How a Crypto Trade Bot Works
BitsGap Tutorial & Overview With Different Strategies
In my last article, I talked about why you should consider an automated trading strategy and performed a brief technical overview of connecting your exchange to a trading bot for the first time.
In this article, I plan on going into more detail surrounding how the bot works, the different trading strategies that BitsGap offers, and an overview of the price plans and what comes with each. Let’s get into it.
I hope that you’re as excited as I am!
How Automated Trading Works
When you think of a computer that makes trades on your behalf, you may be thinking of a bot that takes your entire portfolio and trades it back and forth as one lump sum between the highs and lows. That would be somewhat correct, but not entirely.
The bot does trade back and forth on your behalf, algorithmically selling at high points and buying at low ones, except it does it in incremental amounts. The screenshot below should illustrate what I’m saying and give you a visual of what I’m saying.
This morning we’re trading SHIB/USD. As you can see, there is a grid of green and red lines. When the price of the asset strikes through the green lines, the bot buys a predetermined amount. When the asset price strikes through the red line, it sells a small amount. Easy to understand so far, right? Cool.
Build and Set Your Bot
When you go to set your strategy on BitsGap, the order form will ask for this information:
- Your exchange (you can connect more than one, very cool)
- Your desired trading pair
- Your total investment amount
- How many grid levels you’d like to have (buy & sell lines)
- How far apart you want each line to be (step %)
- Where you want your low price to be (bot stops buying past this level)
- Where you want your high price to end (where you think the price could end at some point soon)
Check Your Forecast
After you’ve explored the bot parameters and found a configuration that works for you and your budget, you can even hit “backtest,” which then uses historical data from the last 30 days to predict how the trading pair will perform with the settings you’ve selected.
Remember, past performance is not a clear-cut sign that the same will happen in the future. It’s not a guarantee. It’s a forecast. Kind of like they do with the weather. Except these forecasts are based on an entirely different set of metrics and price movements.
Below is my forecast for the SHIB/USD Classic Grid Bot I have set now. I will briefly explain the different bots below.
Bot Strategies on BitsGap
This part comes before filling out your order form for the bot as described above. Still, I wanted you to know how the bot operates fundamentally before going into the different types of strategies available.
BitsGap offers three different trading strategies for their bot, each with a slightly different algorithm based on market conditions and what you believe may take place in the market. The screenshot below is for your reference.
I will tell you that it takes some experimenting with each to see how they perform under different market conditions with various coins.
In general, if the market is sideways, somewhat stagnant, or even declining, the SBOT is what you should choose. If the market is going up, the classic bot is your best bet.
1. Sbot
The Sbot is programmed to accumulate more of the asset you choose to trade it with despite market conditions. Again, it does this by making dozens (if not hundreds) of micro trades between the tops and bottoms. I have seen my balance go up as the price of a coin fell in the immediate short term before.
To me, it seems way more efficient than flat out holding your coin and watching your entire portfolio drop by 40% because you went to lunch or had to be at work and weren’t able to sell in time.
2. Classic Bot
The classic bot is the trading strategy you’ll want to go with if you think the price will rise in the immediate short term or even over a few weeks or months. This bot would not perform as efficiently as the sbot if it were set on a sideways coin or declining over time. It will, however, perform better when there is a steady and consistent increase.
3. Combo Bot
I’ve never used this bot, and it’s only available on higher-tiered plans within BitsGap. This strategy is a futures bot that also uses dollar-cost-averaging (DCA) with traditional grid strategies.
Practice on the Demo Account
On BitsGap, you can also hit a button that automatically turns your account into a demo account with fake money to practice with before leveraging your real dollars or crypto.
Pricing
BitsGap offers three tiers of membership, each with a different price and features that I will let you explore on your own if interested. I will also include a screenshot. The main thing is:
- Basic — $29/month — 2 active trading bots
- Advanced — $69/month — up to 5 active trading bots
- Pro — $149/month — up to 20 active trading bots
One of my arguments for investors having access to an automated trading strategy is because crypto is exceptionally volatile and almost impossible to time accurately for maximum returns consistently.
The other reason was that computers do not function the same as people and therefore act differently and automatically without any emotion. That is one of the most beneficial functions of the bot: not having any emotion involved whatsoever.
Closing
If I was day trading for an immediate profit and a red candlestick popped up on the five or 15-minute view, I may become fearful of an imminent price decline and exit my position out of fear.
The bot does the opposite.
“Oh, the price is going down? Not a problem, brother. Time to accumulate. I got you on this one.” — Bot
Then you’re able to invest with ease, knowing that the system will buy at the best immediate prices and sell at the highest price in the near short term.
This gives you a bunch of micro-wins instead of betting your entire portfolio on a single-hand trade. That’s what amateurs do. And they lose almost every single time. Don’t be one of them.
It’s not a set-it and forget-it system, and it’s necessary to check up on the performance of your parameters and do some tweaking and adjusting.
The markets change so often, and there are so many trading pairs that I have difficulty letting my bot run for more than 48–72 hours, which is plenty of time to see how it’s doing.
Be a winner. Have a strategy, and complement that strategy with automated trading so you can do more of the things you love and trade smarter while you do them.
Thanks for reading. Be sure to clap for this article if you received any value out of it.
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