What Are Crypto Trading Bots? A Comprehensive Guide for 2022 Guide for Crypto Trading - FX LeadersWhat Are Crypto Trading Bots? A Comprehensive Guide for 2022 Guide for Crypto Trading - FX Leaders

Crypto Guide: What Are Crypto Trading Bots? A Comprehensive Guide for 2022

What is Crypto Bot Trading?

Crypto trading bots are a useful tool which enables you to execute cryptocurrency trades at the right time and the right price, which is crucial in this extremely volatile market. Crypto trading bots were introduced not long after the cryptocurrency market itself began. The crypto market itself started about a decade ago, in 2011, with Bitcoin being the first to make the breakthrough, followed by Litecoin and many other digital coins. Crypto bot trading followed these first cryptos, since automated trading was already a major industry in its own right in other markets, such as stock markets, forex, bonds, commodities etc. As a result, traders and developers didn’t have a lot of work to do they simply had to adapt the existing trading bots and algorithms to the crypto market. However, the boom in trading bots only came after digital coins grabbed the attention of the public in late 2017, after they surged higher towards the end of that year.

Crypto trading bots are a set of algorithms and programs designed to automate cryptocurrency trading. Such cryptocurrency trading algorithms repeatedly perform tasks in the crypto market, such as evaluating markets, performing technical analyses, carrying out analyses on statistics, calculating price differences between different crypto brokers, and of course, buying and selling activities. With this type of solution, you can participate in this market 24/7, using artificial intelligence, based on parameters that the developer formats in advance, since this is a non-stop market. It started with Bitcoin trading bots, which still account for a large part of such trading.    

How Does A Crypto Bot Work?

As mentioned above, crypto bots are algorithms or automated software, which are built either by a third party, such as a tech developing firm, or by traders/investors themselves. Trading bots are linked directly to your trading account. They can execute trades on your behalf, or just issue cryptocurrency trading signals and you can decide whether to execute them or not. These bots are connected to your crypto exchange, and they communicate directly with the markets through these exchanges.

Such automated software can make trades, based on your own preset market conditions, such as overbought and oversold areas, support and resistance areas, moving averages, pivot points, candlestick patterns or arbitrage, which is a favourite for the crypto market. There is an ongoing debate about whether crypto bots should be permitted in cryptocurrency trading, for this very reason, although crypto bot trading is in full swing at the moment, and will continue as long as the crypto market lives on.

Where to Get a Crypto Trading Bot

You can build bots for trading cryptocurrencies yourself, or you can buy one from a number of providers. If you are an IT developer and know coding, you can build your own algorithm, based on the type of strategy you use, with numbers, pondered levels, pivot points etc., and implement the software on your broker platform. It will then make trades for you, based on that strategy, or give you buy and sell crypto signals, so you can decide for yourself. If you are not a developer, you can purchase software on which you can build your algorithm by dragging and dropping the indicators you use, such as moving averages, support and resistance levels, candlestick patterns, etc. This makes it easier for crypto traders, who have no experience in coding, to build their own crypto bot.

Otherwise, you can buy a bot from a growing scene of developers, who sell their algorithms for a fee, which can sometimes be quite expensive. Among them, you will find many Bitcoin bots or arbitrage bots, which offer quite a profitable sort of trading in the crypto market, due to the huge volatility and the price differences among crypto brokers, for the same cryptocurrencies. By just taking a quick glance at some of the main cryptos, we can see that there are some differences between crypto brokers, in terms of the highs and lows for the same digital token, and which crypto bot trading can benefit you, by playing the arbitrage strategy. You can also sell a crypto via the broker with the highest price and buy it from the broker with the lowest price. Trading bots can benefit from such differences. In order to execute trades on an exchange, you have to authorize a trading bot to access your trading account via API keys (Application Program Interface), and access can be granted or withdrawn at any time.  

Crypto Bot Trading Vs Manual Crypto Trading

The logic behind this comparison is similar to the dilemma in the traditional financial markets: should we automate trading or keep buying and selling by ourselves, based on our gut feeling/analyses, but the difference is that the volatility in the crypto market is many times higher than is the case in all other markets. Even oil and gold, which used to be considered very volatile before, look like child’s play, now that the cryptocurrencies have become widespread.  

Timing is critical

Timing is one big advantage that the crypto bot offers. Crypto trading software can execute trades in an instant, which is crucial when volatility is very high. I have missed many trades trying to catch the perfect price, as the cryptocurrency moved away extraordinarily fast. When trying to benefit from the price differences offered by different brokers, it is crucial that such trades are also executed automatically, since the volatility is high and the differences can disappear in an instant. Automated crypto trading is perfect for such crypto trading systems.

