One of the trends that are most talked about right now is cryptocurrencies. But, they are extremely risky. This article will teach you how to trade cryptocurrency as a professional.
AI trading bots can help you generate consistent profits by analyzing market data. This article shows you how to use them to profit from Bitcoin, Ethereum, Litecoin, and more.
Learn 6 of the Best Crypto Trading Bots Strategies
The bots for trading in crypto are automated computer programs that buy and sell cryptocurrency at the appropriate timing. Their aim is to earn as much profit for their clients as is possible. How they achieve this is by continually monitoring the market and reacting to a set of rules. You can customize how the bot interprets market developments, such as volume, order, price, time, and so on, depending on your preferences.
Trading bots – A little background
In 1949, Richard Donchian came up with the idea of an automated trading system after he came up with rules to purchase and sell funds. Famous traders such as John Henry adopted the idea of trading based on rules in the late 1980s. Trading bots have been a popular segment of the market ever since. But, they’re usually costly and not accessible to the common investor. Bloomberg terminals are expensive. Bloomberg terminal is typically more than $10,000.
There are two major uses that trading bots can be used for. Firstly, investors can use bots to make the whole process a lot simpler and streamlined. Bots are able to manage things such as portfolio diversification, index building as well as portfolio rebalancing, and more.
The second scenario is more sophisticated and complex. In this scenario, the bot will attempt to outdo the market and make consistent profits. This strategy isn’t without its difficulties.
The game has completely changed by introducing cryptocurrency trading. The crypto market is open all hours of the day and can be extremely unpredictable, which is why bots are more frequent than ever. Many people trade Bitcoin on a regular basis but don’t have the time or capacity to conduct a dynamic analysis of market trends. Trading bots that trade on cryptocurrency are an excellent tool to make trading more efficient.
Building blocks for a Crypto trading bot
These are the features that all bots for trading share:
- Backtesting.
- Strategy Implementation.
- Execution.
- Job scheduler.
#1 Backtesting
Before you can engage in any trading with your bots, it is essential to backtest it against data from the past. You must make sure that the backtest you run is as accurate as it can be. This can be done by taking into account latency, slippage, and fees for trading.
Accessing exchange APIs allows you to collect market data that is of the highest quality. Libraries like CCXT allow you to interface with various exchanges.
#2 Strategy Implementation
The decision to determine the strategy for trading that your bot will use is crucial. At this point you will define the logic and calculations that will help your bot to determine when and what to do. After creating the strategy, you have to test it to observe the results. In a moment we will go over the strategies you can use.
#3 Execution
Do you have a back-test of your plan?
The next stage is to implement the process in real-time. This is where the logic that you have programmed into the bot will be converted into API requests that the exchange will be able to understand. Some bots might even have let you simulate your strategy live using fake money.
#4 Job Scheduler
After you have successfully tested the strategies in real-world situations then it’s time to automate your entire procedure. It is necessary to create a job scheduler in order to execute your trading strategies in a way that is automated.
What is the best time to use the best time to trade with crypto bots?
We’ve touched on this issue before but there are numerous functions that a well-executed bot could carry out for you such as rebalancing portfolio management as well as data collection, smart order routing, etc. When you are creating and programming your bots, make sure you follow the basic rules of automation:
Automation isn’t completely hands-free. Automation doesn’t mean you need to give up your touch.
The biggest time-consuming tasks that tend to be repetitive and cause unnecessary hassles are the ones that should be automated.
What could you do to improve trading bots? Let’s look at it in depth.
#1 Repetitive Tasks
Administrative tasks that are repetitive consume a lot of time and energy. A trading bot will allow you to virtually “copy and paste” specific tasks so that you can conduct trades with ease. A bot can be a great help in repetitive tasks such as periodic balance adjustments. You can only do hourly rebalances if you are managing an hourly portfolio. This means you’ll have two options to choose from:
Set the alarm every hour to balance the portfolio, and you’ll lose mental sanity along the way.
Create an automated trading system and program it to adjust your portfolio every hour till the time of expiration.
#2 Timing
Timing and achieving the highest level of precision when trading is important to be successful in trading. Each trade you make can make a significant difference to your earnings potential. Let’s look at an example. Let’s say the price of Bitcoin is declining and you wish your position to be liquidated when it reaches the $8,750 support threshold. You must be careful and patiently watch the price chart before pulling the trigger. It’s easy to program the bot to monitor the market and make trades at the right times.
#3 Day trading can be an opportunity to work full-time
There are a lot of everyday responsibilities that can prevent us from sitting in front of computer screens and monitoring the price charts 24*7. And, think about the hassle that you’ll experience if you don’t have a well-thought-out and well-diversified portfolio! It’s not always possible to conduct all of the research you have to do each day. Additionally, as we’ve previously mentioned the process of trading involves numerous repetitive and tedious tasks. These tasks that are repetitive can be automated with a trading bot which makes it simpler for you to complete your trades.
