Cryptocurrency Trading Bots: An Extensive Guide
Millions of traders around the world have been interested in crypto trading bots. They’re trying to figure out how to simplify their plan and outperform the competition. You’ve probably come across references to trading bots after dipping your toes into this industry. The following detailed guide will serve as a guide for your journey into cryptocurrency trading bots.
At the end of this guide, you may not only have a clearer understanding of why trading bots are useful, but also know which trading bots currently lead the market, and what distinguishing features to search for when selecting a trading bot.
Disclaimer : Throughout this article I have used referral links. Most of these services gives you additional discounts if you use referral links.
What is a Crypto Trading Bot?
A cryptocurrency trading bot is a software application that trades on exchanges automatically.
Instead of manually inserting each transaction into the exchange, the trading bot will access data from a user’s exchange account and position trades automatically.
The operation is controlled by machines, which have a degree of speed and precision that humans cannot match.
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Why You Should Use a Trading Bot?
Countless is an apt definition of all the benefits that an automatic trading bot offers. This includes:
Emotionless Trading
Any decision made by a crypto trading bot is dependent on perception. It, unlike humans, has no fear of losing or hunger for gains.
Experienced traders may be able to make rational decisions by suppressing their emotions, but this is not always the case for everyone, especially beginners. A crypto trading bot, on the other hand, still leaves sentiment out of the equation.
Backtesting
Backtesting evaluates the feasibility of an idea by applying trading principles to historical market records.
When constructing an automated trading system, all rules must be strict, with no space for ambiguity. The machine cannot make educated guesses and must be told precisely what to do.
Traders may use these precise collections of guidelines to test them on historical data before putting their assets at risk in live trading. Backtesting carefully helps traders to analyse and fine-tune a trading concept, as well as assess the system’s expectancy — that is, the average amount a trader may expect to gain (or lose) per unit of risk.
Speed & Precision
Since trading bots react instantly to changes in market conditions, automated systems will produce orders as soon as trade requirements are reached.
Getting into or out of a trade a few seconds sooner will make a significant difference in the result of the trade. All other instructions, including protective stop losses and profit goals, are immediately created as soon as a position is reached.
Markets can move fast, and it can be discouraging to see a trade hit a profit limit or blast past a stop-loss threshold before the orders can even be entered. This is avoided when using an algorithmic trading bot.
Types of Crypto Trading Bots
- Arbitrage: This involves simultaneous buying and selling coins from one exchange to another. This allows for faster and safer profits.
- Market Making: It helps you in preventing large price swings in the market. It can also set buy and sell limit orders near the current market price.
- Momentum Trading: It is ideal for traders who wish to ride the positive momentum wave with the assets and sell them later when the momentum reverses. The idea is that the cost of the asset goes above average and then falls as it starts losing momentum.
- Mean Reversion: Under this, the crypto trading bot uses the strategy built on the assumption in case the price of the coin varies with the average, it can revert to that.
- Copy-trading: This involves the trend whereby one is enabled to automatically copy the trade tactics of other experienced traders. The elements are gamified with a leaderboard and a social community of the traders.
- Grid Trading: This helps you to perform the Grid Trading Strategy. It helps you to place series of buy and sell orders within the price range. Whenever a sell order gets fully executed, the bot will place another buy order immediately at a lower grid level and vice versa.
How to Build a Trading Bot?
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How to Pick a Trading Bot?
Before you trust a bot with your trading portfolio, make sure it is designed with your best interests in mind. Until selecting a crypto trading bot, keep the following considerations in mind:
- Reliability: Any enterprise, including cryptocurrency trading, relies on trust to succeed. The entity that creates the trading bot must be reputable. You don’t want a bot that is going offline or has bugs. You won’t lose out on openings if you use a bot that trades 24 hours a day, seven days a week.
That is why I have listed entities that have advanced trading bots that have been thoroughly checked and proven to be reliable. These businesses have been in operation for a long time and have a long list of loyal customers.
2. Safety and security: The majority of cryptocurrencies are relatively secure. This does not, however, preclude malicious entities from attempting to break into accounts and steal information.
As a result, it’s critical to look for a bot with a solid track record of security. The bot’s creators must be a reputable company with a thriving user base.
3. Discretion: You don’t want to be duped into wasting your hard-earned money as a crypto investor. Until you choose a trading bot from any enterprise, make sure that the company has detailed information about their operations.
