A trading bot is software that you set up so that it automatically handles trades for you based on settings that you have to make up yourself. A trading bot used to be enormously expensive and only meant for Wall Street and the like. With the advent of cryptocurrency and crypto trading bots, this has changed.
✔️ A trading bot is a computer program that performs crypto operations (automatically) for you.
✔️ A tradingbot has several advantages.
✔️ Tradingbots come in all shapes, sizes and prices.
✔️ As a user, you must set the tradingbot's strategy yourself.
✔️ With a tradingbot, you will have to do a lot of testing before you start seeing good results.
So a trading bot is a computer program. Literally, it is a trading robot that goes to work for you to make your adventure in crypto a little less intensive in terms of the time you have to put into it.
Some people are involved with crypto day and night. They set alarm bells when a coin has reached a certain price and then quickly sit down at their computer to set up a trade, after which they crawl back under the wool.
Fine, you know, but so it can be easier. You can use a crypto trading bot for that.
A crypto bot never gets tired, does not lose sleep, never gets angry and is not influenced by anyone.
The goal of a trading bot is to beat the market (average result). Otherwise, you can do it yourself. Another clear goal of a trading bot is to maximize profits at the lowest possible risk with the least amount of effort.
Turning off emotions
Making more profit, beating the market
Using expertise from others
A bot is fast and always online
You may not believe it, but if you want to work with a trading bot, you must first have one. Trading bots come in all shapes, sizes and prices.
Consideration: remember "not your keys, not your coins". If you don't own the private keys yourself, the coins are technically not yours. On an exchange this can be very annoying, with a shadowy trading bot it can be disastrous.
There are free trading bots, such as Gekko or Zenbot.
There are also paid trading bots, such as Cryptohopper, Gunbot, Haasbot or Crypto Trader. Costs vary widely, but are often very pricey, ranging from several hundred to thousands of dollars.
It is also possible to design your own bot using open source software. Of course, this requires some knowledge of how programs work with constructs and the like.
You can also have a team of experts automatically trade for you, even from BlackRock. This costs a lot. The question is often how honest these teams are regarding your results and how much they keep for themselves.
Artificial intelligence can also work for you to do transactions automatically.
If you don't like robots then you can even go copy trading, where you take over the crypto trading of successful traders 1 on 1 for a payment of a percentage of the profit or trade.
Something you should always do before making a choice in this is to look at past results and read reviews. After all, there is usually a lot of money at stake and then you have to be very careful.
Bots that have been on the market for some time have often gone through quite a bit of development. New bots may suffer from bugs.
One thing you should never do: believe in golden mountains. This bot always works! It achieves an average of 90% profit per month. Experts say this is the best bot. Just assume that their goal is not to make you rich, but themselves. You can guess the rest.
Influencers on YouTube and the likes also almost always have only their own interests in mind. More views, more subscribers, more merchandise sales, more them and less you. Just like politics!
Having made the choice, you have to start setting up such a thing. How you do that depends on your own strategies and experience.
International research has shown that bots outperform traders in the stock market, with the best traders setting up the bot the best and thus getting the best results. In crypto, it will be no different.
So you have to start setting what the bot should do and at what conditions. A bot must analyze price trends and take preset action.
An example would be that you Bitcoin should buy when it drops to 19 and sell when it rises to 21. But you can set much more than this simple example.
There are a lot of strategies to come up with in crypto and you can pick one to use for your bot.
If you are going to set up the bot for day trading, you have to determine in advance how you would do it yourself. As a day trader you know where you have had success, otherwise you would not have become a day trader. This is how you should set up the bot.
If you have a good bot this will be done in no time and you can go do something else with your life other than marry your screen. The best bots are easy and quick to set up and have a clear interface and help me file. Online support should be thick as well. So experienced traders can quickly get set up and start making zen style profits.
If you want the bot to swing trade then it can. If you want it to trade based on TA, Bollinger Bands, RSI, Moving Average or whatever then you can automate all of this. Then you don't have to peer whether it really is a golden cross, whether the 200 MA really crosses the 50, and so on.
There are also forex trading robots. These trade the more traditional markets for you. A forex trading robot is very useful for experienced traders in stocks, options and other well-known financial markets.