#4 The market is never quiet
The cryptocurrency market is never shut, as we’ve mentioned before. There are literally thousands of exchanges across the globe, offering the services they offer 24 hours a day. This may sound incredible, but the truth is that prices can change at any time. That means in order to make sure that your investments are effectively leveraged efficiently possible, it is important to remain awake at all times and carefully review the price charts. Since that’s humanly impossible there are two choices before you:
Not make the most profits you can since you’ll need some personal downtime.
To automate your strategies you can use a trading robot while you’re sleeping.
5 Complications are easily simplified
Take the smart order routing example.
The idea is to route trades through a variety of trading pairs.
Each trading pair must be selected with care by its timing, asset quantity, and trading price. pricing.
The entire process must be completed within a specified time frame before the market conditions alter.
It’s easy to comprehend, doesn’t it? However, the implementation of this profession isn’t always easy. This is only one of the many examples of the many complexities that should be factored into training. Some strategies are nearly impossible to implement.
These complicated strategies can be automated using trading bots.
What strategy should I implement into my bots?
Here are some ways you can incorporate into your bots. The information in this section is derived from this article.
#1 Mean Reversion
The method of mean reversion relies on the simple idea that if a coin’s value fluctuates from its average, it will eventually revert to its original value. This holds true for traditional and cryptocurrency markets. This is due to the psychology of markets. Let’s say we have crypto named “X,” which has an average value of $1.
If the price for X goes up to $1.25, traders will sell the asset in huge quantities, which reduces the price to $1.
If the price falls to $0.75 then the market will see this as an end and begin to accumulate as much as possible to bring the price up to $1.
#2 Momentum Trading
A momentum investor judges the fluctuation and ebb of the market based on its momentum. The ideal scenario is to ride a positive momentum wave with your assets and then immediately sell them off when the market momentum reverses. The fundamental premise behind this is the belief that the price of an asset can rise above its average, only to run out of momentum and drop. In this case, it is crucial to know the exact timing for the buy-in and sale-off is critical.
#3 Arbitrage
The price of an asset can differ across exchanges. This mainly happens due to fragmentation in prices across marketplaces. Eg. the X exchange rate could be $1.01 in Exchange A and $1.02 in Exchange B.
The Arbitrage strategy lets you benefit from trading and buying using the same exchange. It is necessary to sell X and then buy X almost simultaneously in order to take advantage of these price differentials.
#4 Naive Bayes
Machine learning is used by the Naive Bayes trading algorithm to forecast the probabilities of an event. You can provide relevant information to your bots so that it can determine the right time to enter and exit.
#5 Natural Language Processing, (NLP).
The price of a cryptocurrency asset can vary dramatically based on fundamental news such as tweets or articles. Using NLP programming, one can teach their bots how to programmatically interpret words and phrases and analyze the underlying sentiment. Eg. News about partners is usually bullish. If your bot can see an article that reads “X is partnering with B to help increase adoption in mainstream,” then it should begin accumulating this asset.
Different Types of Cryptocurrency Trading Bots
The five major types of cryptocurrency trading bots are as follows:
- Arbitrage bots.
- Bots for market making.
- Algorithmic trading bots.
- Bots for trading with technical aspects.
- Profile automation bots.
#1 Arbitrage Bots
These are the bots that are hardcoded using the strategy of arbitrage. Blackbird is one of the top arbitrage bots available on the market.
The Blackbird Bitcoin Arbitrage is a C++ trading system that does long/short arbitrage between Bitcoin exchanges. While the code will require some effort, however, it’s free to use. Blackbird isn’t a way to sell your Bitcoins, but it short sells Bitcoins through the exchange for short-term transactions. The reason it does so is because of the following reasons:
This approach is non-biased to the market.
Using this strategy, one doesn’t need to transfer funds between bitcoin exchanges. Both buying and selling are performed through the same exchange however, they operate independently.
#2 Market Making Bots
Market-making bots place several buys and sell orders in order to earn a quick profit. Eg. If X trades at $1 the bot will make a buy order of $0.99 as well as a sale order of $1.01. You will make $0.02 in the event that both orders are filled. HaasBot is one of the most effective market-making bots available.
The bot has been in existence since the year 2015 and is run in Rotterdam. These are the major features of Haasbot that you need to be aware of
Boasts the widest range of trading options. It operates 10 HassBots in parallel, has access to 20 indicators, employs various trading strategies, and is available on all major exchanges.
It’s created for traders who are not technical, so it’s pretty beginner-friendly. It does not require modification to its code.
It is hosted on the cloud so there is no requirement to download any files.
Three subscription choices are offered: 3, 6, and 12 months. Prices range from 0.04 BTC for a 3-month Beginner license, to 0.32 BTC for a 12-month Advanced license.
