Whether you are new or a veteran in trading cryptocurrencies, you have probably heard about automated or Algo trading. You may have also heard how profitable it can be to use these tools. But what is it really, and how does it work?
This article will cover both the basis of automated crypto trading and more advanced strategies. Also, you will find that most algorithms can actually be easily coded in a few minutes using an algorithmic trading toolkit and therefore do not require any programming skills.
What is Automated Crypto Trading?
Automated crypto trading refers to any software or bot that automatically executes trades without any user intervention required. It can also refer to manual processes where traders set up their own systems that execute trades at predetermined times without any human interaction.
This form of trading is now used by traders who want to profit in the crypto space without spending many hours sitting on their laptop screens. Instead, traders can simply set their desired parameters for the trade and let their bot handle the rest while they go on with other tasks.
How it Works
Automated crypto trading first came about when the first set of Bitcoin exchange platforms was established. These platforms offered users the opportunity to trade bitcoins for other cryptocurrencies or fiat currencies (such as USD).
One of the main reasons for using such an exchange platform was that it allows one to trade from anywhere in the world. When these initial exchanges became popular, some users began experimenting with different trading strategies to profit from price discrepancies between exchanges.
Eventually, they realized that profitable strategies could be automated. That is just by writing a computer program that could automatically place orders on behalf of a trader at specific times and prices when certain conditions are met.
This gave birth to automated crypto trading – software programs that execute trades based on predetermined rules set by their creators or owners. These rules can be based on technical indicators like moving averages or support/resistance levels, fundamental indications like news events; price movements; or any other metric impacting asset prices.
The process for automated crypto trading is quite simple and easy. All you need to do is sign up on an exchange platform, select the currency pair and set up your automatic trading account.
If you want to profit from automated crypto trading, then you need to set up an API key on your exchange platform. This way it can integrate with your software program automatically. This API key will allow your software program to send requests or commands directly to your exchange platform account.
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Automated Crypto Trading Strategies
Automated cryptocurrency trading strategies are usually programmed into software that monitors markets and places orders based on pre-defined rules. There are many different automated crypto trading strategies available. They can be divided into three main categories:
1. Trend Following Strategies
These are the most common and popular types of strategies used by automated crypto trading bots. Trend following is based on the premise that a coin’s price will move in the same direction for a period of time, before reversing its direction. These bots look for certain patterns in price movements and then buy or sell accordingly.
2. Arbitrage Strategies
Arbitrage is when you take advantage of price differences between different exchanges. For example, if one exchange has a lower price than another, you could buy on one exchange and sell it on another at a higher price to make profit. This type of bot looks for these opportunities and executes trades automatically based on them.
3. Oscillators & Signals Strategies
These indicators show whether an asset is overbought or oversold relative to its historic range (or relative value). Signals are alerts from external services that suggest that a particular asset may be overbought or oversold relative to its historic range (or relative value). These signals can be used as entry points for automated trading.
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Benefits of Automated Crypto Trading
- The main benefit of automated crypto trading is that it’s incredibly convenient. You don’t need to worry about checking your portfolio every few hours or even minutes; instead, you can leave the software to do all the work while you go about your day-to-day activities.
- Another advantage of automated crypto trading is that most programs are free to use for as long as you want. Some paid options are available that offer additional features, but these tend to be more expensive than their free alternatives.
- You also don’t need any technical knowledge or previous experience with trading or coding to use automated crypto trading programs; they are designed so that anyone can use them without any difficulty whatsoever.
- It reduces the likelihood of making mistakes. An automated crypto trader will not make emotional decisions based on news or trends in the market. Instead, it follows a predefined set of rules optimized to maximize profits while minimizing risks.
- It’s easy to set up and launch your bot software. There are many free open source options available online, or you can hire a professional developer to create one for you at a reasonable price.
- One of the most significant benefits of automated crypto trading is speed. It allows you to trade much faster than if you were manually trading. The speed at which an automated bot can trade is limited only by how fast your internet connection is.
5 Best Crypto Trading Bots for Automated Trading in 2022
Coinrule is a crypto trading bot that uses machine learning and artificial intelligence to trade on multiple exchanges. It has a built-in copy trading feature that allows you to copy the trades of other users, which is useful for those who don’t have time to actively trade themselves.
You can use Coinrule to set up strategies based on technical analysis indicators like moving averages and candlesticks. The bot will then place buy/sell orders on your behalf according to your chosen strategy. The bot supports most major cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Ripple (XRP).
