Crypto trading automation is one of the best ways to continuously buy and sell crypto without the need to monitor your computer. This means you can actively trade on preset conditions and times even when you’re on vacation, at work, or anywhere else.
Suppose you’re a newbie in the crypto game, or you’ve been trading for a while and looking to boost your trading experience. In such a case, keep reading below as we explore crypto trading automation.
Crypto Automation And Trading Bots
A cryptocurrency bot removes the manual execution of buying or selling crypto via its software program. Instead of waiting for your target price before you can place a position, the crypto trading bot can do it for you. However, you still need to set the triggers or commands for the bot to act: sell or buy specific crypto.
The bot doesn’t have to overthrow your trading strategies, though. For instance, you’re into arbitrage trading. You may want to consider a crypto arbitrage bot that you can customize via additional settings or connect to your platform to execute your strategies.
You can also use the bot to update you on the price level you’re watching for. This way, you can personally enter a position if you want to. The bot can ‘talk’ to the crypto trading platform you’re using via an Application Programming Interface (API) to trigger a set of commands into motion.
How Does A Crypto Trading Bot Work?
A crypto bot works under trading strategies and unique algorithms based on technical analysis and historical data. The bot will use it to test its strategy and calculate the number of potential profits and losses. The results will be based on whether the trading strategy rules will be created, especially if such is satisfactory.
Some bots provide you with execution on specific market conditions, while others offer indicators, allowing you to analyze the market. That’s why you must consider the bot’s performance and accessibility to ensure that it can cater to your trading needs. Look for the ones you can use on multiple crypto trading platforms like the Bitsgap’s software and other similar bots.
In a simpler explanation, the crypto trading bots work in the following ways:
- Report back on loss or profit.
- Anticipate possible profitable trades.
- The bot purchases digital coins when there’s a fall in price.
- The bot sells the coins when there’s a price rise, or the bot can consider more complicated trading strategies. Most high-quality bots can place orders while analyzing over a hundred parameters such as signals, indicators, and the latest historical data.
What Are Trading Algorithms Used?
Although there are different names for such, the main two types of algorithms in crypto trading automation are as follows:
- Mean-Reversion: As its name sounds, the bot will execute a command opposite to what the price is doing. That may be due to the bot’s analysis that prices are only on a pull-back when they’re up.
- Momentum: Unlike mean-reversion, bots with a momentum algorithm will go with the trend. If the analysis shows that the prices will continue to go up, they are more likely to buy or vice versa.
What Are The Advantages Of Crypto Trading Automation?
Besides continuously trading even when you’re not in front of your computer, there are more benefits that crypto trading bots offer. Some of which are the following:
- Stay Diversified: With crypto trading automation, you can handle multiple accounts and execute various trading strategies. You can also do this with fewer errors and at a much faster pace than you would when using analog tools and manual trading.
- Allow Back Testing: You can better know how to trade in the future when you perform back testing. Since you’ll use historical data to test a strategy, you can use a trading bot to automate it. This allows you to prevent the guessing game, which could potentially lose your funds.
- Eliminate External Factors: Most traders tend to lose because of fear of missing out (FOMO) or relying on company news. With crypto bots, all of these external factors that may affect your trading decision will be eliminated. This means you avoid trading based on emotions.
Crypto trading allows you to gain large amounts of profit, but its volatility can make it more challenging or, in some cases, make you lose money. With crypto trading automation, you can easily ride the market’s volatility since they can execute trades faster than manual trades. Try it now and see how it can boost your trading profits.