#3 Algorithmic Trading Bots
It is a program that runs on code that creates and executes signals for buying and selling in the market. The main parts of these bots comprise rules that signal when to buy or sell as well as rules that specify the time when the position should be closed in addition to rules that determine order size and allocation of the portfolio. Trality is a well-known tool for the creation of these bots. An algorithmic trading bot
Trality is utilized by traders with various experience levels and skillsets to develop robots to automate trades through its easy-to-use and all-in-one, cloud-based ecosystem.
With the built-in browser Python “Code Editor”, you can utilize its simple API and a list of technical analysis indicators to customize your bot. Additionally, the possibility of trading in addition to indicators for technical analysis is what keeps traders coming back to Trality. The real strength lies in the capacity to use math, statistics, and other sources of data to propel your robot to the moon and back. You can automate any advanced trading strategy with this tool all in one location.
Trality also has a product called the “Rule Builder” for those who do not have the ability to program. It allows users to automate and design their strategies without writing any code. The drag-and-drop interface allows you to combine pre-defined strategies and analysis indicators into one box.
- Proficient and beginner tools
- Cloud-based, which means your algorithms can run all hours of the day
- Fast and reliable backtesting module
- Modular pricing
- It supports all major exchanges.
- Rich documentation
#4 Portfolio Automation Bots
The bots are focused on helping users build, acquire, and maintain their desired portfolio instead of actively trading. They are designed to automate boring, repetitive tasks. HoldBot is a fantastic illustration of an automated portfolio manager.
Hodlbot maintains an index that consists of the top 20 coins by square root market caps. When prices fluctuate in any direction, the HodlBot automatically adjusts your portfolio by selling out-performing assets, instead of buying underperforming ones. Below are some of the features of Hodlbot to be aware of:
You don’t need to enter any other codes.
It is possible to try it for 7 days free, and then you will be charged $3/month.
Advanced options for portfolio customization that include automatic rebalancing and adjustable time intervals
Market indices that are well-studied and a backtesting tool.
#5 Technical Trading Bots
Bots for trading with technical aspects are the best all-time friend of traders who are conservative. They are among the most frequently used and well-known bots available on the market. They use signals and indicators to forecast future price movements and then utilize them to make money. 3Commasis one of the more widely-used technical trading bots.
3Commas has an online interface that doesn’t require any downloads.
It is not necessary to change the code in the backend.
There are two subscription levels that are available: Basic and Pro. The basic level costs $25/month while the Pro level is $84 per month and includes more features.
It can employ different strategies based on technical indicators.
Supported on the majority of the most popular exchanges.
#6 Automated Crypto Trade
Bitsgap is most well-known for its automated trading bots. Bitsgap is used daily by thousands of traders with diverse backgrounds and levels of skill to automate their trading.
Bitsgap’s algorithm relies on a simple but effective method called GRID. It spreads investment in a proportional manner within a range of trading that is predetermined by an individual trader. The bot will place an order for purchase whenever the limit order for buy has been fulfilled. And vice versa, a new buy order is placed under any full sell order. The bot trades non-stop so long as the price is not higher than the trading range.
Bitsgap algorithm was designed to maximize profit from buying low and then selling high every time the price changes. Automated bots come with all the risk-control options, including Stop-loss and Trailing UP. They also come with Taking Profit as well as a variety of exit strategies.
Check this video to learn how the Bitsgap cryptocurrency trading bot function:
- A cloud-based service, which means you don’t have to download anything
- Trading bots are based on an efficient and transparent logic
- Simulator to trade in DEMO mode, which is completely risk-free
- Backtested Strategies for a quick bot start
- 14-Day Trial for Free Trial
#7 Pre-programmed bots
Some platforms offer robots that handle all programming on your behalf. All you need to do is specify where you want to make trades and what amount. You can also set additional conditions like the time for which it will run and when to take profit or stop losses.
CryptX Terminal provides one of the most extensive variety of pre-programmed robots with an intuitive platform at an affordable cost. CryptX provides a range of portfolio management tools and trading strategies that include signal trading and arbitrage bots that include Bollinger Bands and MACD, OBV, and RSI. Connect to your accounts on the 10 most well-known exchanges with an API key and then launch your bots. You can also access backtesting data to check the performance of your bot against previous data.
Free accounts let you access one bot each day, on at least two exchanges. Paid plans let you connect to all exchanges supported, run up to 10 bots each day with 10 backtests ($37/month) or unlimited bots and 1000 backtests every day ($74/month). Other advantages include:
- Web-based interface that works in all modern browsers
- It is not required to know how to code
- 30-day trial for a professional plan that is free
What can I do to choose the best crypto trading bot?
These are the kinds of questions you should ask when selecting a trading robot:
Question 1: Is the team credible?