One of the key features of Coinrule is its ability to trade on multiple exchanges at once. This means that if you see a coin going up in price on one exchange, you can set up a buy order on another exchange so that when it hits that exchange, it will automatically sell for a profit. This type of functionality is especially useful for arbitrage trading.
Cryptohopper is a popular trading bot for cryptocurrency trading. It is designed to be used by both beginners and experienced traders. The bot supports 17 exchanges, including Binance and BitFinex, and offers a range of advanced features such as stop losses, trailing stops, and take profit levels.
Cryptohopper also offers a number of features that make it easy for users to set up automatic trades. The auto trading bot comes with a user-friendly interface that allows traders to easily create, schedule, and manage trades without any coding skills. The software offers a wide range of features for beginners and advanced traders alike.
The software also comes with real-time support from the developers themselves via their website forum and chat rooms. Additionally, users can also access online articles on how best to use the platform alongside video tutorials showing how to install it and set it up correctly.
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Pionex is one of the most popular crypto trading bot platforms in the world. It offers a wide variety of features for every level of trader, from beginners to experienced traders. The platform provides integration with 12 exchanges and is used by over 400,000 traders worldwide, including Binance and Poloniex.
This platform has its trading terminal where users can place their orders manually or use different automated strategies. In addition, it offers a range of tools for analyzing the market, such as technical analysis indicators and price alerts.
It has a built-in wallet which means it doesn’t require you to sign up for an exchange account to use it. You can also set up a portfolio of coins that you want to track and trade with the bot.
The bot’s interface is intuitive and easy to use, and they even have mobile apps so you can access the platform from anywhere. They also have free and paid versions available, so choose what works best for you.
WunderTrading has been around since 2014 and has won multiple awards. It’s also one of the few that can be used without needing a VPS (Virtual Private Server). WunderTrading uses a proprietary algorithm based on technical analysis to trade with your account.
You simply connect your trading platform (e.g., Poloniex, Bittrex, Coinbase) via API keys, and WunderTrading will trade using your account.
WunderTrading also comes with a special focus on arbitrage opportunities: it will actively look for pairs to trade between different exchanges where the price differs for the same coin; however, if you don’t want to use this feature, you can turn it off.
With WunderTrading bot, you can buy and sell cryptocurrencies for a profit without having to bother about the price dips. The bot buys low and sells high as per your instructions. Furthermore, it has an excellent backtesting feature that allows you to understand how well your strategies will work before using them on live trades.
WunderTrading is available on web-based dashboards and mobile apps for Android and iOS. You can set up automatic deposits into your trading account with the help of this cryptocurrency trading bot.
Haasbot is another popular bot that can be used to automate your trades on several different exchanges. The software supports over 20 exchanges and offers a wide range of features to help you trade more effectively and efficiently.
Haasbot supports a variety of technical indicators and allows you to create your custom strategies using the software’s built-in script editor. It also offers real-time support from its developers, so if you run into any issues with your bot, they can help you fix them quickly.
The platform also offers customization options to create your strategies or modify existing strategies as per your requirements. You can use these strategies for automated trades on multiple exchanges simultaneously. You can also set it up on one exchange if you want to keep your portfolio diversified with multiple bots running at a time.
Facts About Automated Trading Tools
When it comes to the use of these automated trading tools, there are a few things you need to know:
First, automated trading tools have been around for decades, dating back to when computers were first introduced into the financial markets. However, these early tools were primitive and not nearly as sophisticated as today’s versions.
Second, as technology has improved over time, so have automated trading tools. Today numerous types of algos can be used for different purposes such as market analysis and order execution. In addition, these algos have become more user-friendly and easier to use than ever before due to advances in technology.
Third, there are a few things that are as frustrating as finding a bot with the potential to make money, but that doesn’t. These frustrations can include anything from having difficulty configuring it for your needs to troubleshooting problems.
Lastly, professional traders often use automated trading tools because they let them focus on other aspects of their business while still being able to set up trades. Many professional traders rely on these tools as part of their everyday routine.
To start things off, you will be glad to know that there is a common misconception about automated crypto trading. That it is highly dangerous and can cause many losses to inexperienced traders. This is far from the truth, as these tools have been live on the market for quite some time now and have proven to be one of the best solutions for those looking to earn money through crypto trading.
In fact, many investors out there make passive income through automated crypto trading and it looks like this trend has no intentions of disappearing anytime soon.
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