Churning out profits in crypto trading usually depends on how quickly one buys and sells crypto assets. As a result, even a minor delay in placing trades may incur noticeable losses. Unlike the stock market, the crypto trading market never stops and never sleeps, which could be a highly stressful scenario for traders.
With the prices of crypto assets fluctuating even in the space of minutes and seconds, the crypto market is known for being volatile in nature. Combining the effect of all these factors limits the effectiveness of manual crypto trading in a lot of ways. Traders, in many cases, are unable to react to the quick changes in price to achieve the optimal trades. They cannot dedicate as much time to crypto trading as necessary to achieve the best trades as it requires round-the-clock monitoring of cryptocurrency exchanges.
As a result of the volatility of the crypto market, trading bots have become increasingly popular by allowing them to remain in control of their trading strategies at all the time. The crypto trading bots automate the investment of traders and maximize their profits. The expert and professional traders build their own crypto trading bots, allowing them to buy and sell cryptocurrencies without needing to physically undertake the transactions.
Crypto trading bots are automated tools that conduct trades and execute transactions on behalf of human traders. As a novice crypto investor, you may not be familiar with how crypto trading bots work, and how one can use them.
Before moving further, let’s understand what are crypto trading bots?
Crypto Trading Bots
A crypto trading bot is a computer program or application that uses an API to interact with the trader’s exchange account and execute trades automatically when market conditions meet the predefined criteria/conditions.
Most of the bots work in a straightforward way where you authorize the bot to buy and sell the cryptocurrencies if and when it reaches to a specific price point. The bot takes care of placing and executing the orders automatically, so you don’t need to monitor your platform all day long to see when these price movements are reached. And, according to your unique trading strategy, the bot is customized to execute orders.
Let’s understand it with an example:
Say, you instruct your bot to sell an asset for $10, and buy it back to $9. Most of the crypto trading bots providers charge monthly or annual fees for using their bot’s services. Generally, the cryptocurrencies, account options, exchanges, etc. are available through your trading bot and may vary depending on the provider you choose.
Trading bots are computer programs that use a certain algorithm to analyze and recognize the trends in the market. Thus, by making use of the information gathered, they generate both buy and sell orders for users. These bots will make decisions by looking at certain facts like market volume, time, prices, and more.
The strategies which crypto trading bots implement can do anything, from trading to construct the custom indexing strategies to advanced real-time arbitrage. The possibilities are endless and the trading bot implements a strategy that relies on algorithms created by the developers.
Crypto trading bots can automate the analysis and market interpretation easily. They gather data from the market, interpret it, calculate the market risk, and then execute buying/selling of cryptocurrency assets. Choosing bot services is like hiring an expert to do trading, so you can sit back and watch the profits grow.
Let’s understand crypto bot trading with an example:
Mr. Max decides that he wants to try using automated bot strategies to secure crypto profits and to grow his Ethereum holdings. So, he invests in any crypto trading bot software to earn good profits. He decides to capitalize on the daily price movements and after setting up the bot on his exchange of choice, he decides on a trigger on which the trading bot script will act on.
After looking at the chart, he is sure that Ethereum will at least be trading rather than being flat, and then he sets the automated bot to buy it when the price drops down to 5% and sets it to sell when the price goes up by 5%.
Now, the trading bot knows the rules, and its’ ready to start trading. Mr. Max heads off to his other work and the bot will start trading. Later during the day, Mr. Max checks how things are doing and sees that the bot’s trading strategy is amazing.
Crypto trading bots can save lots of time and are even cost-effective than hiring the experts to trade manually.
How crypto trading bots work?
Generally, the investors seek out the trading bots that will be most useful for them, and then download the code from developer. Each bot has different software and hardware requirements.
In order to maximize the impact of a bot, the investor must know how to utilize the bots and its tools. The traders must have a proper account set up across different crypto exchanges.
Most of the crypto trading bots work in three moving parts:
Signal generator (Market analysis) > risk allocation > execution
- Market data analysis
This is where you make predictions. This module of the trading bot will save raw market data from multiple sources and interpret it. On the other side, it will also decide whether to buy/sell a specific crypto asset. Many types of bots allow users to customize which types of data goes into signal generator to get the best results.