No emotions in trading

Trading Without Emotions is another benefit that Bitcoin bots and other cryptocurrency bots bring. Even experienced traders have emotions, such as impatience, overconfidence, greed etc., especially in the crypto market, which can be very profitable or extremely dangerous, due to the immense volatility. A bot eliminates such unwanted feelings, which interfere with trading, as it only executes trades according to the parameters that you have set.

Efficiency

Crypto trading bots can offer Efficient Trading, which is particularly useful when you have many smaller trades, which is a must in the cryptocurrency market. It is advisable that you keep your positions small when trading cryptos, in order to keep the risk down as well. When you trade many cryptocurrencies, this is even more important. But it is hard to keep track of everything, and open or close them at the right time and the right price, if you have many trades. But this is no challenge for crypto bots or Bitcoin bots. They can multitask, open or close many trades and observe all of them in real time, which makes for faster processing, more efficient trading and, of course, higher profits. 

Full time market coverage

Crypto bots offer 24/7 Market Coverage, day and night, which is impossible for a human trader to do. But it is also very important, since the volatility is extraordinary. With our trading signals, we at Fxleaders offer 24/7 market coverage in this regard, but we have a number of analysts who take care of that task.

Fewer mistakes

Crypto bots make Fewer Mistakes as well, if any at all, as long as they are using a good algorithm. As a trader, I have made many mistakes myself, such as buying the wrong pair, e.g. EUR/USD instead of EUR/GBP, closing the wrong trade, which might actually be in a loss, or placing the wrong entry level. Certain cryptos have many digits. There’s a massive difference between placing $5,000 or $50,000 in Bitcoin, or $0.0000080 or $0.000080 in Shiba Inu coin. Using a Bitcoin bot or a Shiba Inu bot eliminates such errors.

No human supervision needed

Bitcoin bots are very useful and efficient, and they do run round the clock non-stop. However, you still have to keep an eye on them and you will probably have to make changes/adaptations to the crypto bot from time to time. The sentiment and the way the market reacts change fast in the cryptocurrency market. So, the strategy that was working a few days ago suddenly might not work anymore. Therefore, you have to check crypto trading bots regularly and adjust them as necessary, in order to keep up with market changes. So you still need to understand the markets to a certain extent, if you are to make effective changes and adapt the strategy according to the new market forces.     

Limited Number of Cryptos

When you build or buy a crypto trading bot, you need to enter the cryptocurrencies that will be traded by the bot. In the case of a Bitcoin bot, it is simple, since it only trades Bitcoin. However, most traders prefer to trade more than one cryptocurrency, thereby making use of the whole market. But many trading bots only accept a limited number of cryptocurrencies for trading. On top of that, the crypto exchanges/brokers themselves don’t list all of the cryptocurrencies, and besides, most crypto bots are specified for just one crypto, or a limited number of cryptos, and new cryptocurrencies are being launched constantly, with monotonous regularity.

If you built a trading bot three or four years ago, it won’t be able to trade the cryptos that have come out since then, such as Cardano ADA, USD Coin USDC, Solana coin, Uniswap, Terra coin Luna, etc. So, you’ll miss out on some great trading opportunities, since new cryptos make some of the strongest rallies at times. On the other hand, here at Fxleaders, where we use manual trading instead of automated crypto bots, we have benefited many times from buying new, insignificant cryptocurrencies, before they increased many times in value and attracted the attention of the markets. A Bitcoin bot would have missed any such opportunities.

Best Crypto Bots Review

3commas.io

This is a trading platform that makes it possible for people to participate in the crypto market through crypto exchanges. It is connected to 23 exchanges and it integrates crypto trading bots into the platform as well, where you have the option of setting your own parameters or building your own strategy. 3commas offers three plans for different types of traders: Starter, Advanced and Pro, although you have to pay a fee, simply for using the platform.

  • You can set your own the crypto trading bot parameters
  • Financial protection algorithms
  • Integrates with TradingView for advanced bot/signals
  • Compatible with 23 crypto exchanges
  • Copy trading and portfolio analysis across all exchanges
  • Difficult to set your bot without TradingView

Cryptohopper.com

Cryptohopper is a trading bot that was launched in 2017, with the aim of making cryptocurrency trading simpler and easier. Their goal is to empower traders by providing a fully featured service that is easy to use and that allows participants to trade multiple cryptocurrencies pretty easily. It also allows for Market Making  

  • Algorithmic and social trading
  • Market Making for very advanced programs
  • Access to high-level analysis tools
  • A comprehensive mobile app that includes advanced security features

About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
Ava banner