Using an organisation that provides free trials would give you the peace of mind that you’re in good hands.
4. Usability: The aim of using a bot is to make trading more convenient for you. Crypto trading isn’t all about programmers and IT experts. If you’re not one of these users, you’ll want to pick a bot that’s simple to use. The bot must have an easy-to-use gui that is appropriate for your skill level.
In addition, the customer service infrastructure is critical. It would be beneficial if you examine how patches are distributed and vulnerabilities are resolved. The bot should also be compatible with your trading techniques and customizable.
5. Profitability : Transparency and trustworthiness are not enough for an organization. The primary goal of cryptocurrency investing is to make money. As a result, an enterprise that gives you the highest possible returns would make your investment worthwhile.
The consistency with which a trading bot achieves profits is used to determine its efficacy.
The Best Crypto Trading Bots in 2021
1. 3commas — Tools for Cryptocurrency Trading
3Commas is an advanced trading bot with a number of sophisticated trading options. These bots can be used to automate your trading strategy through their web interface. Targeting the same niche market as Haasbot, 3Commas has become popular among the more experienced traders. They also offer the ability to manage your bots through their developer APIs, providing additional options for developers.
Features
- Trading Terminal
- Trailing Options for Take Profit / Take Loss
- Signal Customization through Trading View
- QFL Bots
- Multiple Pair Composite Bots
Cost
Pricing plans start at $14.5/month for the Starter license and caps out at $49.5/month for the Pro license. Start your free trial here.
Supported Exchanges
Bitmex, Bittrex, BitFinex, Binance, Bitstamp, KuCoin, Poloniex, HitBTC, Cex, Coinbase Pro, OKEX, Huobi, and YOBIT.
2. Cryptohopper — Automated Trading Platform
Cryptohopper is a trading bot platform which executes strategies based on technical indicators. These strategies can be custom designed to implement advanced strategies of your choosing. Similar to 3Commas and Haasbot in many ways, Cryptohopper is a great option for advanced cryptocurrency traders who are willing to dig into the details of each trading strategy they wish to implement.
Features
- Design Strategies
- Experiment with Strategies via Paper Trading
- Trailing Stop-Loss
- Short Sell Assets
- Automate Crypto Trading Strategies
- Data-Driven Analytics — 130+ Indicators and Patterns
- Performance Reports
Cost
Pricing plans start at $19/month for the Starter license and caps out at $99/month for the Pro license. Start your free trial here.
Supported Exchanges
Poloniex, Kraken, Bittrex, Coinbase Pro, Binance, KuCoin, Bitfinex, and Huobi.
3. Bitsgap — Automated Crypto Trading
Bitsgap is best known for its unique automated trading bots. Thousands of traders with different experience and skill sets are using Bitsgap on a daily basis to maximize returns by automating their trading.The algorithm implemented by Bitsgap is based on a simple and effective technique, called GRID. It distributes investment proportionally within a trading range predefined by a trader.
Features
- Trading Terminal
- Crypto Trading Signals
- Demo Mode
- Smart Stratergy Design
- Portfolio Tracking & Management
- Arbitrage Tool
Cost
Pricing plans start at $19/month for the Starter license and caps out at $110/month for the Pro license. Start your free trial here.
4. KuCoin
Kucoin is a Chinese cryptocurrency exchange that was founded in August 2017. It offers an excellent list of trading pairings. It has been trading in 432 markets over the previous 24 hours, with a total trading volume of $25 million. It also provides a sophisticated API that enables users to create a secure and automated trading strategy.
Fees : 0.1% trading fee for maker and taker.
Price : No subscription fee is needed for the trading bot.
4. Pionex
Pionex is the world’s first exchange, offering 12 free trading bots. Users may automate their trade 24 hours a day, seven days a week without having to check the markets. It is one of the largest Binance brokers, aggregating liquidity from Binance and Huobi Global.
Fees : 0.05% trading fee for maker and taker.
Price : No subscription fee is needed for the trading bot.
5. Huobi Global
Huobi is one of the major cryptocurrency exchanges situated in Asia and serving Asian customers, having been in business since 2013. Huobi Worldwide, its global crypto exchange giving an attractive platform to trade cryptocurrency — with extensive support for numerous altcoins and a big range of stablecoins, alongside its own innovation — HUSD, a USD-backed stablecoin — has just undergone some branding changes.
Fees : 0.20% for both takers and makers.
Price : No subscription fee is needed for the trading bot.
