The Ultimate Guide To Crypto Trading Bots

Crypto trading bots have become a popular topic for countless cryptocurrency users across the globe. Searching for ways to market their own approach and also outperform the market. After dipping your feet into this interesting market for the very first time, you came across references to robots. To ease your boat to cryptocurrency trading bots, the subsequent comprehensive manual will function as your definitive source for getting started.

From the time you’ve reasoned this manual, you will not only better comprehend why trading robots are helpful, but the way to construct your own trading robots, which trading robots now lead the current market, and what exactly defining attributes to search for when choosing a trading bot.

An Intro to Trading Bots

Even a crypto trading bot is a software application that automatically trades online trades. Rather than manually entering every trade to the market, the trading bot can access information from a customers’ exchange accounts and automatically put transactions. The procedure is handled by computers, which delivers a degree of precision and speed which is not possible with people.

The strategies these robots employ are capable of accomplishing anything out of trading to build custom indexing approaches to innovative real-time arbitrage throughout exchanges. The options are nearly infinite. Every trading bot typically implements a trading system that is based on calculations which were made by the software developer.

The Way Trading Bots Work

Cryptocurrency trading bots operate by obtaining information on the market for an individual. Every user can give access to their own accounts into the trading bot by providing the bot that their API public key along with API personal (AKA key ) key. Both of these parts of data can be used as a means to inform the trade a bot has authority by you to get your trade account info.

The Purpose of Trading Bots

The core goal of trading robots would be to automate activities that are either overly complicated, time-consuming, or hard for people to perform manually. The elegance of those activities ranges from approving one trading plan on a single trading group to intelligently routing transactions between any advantage for a varied portfolio. Without constant attempts, some robots can allow users to execute an entire portfolio management plan, saving huge timeframe. Rather than requiring one to be online regularly to manually put trades and adapt your portfolio, then bots may take hands to implement in your plan evening or day.

Quality trading bots may help you save money by providing improvements within a manually implemented plan. Bots are quicker in collecting information, more exact if placing orders, and also may crunch numbers faster than any individual.

When to Use Trading Bots

The options are endless when it comes to robots. There are robots for example Indices, portfolio management, information selection, intelligent order routing, or anything else between. Whatever it’s that you would like to do, there’s probably a bot out there somewhere which can it.

That does not mean we ought to use a technical bot to accomplish each tiny job we would like to do. In reality, that will definitely wind up being more work than simply doing it . The target is to come across enormous tasks that have the maximum amount of your own time or will be the most complicated to execute yourself. Those jobs are ripe for the pickings when it comes to interfering with robots. You may still manually carry out the tasks which are rare or simple.

Before we begin searching for a bot, then consider the most awkward facets of cryptocurrency trading to you. Consider each one of the tasks that you do through the day. Produce a little collection of the biggest tasks that you want could be automatic, and that means it’s possible to spend time with your cryptocurrency portfolio.

To be able that will assist you consider tasks which may be automated using trading robots, the upcoming sections will describe unique techniques trading robots improve upon uslowly people. Consider all one of those aspects to obtain the ideal jobs for automation.

Repetitive Tasks

Repetitive tasks suck. Doing the same thing over and over again just means you’re consuming more of your time with that task than necessary.

Imagine there was a real life way to copy paste work. Essentially, copy the work you just did and repeat it again the next time.

That’s basically what we’re doing with a trading bot. By doing the work one time by setting it up with the trading bot, you can then copy that work over and over again until the end of time. You would be right to be excited by that concept.

Imagine you read this article which found that 1 hour rebalances historically outperformed alternative rebalancing frequencies. Now, you want to rebalance your portfolio every hour. That would mean every 1 hour, you would need to calculate the percentages of each of the assets in your portfolio, determine the optimal trades, actually perform the trades, and stay online the entire time. Let’s be honest, it’s an impossible task. Even if it was possible, any reasonable person would go crazy with the repetition.

Bots don’t have a problem with the mundane repetition. In fact, that’s one of the first reasons software engineers will automate a task, in this case rebalancing. Create the bot once and automate your portfolio forever. No more repetitive tasks!

Precision

Trading is a game of precision. New traders may not mind the imprecision of moving into and out of positions on a whim, but as we gain experience, many traders begin to grasp the necessity for being precise. Every trade can have an impact, so carefully select trades. Bots don’t have the concept of being careful, but they are precise.

Let’s consider an example scenario. Say we want to sell DOGE when the price of Bitcoin reaches exactly $100,000. Doing this manually would require incredible skill and patience. Manually implementing this strategy would probably end up with us accidentally missing the mark and selling DOGE when Bitcoin hit $100,010. That’s not bad, but it wasn’t the strategy we wanted to implement. Our imprecision meant we didn’t end up following the plan.

Executing a precise strategy is simple for bots. The bot can easily monitor the market for this condition and execute the trade when the time is exactly right. Bots are precise, quick, and reliable for this sort of execution strategy.

Time Consuming

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Everyone has things to do – life is chaotic. We don’t have time to be at the computer every waking moment ensuring our portfolio is on track.

In one of the previous examples, we discussed portfolio rebalancing every hour. This is an example of something that could easily take 15 minutes or longer for each rebalance. If you have a diversified portfolio, it will take even longer. Not only would this be repetitive, but it would also be time-consuming. Countless trading strategies are cumbersome in this way.

Trading bots aren’t like you. They don’t have anything better to do. All they want to do is implement these time-consuming strategies for you. Since they run on computers, calculations happen in an instant, trades process in the blink of an eye, and they never get tired. Time-consuming tasks then get simplified to set it and forget it. Automating a time-consuming task can be done by configuring a few things in a trading bot and letting the trading bot implement the strategy for you.

24/7 Markets

The cryptocurrency market never sleeps. Not for a second. Exchanges don’t close down at night. Even when one exchange goes down for maintenance or updates, there are still hundreds online still humming along. This 24/7 market makes it impossible for you to always be able to monitor your portfolio. Eventually, you will need to sleep, and we all know assets have an affinity for dumping as soon as we look away. At least it feels that way.

Once you realize you can’t always be ready to take action, there are two options: deal with the consequences of not being around to handle every situation for your portfolio or automate your strategy with a trading bot. Most will take the option that allows them to sleep easy at night.

Now, that doesn’t mean our strategy needs to be the same around the clock. It might be that you have a portfolio strategy during the day and a different strategy at night which will act as a safety for your portfolio while you’re sleeping. Whatever your strategy, bots can help you automate that strategy so you can spend less time worrying about the “what ifs” while your laying in bed at night.

Trading is Complex

At the end of the day, even if the repetition, time commitment, and precision weren’t enough to drive us towards trading bots, there is still the factor of complexity. Some strategies would be physically impossible to implement for a human due to the sheer complexity.

Taking smart order routing as an example. The requirements for effectively routing trades through numerous trading pairs intelligently are countless. Starting from the top we have the need for monitoring every trading pair across the exchange in order to determine the optimal time, asset quantity, and price for a trade. Next, we need to factor in the time restrictions to complete the routing before the market conditions change. Then we need to actually execute the trades to fill this first stage of our order. Finally, rounding it off by starting from the top again because we were only able to move $100 in the last order and need to move $100,000 in total.

Cryptocurrency trading is an intricate skill set that is developed through continuous self-improvement, overcoming mistakes, and forging forward in the face of uncertainty. Even with experience under our belt, some strategies are still out of reach to even the most advanced traders if attempted manually.

Complex strategies need to be automated using trading bots. Without these bots, the strategy wouldn’t be possible. The lesson is to use trading bots to implement trading strategies that are too complex to execute manually.

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