- Risk allocation
This part calculates potential risk in market using the market data. And, based on the information, the bot will decide how much to trade. So, this component takes buy or sell signal, and then decides how much to buy. It’s probably the most important and critical aspect of a crypto trading bot.
- Buying/selling of assets
This module of the trading bot uses APIs to buy or sell the crypto assets. Sometimes, you might want to avoid buying crypto assets in bulk, and during certain situations, making immediate purchases is the better option. This is all which execution module takes care of.
All three modules need their own distinct algorithms, and optimization process applied.
Different types of trading algorithms used
With going too technical, there are two types of algorithms used. These include:
Prices are up and you think they will continue to grow up = Buy (vice-versa)
Statistically, most momentum strategies don’t win often, but if these win, their gains are fairly higher. Win: loss ratio of around 55% with gain and 70% loss are common with profitable algos.
Prices are up and you think they are due to pull-back = sell (vice-versa)
On the other hand, most mean reversion strategies win more often than they lose. However, the gain to loss ratio is smaller. Win: loss rates of around 70% with gain and around 55% loss are pretty common with the profitable algos.
Crypto trading bot strategies
Automated crypto trading bots are designed to be configurable, allowing traders for a wide variety of strategies. From a simple strategy to more complex strategies which evaluate a wide range of data points, today’s crypto trading bots are highly customizable. Some of the common crypto trading strategies include:
- Trend following– This strategy aims to identify the directional movement of any crypto asset and gain from the momentum of this movement. If the asset is trending upwards, it will go long, and when the asset is trending downwards, it will go short.
- Arbitrage – This kind of trading strategy looks to exploit the difference in the price of an asset between different markets or exchanges.
- Copy trading– This is a growing trend which allows users to automatically copy another trader’s trade. The best crypto trading platforms make it possible to copy other trader’s trades, or take advantage of the bot strategies without giving up control over the private keys.
- Market making– This market-making strategy is based on continuously buying and selling crypto assets to capture the spread between buy and sell price as the price fluctuates.
Types of bots
Usually, there are different types of crypto trading bots available and one of the most popular ones is Arbitrage bot. These are the tools which examine prices across exchanges and make trades accordingly so as to take advantage of variations.
Because the price of cryptocurrencies tends to vary somewhat from different exchange to exchange, bots which can move quickly enough can beat exchanges which have delayed in updating prices.
Few other types of bots use historical data to test out the trading strategies. And, other types of bots are programmed to execute trades at particular signals such as trading price or volume.
Some of the popular types of bots include:
- Coin lending bots
- Arbitrage bots
- Grid bots
- Market making bots
- Trend trading bots
All these bots work in different ways.
Advantages of crypto trading bots
Following are some of the key characteristics and advantages of crypto trading bots:
Trading cryptocurrencies using a crypto trading bot is more efficient as you don’t have to worry about any kinds of delays or manual errors. As long as the bot is receiving the correct data and has suitable algorithms, it can trade assets with good profits.
- More powerful
The crypto trading bots work 24 x 7 and there is a limit to the amount of data which a trader can process at a time manually. Even if they process all the data, it is quite tough to reach insights based on this data. But, the crypto trading bots can easily handle bulks of data and can make reasonable decisions.
The crypto trading bots make decisions based on the set strategies. Unlike humans, they don’t have any fear of loss. Experienced traders may overpower their emotions and make decisions, but this is not a case with the novice traders. On the other hand, trading bots always keep emotions out of the equation.
How to start using a crypto trading bot?
You can start crypto trading with a bot in two ways:
- Use a trading bot
- Build your own bot
Use a trading bot
Yes! You can choose one of the suitable crypto trading bots from Growlonix or other exchanges. Their bot services will integrate with multiple crypto exchanges and then may charge monthly or per transaction commission.
Build your own bot
On the other side, you can build your own customized bot. One can either develop it from scratch or may use a platform which allows them to customize the bot as per their needs.
If you are a beginner, we would recommend you starting with a ready-to-use bot, reducing the risk of error when automating your own strategy.
The best crypto trading bots 2021
Now, we will take a look at some of the popular and the best automated crypto bots that beginners and expert traders can use. Some of these platforms offer advanced trading tools along with an access to numerous crypto exchanges.
