same historical data. Also, calculate the number of potential losses and profits. And if you are satisfied with the results, you can create the rules for the robot’s strategy on their basis.
Some programs additionally use indicators. These indicators allow you to analyze the current situation in the market. Others work only when certain market conditions occur.
The strategy of exchange and arbitrage bots can be very simple. With the rapid decrease of the currency, you need to buy it. If the price increases, it must be sold.
The algorithm can take into account recent historical data, indicators, and navigate by signals. In some programs, the algorithm does not change. Some of them can use additional parameters. This option suits well for experienced traders who have their preferences.
A standard crypto trading bot can perform the following actions:
- Evaluate the market situation. Monitor the exchange rate for a given time, make a forecast.
- Create, sell or buy orders.
- Provide reports on the profit or loss received.
Types of crypto bots
As the crypto market develops, there are more and more platforms that provide crypto trading bots. Depending on the key functions, there are 3 main types of such algorithms.
These programs track trends in the exchange market and make transactions based on this information. Bots react to events and predict the movement of the asset value. Often, such algorithms allow you to set limits for closing the transaction.
This allows you to lock in profits and avoid large losses when the trend reverses. By following the trends on the market, the bots can prove really useful to your trading strategy.
However, you don’t want to rely on them 100%. Even though they are very accurate, they cannot predict some dips or jumps that you might anticipate with everything that’s going on in the world and with your knowledge as a trader.
Such programs track the price of an asset on different exchanges. They buy an asset on the stock exchange at a lower price and almost instantly sell them on the stock exchange, where it costs more. However, many traders doubt their effectiveness.
This algorithm allows users to borrow their cryptocurrency to make a profit. You can set the rate, volume, and term of borrowing, but it is important to monitor the market to set the most suitable conditions for yourself.
They pretty much function as the banks, but for crypto. Keep in mind that you will have to return it as you earn profit and with interest as well. So don’t rush when you take it and try to set the best possible terms and see that the return is manageable quickly.
Now that you know what crypto bots are, you can definitely see all the benefits (and downsides as well). These programs can save time, speed up purchasing and selling activity and help you make a profit. There are different types of bots as well and you can only use some and not the others.
However, you can’t leave the algorithm unattended. You need to use it consciously. Remember, that bot is not a trader. Only a person decides which strategy to use, as well as what and how to trade. It is only up to you, and bots are more of a helping tool in the process. If you blame bots on your bad streak, remember that you’re just a bad trader or you made some bad decisions.