You can use a bot to manage your portfolio. It is crucial to ensure that the team that runs it has the highest quality and credibility. A quick checklist can aid you in this.
How many years of know-how does the team possess?
What do they have to prove their qualifications?
Do they have the capacity to sustain and grow a solid portfolio?
How well is the operation of the bot documented?
Where do they get their funds from?
Make sure that your team is as transparent as possible about their development. They’ll be held accountable for their actions.
Question #2: Does the bot use the strategy I want?
Knowing which bot is most compatible with your chosen strategy is vitally important. Visit the bot’s site to read the reviews and guides written by other users about it. It is also important to consider how involved you will be in the setup of the bot. It doesn’t make sense to sign up to a bot that requires more technical expertise.
Question 3: How solid is the backing provided by the team?
Next, you should assess the quality of support provided by the team. Can you easily get in touch with the team concerning general support issues or bugs? There is an easy checklist to prepare for the visit.
Does the company have an active community? The community is usually through a platform such as Telegram, Discord, or Reddit.
Are the team members in contact with these communities?
Are developers able to provide timely updates and solutions to possible bugs?
Question #4: How much is it?
As we’ve mentioned in the previous example The cost of the bot’s services could range from zero to up to $1000 per month. Although it is obvious that a paid bot will provide more value than one that is free, you must to weigh the pros and cons of using their services.
Question #5: Does it have the ability to adjust according to the market conditions?
Each bot will execute a strategy differently. If you are a fan of an approach that you like, you should check whether the bot is able to execute efficiently or not. It is not a good idea to lose any potential investments due to the ineffective execution of your strategy.
Question #6: Does it seem easy to use?
While they may be really helpful, the reality is that the majority of trading bots can be incredibly complicated. It isn’t easy for someone who is new to get into the backend. It is important to choose the right bot for your experience level. If you are just beginning your journey you might want to select a bot that isn’t packed with lots of fancy features, however, it is simple to use.
Crypto Trading Bots- – Conclusion
In conclusion, I’m sure you already heard about AI trading bots. But did you know that you could use these tools to benefit from artificial intelligence? By using AI bots, you can trade stocks, commodities, currencies, indices, ETFs, and even cryptocurrencies like Bitcoin and Ethereum. Not only will you have access to a wealth of information about the markets, but you’ll also be able to take advantage of the speed and accuracy of these automated systems. And if you’d rather stick with traditional stock brokers, you can still benefit from their services too. Just remember to always do your research before investing any money.
There you have it. The cryptocurrency trading robots can allow you to easily earn a profit on your investment. It also removes many of the monotony stress and boredom you would experience if you were to perform the task manually. However, as we have seen in the guide, these bots don’t follow a “one-size-fits-all” approach. You need to carefully study them and zero in on a bot that fulfills all your requirements.
FAQ
How Do You Trade Cryptocurrencies?
This article will teach you how to trade cryptocurrency as a professional with a little help.
What is a Trading Bot?
Trading bots that trade on cryptocurrency are an excellent tool to make trading more efficient.
What are the benefits of using bots?
Firstly, investors can use bots to make the whole process a lot simpler and streamlined.
What are the benefits of a bot?
Bots are able to manage things such as portfolio diversification, index building as well as portfolio rebalancing, and more.
What are the challenges of trading Bitcoin?
The crypto market is open all hours of the day and can be extremely unpredictable, which is why bots are more frequent than ever.
What is a bot for trading in crypto?
The bots for trading in crypto are automated computer programs that buy and sell cryptocurrency at the appropriate timing.
What functions can a bot do for you?
We’ve touched on this issue before but there are numerous functions that a well-executed bot could carry out for you such as rebalancing portfolio management as well as data collection, smart order routing, etc.
What are the biggest challenges facing trading bots?
The biggest time-consuming tasks that tend to be repetitive and cause unnecessary hassles are the ones that should be automated.
What is hourly rebalances?
You can only do hourly rebalances if you are managing an hourly portfolio.
What are the key factors to success in trading?
#2 Timing Timing and achieving the highest level of precision when trading is important to be successful in trading.
What are the risks of using a bot?
This means you’ll have two options to choose from: Set the alarm every hour to balance the portfolio, and you’ll lose mental sanity along the way.
What is Arbitrage?
#3 Arbitrage The price of an asset can differ across exchanges.
What is Naive Bayes?
#4 Naive Bayes Machine learning is used by the Naive Bayes trading algorithm to forecast the probabilities of an event.
What are the features of bots for trading shares?
These are the features that all bots for trading share: Backtesting. Strategy Implementation. Execution. Job scheduler.
What are the benefits of using exchange APIs?
Accessing exchange APIs allows you to collect market data that is of the highest quality.
What is Job Scheduling?
It is necessary to create a job scheduler in order to execute your trading strategies in a way that is automated.