Often you can recognize a trading bot already in the order books of exchanges. If you see an order of 10,555 coins for 1 euro and a sell order of 10,555 coins for 1.03, you know enough. Often these bots simply move the margins up and down.
Very successful trading bot can be in arbitrage, although you usually have to bet large amounts of money to do so to cover the cost of trading. This is fairly risk-free because the buy and sell price is already fixed.
Grid trading. For example, the bot buys a coin listed at $1 for $0.98 and sells it for $1.02. Then it does the same thing again. The grid (grid) always moves up, so if the coin is now worth 1.05 it buys in for 1.03 and sells for 1.07. Especially successful in sideways moving markets. In fact, such a bot uses an OCO (one cancels the other) trade, setting a stop loss and a take profit.
Mean reversion. Buy the coin when it falls below its average price and sell it when it is above it. Similar to swing trading. Buy low and sell high.
Arbitrage. Buy cryptocurrencies for a slightly lower price in one market and sell it for a slightly higher price in another. Works mainly with high amounts to cover the cost of trading. Can then be very successful because purchase price and selling price are known.
Momentum. Work with a moving average and buy in when it is cheap according to this MA and sell when it is high.
Work with well-known bot TA strategies. Technical analysis comes in many shapes and sizes. Bollinger Bands is as one of the most successful indicators used by bots according to research. Sometimes trading bots also work with RSI, Volumes, Ichimoku Cloud, support and resistance, price trend, Fibonacci or other technical indicators, too many to mention.
Trading bot service. Work with preset bots or set them up yourself. You install the software, then you can get started.
Backtesting. Select a specific time period and test whether the trading bot settings you have in mind would have worked during that period. Nice to see results before you bet your money.
HODL. With Hold On for Dear Life you set the bot to do nothing at all, you keep the coin in all market conditions. These are the cheapest bots. The disadvantage of these HODL bots is that you can do this yourself.
You also need to determine what you want. Will you be swing trading, day trading or long-term investing? On this you need to adjust the settings of your bot. You also need to determine which market you're going to enter. If you work with a bot, it is probably best to work with enormously strong coins like Bitcoin or Ethereum, which do not fall over easily and do not suddenly throw bins of coins on the market.
There may also be times when you need to turn the bot off. If you see that your bot is starting to turn losses, because day trading or swing trading is no longer paying off, then you should think about why that is and whether you shouldn't temporarily turn it off or set it up differently.
Before using a bot look at how many stars a bot gets on a comparison or review site like Trustpilot. Then look at the best ones and ask yourself what you are willing to pay for them, which one is most suitable for the strategy you want to follow and which one is easy to use and has a user-friendly interface, unless you are an expert. What makes a crypto trading bot interesting? That's the question you can ask yourself.
After purchasing, read up carefully, as they often involve large sums of money and you didn't forget to put a comma when you should have. Computers.... They don't understand anything!
Of course, it is also possible that your trading bot is running solid losses, after all, you set it up yourself. Therefore, it is not a bad idea to first backtest your bot with your settings. You can also test different cryptocurrencies. If it doesn't work with one then switch to another cryptocurrency.
Backtesting shows you what results you would have achieved in what time period in the past with your trading bot settings. This should actually be on a bot if you are serious about getting started.
If you come out of the backtest with decent profits, then you are in good shape and you can start applying your strategy and start the bot. Check it out first with small amounts, say a month, to see if it actually works.
You don't want any surprises with your full stack. If you backtest over 4 years then you may well have had 5 months of fat loss and 43 months of profit. You'll just see that you start with one of those 5 months. So you have to backtest with a similar period as the market is in now.
It's also not a bad idea to split your stack. That way you can do robot trading with 50% (or so) and the rest yourself. Better safe than sorry.
Also, it doesn't hurt to take a break from time to time and put some of your bot's gains, which you hopefully have made, into fiat money or stablecoins cash out, so that you also accumulate something. After all, wins aren't real until you have them cashed out. Virtual winners are often a temporary phenomenon.
A trading bot can give you a lot of extra profit if you set it up perfectly. The opposite is also true. Especially experienced traders with profitable strategies will benefit the most.
If you purchase one, determine minutely which one is best for you and why. Robots also need maintenance. So throw some oil in the hinges from time to time to keep it working well given the market conditions.
If you have purchased one, test out many features. After all, you want maximum performance and that requires testing, testing and more testing.