Trading Bots: a viable option for investors or a waste of time?
Trading bots, or automated trading algorithms, are rising in popularity, becoming more widespread amongst traders because it allows them to overwatch their transactions constantly. As a result, trading bots become an excellent example of the expression “make money while you sleep” because these trading bots work 24/7, even when traders are offline.
Additionally, a bot with the correct settings allows faster and more efficient transactions than manually making them. Given that the cryptocurrency market is always open, this trading method will enable investors to capitalize on every opportunity and market move.
What are trading bots?
They are like trading robots that can adopt positions at the right time and price — factors that are essential in a fast-moving market like crypto. In the backend, these bots are built on algorithm sets and programs designed to automize trading. Initially, they were created for equity markets but have managed to adapt to the cryptocurrency market after its debut.
These trading algorithms repeatedly do several tasks, like market evaluation, technical analysis, statistics making, calculus of price differences between crypto brokers and exchanges, and buying and selling activities — or actual trades.
Are trading bots more precise than human traders?
Generally, yes. Even if it’s almost impossible to beat a professional trader, given the vital role of his or her experience in the markets, trading bots are machines that use artificial intelligence. As a result, they manage to be more precise than most traders. Unlike long-term investing, trading is a difficult job that requires time, energy, and a lot of discipline and attention. If traders are not adequately informed and educated over a decent period, or if they let fatigue and stress drive their emotions, they risk losing a lot of money.
Since trading bots run without human intervention, they’re more precise. All the transactions that a trading bot is doing are based on the trader’s decisions after his settings and inputs. On average, the use of trading bots can significantly simplify the life of an active trader.
Why would anyone use trading bots? What are their advantages?
- Working while you sleep
First of all, as mentioned above, they never sleep and make money in traders’ place, while they can take a break or relax. A trading bot can react to any market movement at any time. Also, trading bots are extremely fast and reactive — not only do they not require time to execute an order, but the algorithm can decide to send an order in less than a second.
Such a quick reaction to the market’s volatility offers traders who use trading bots an advantage in front of those who use manual trades. Sometimes, only a few seconds late can transform a profitable transaction into a loss, especially if we’re talking about scalps.
Since these robots use artificial intelligence, they’re smarter than average traders. They do not make as many mistakes, and the processed data quantity makes a huge difference. Even the most experienced traders can follow only a limited number of charts simultaneously, while a trading bot can constantly watch the whole market at the same time.
But most importantly, these robots are not controlled by emotions. Emotional waves can determine traders to miss opportunities because they’re worried when the price is low — and when these same prices grow endlessly, traders risk falling into the FOMO trap and buying at a high price. Trading bots do not make these logical gaps because they’re practical.
These advantages are growing as we discuss riskier zones of the crypto sphere — like Futures. Leveraged trading is hazardous because there is no limit to the amount of money traders can lose (unlike traditional spot trading) so any market movement can affect one’s portfolio. Since trading bots are more precise, they can also be used in this type of derivative trading.
What are the most significant risks?
Although trading bots are extremely precise, they’re still built by people, so it’s expected that errors may interfere. Some of the risks of such algorithms may be faulty software, scams, and system errors.
Another error may appear if the trader wrongly sets the bot’s settings from the beginning. In trading, anything is possible, so investors need to do proper research before doing anything and assume every decision. Even with all of this, many companies that sell this type of automated trading software can have a money-back return policy if their bot makes mistakes.
What do you think about automated trading? Would you leave your assets in the hands of a machine or do you prefer to get your hands “dirty” yourself? If you want to do it yourself, in the traditional way, you need a Friendly Crypto Exchange by your side. Register on IXFI and trade with no worries.
Disclaimer: The content of this article is not investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial and fiscal circumstances.
Although the material contained in this article was prepared based on information from public and private sources that IXFI believes to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and IXFI expressly disclaims any liability for the accuracy and completeness of the information contained in this article.
Investment involves risk; any ideas or strategies discussed herein should therefore not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial and fiscal objectives, needs and risk tolerance. IXFI expressly disclaims any liability or loss incurred by any person who acts on the information, ideas or strategies discussed herein.