This is one of the most advanced and established players in the cryptocurrency market for several reasons. Firstly, this platform entirely runs on the cloud network, so no installation is required, making 24 x 7 trading possible.
It has an incredibly intuitive dashboard and requires s few minutes set up to start trading. The next good thing about this trading bot is that they are the only bot to embed external signalers, thus, allowing new traders to subscribe to a growing list of experts. The bot lets you take advantage of the bull market with a trailing stop-loss strategy.
Cryptohopper has a modern dashboard where traders can configure and monitor everything. It comes with a pre-created template for popular exchanges like Poloniex, Binance, Bittrex, etc.
Unlike other trading bots, Cryptohopper doesn’t charge any trading fee and is one of the few bots offering a free trial for one month.
This is one of the best crypto trading terminals and bots which enable users to trade like a Pro. It has an added benefit of signal automation and many other advanced features. The platform supports multiple order types and more than 17 exchanges including Binance, Binance Futures, HitBTC, KuCoin, Huobi Global, Bittrex, BitMEX, Bitstamp.
It has a Telegram signal bot based on socially available channels which gives you a good average profit. It also has technical indicator based bots using Email Trigger based order and TradingView. One can start trading on this platform for free.
This is another popular crypto trading bot that works with a number of popular exchanges like Binance, Bitstamp, KuCoin, BitFinex, Bittrex, Cryptopia, YOBIT, etc. The bot works 24 x 7 with any device as it is web based, so you can monitor your trading dashboard on both mobile as well as laptop/desktop.
The bot allows its traders to set stop-loss and take-profit targets, and also has a social trading option, allowing the traders to copy the actions of the most successful traders.
This is one of the newest trading bot platforms in the market with some great features. This trading bot is suitable for both beginners and more advanced traders. It supports the most popular exchanges like Coinbase Pro,Binance, BitMex, Kraken, etc., and can be accessed for free by using a starter account.
It is the oldest and most popular crypto trading bots suitable for both novice traders and experts. For those who are new to trading, this bot offers 14 pre-coded trading strategies, allowing them to pick the pairs easily. For more experienced traders, Gunbot offers impressive customization options to modify the precoded strategies to suit their trading preferences. It also allows them to create their own fully customized and personalized strategies from scratch.
It has a user-friendly interface, allowing traders to easily visualize their buying and selling points. Gunbot supports more than 100 exchanges including Binance, Binance US, Bittrex, Bitfinex, Coinbase, KuCoin, Huobi, etc.
It is a cloud-based crypto trading platform that allows traders to manage multiple accounts via one unified interface. This platform integrates up to 30 exchanges via API. Bitsgap features easy-to-use trading tools including automated bots to set up buying and selling strategies to generate profits from any price movements, portfolio management, an arbitrage service, smart trades to place take-profit and stop-loss trades simultaneously.
This is the leading crypto trading bot platform that focuses on portfolio strategies such as rebalancing. This trading platform allows its users to configure a crypto asset portfolio, specifying the percentage weightage of coin’s value, and sets it to be rebalanced automatically at a specified or set time. This is the perfect platform for both novice and the advanced traders. It offers a robust backtesting tool that evaluates market using precise order book data. This is the most highly regarded automated trading service in the market. Exchanges it supports are KuCoin, HitBTC, OKEx, Binance, BitFinex, etc.
- Wunderbit trading
It is a cloud-based platform that allows you to start trading and investing in the cryptocurrencies seamlessly. On this platform, users can copy trade the best crypto traders with transparent track records, or can create fully-automated crypto trading bots. The platform allows you to use advanced trading strategies and manage portfolios of multiple crypto exchange accounts at the same time without needing to execute separate trades on each account.
With easy-to-use automated trading software, you can build and adjust crypto bot within a few seconds. Wunderbit’s free account allows traders to start with manual trading, copy trading and trading bots. Along with this, its paid plans are available at competitive prices and allow users to have more open positions, active bots, and a range of advanced features.
Crypto trading bots are profitable and work smartly. It will be your strategy which may create problems. The trading bots’ job is to execute the order based on your configuration and set strategies. Best crypto trading terminal like Growlonix are helpful if you are new to trading but want to trade like a pro.