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Cryptocurrency Trading Bots – Do They Make Sense For You?

02.11.2020

The crypto world can be very fast-paced. One minute things may be calm. But the next, the market is on fire! Trying to keep up is often a full day’s job. Due to this, more crypto traders are trusting cryptocurrency trading bots to stay current 24/7. But there’s a lot to learn before you can start using these bots. 

What exactly are crypto trading bots? How do they work? Do they make sense for you? You’ll find out all these and more, right here. Stay tuned!

Cryptocurrency Trading Bots – A Primer

Let’s start with the basics. Trading allows you to buy and sell assets for profit. These include assets like stocks, shares, gold or currency. When you’re crypto trading, you exchange digital assets with other traders on a crypto exchange. Most of the time, crypto trading looks pretty similar to normal trading. But there’s a big difference. Crypto markets never close, they never sleep. This means even when you’re asleep, the market simply keeps going. That’s why a trader’s biggest nightmare is waking up to find that massive price movements have occurred while they slept. 

Due to this, many traders use cryptocurrency trading bots to stay on top of the market. What are these bots and what do they do? That’s up next. Want to learn more about crypto trading? Check out our cryptocurrency trading for beginners guide or our hands-on cryptocurrency trading guide

What are Crypto Trading Bots? 

Crypto trading bots are a type of trading tool. They are pieces of software that execute trading instructions on your behalf. You basically plug them into your trading account, and let them trade on your behalf. All you need to do is tell the bot how you want to trade. Then you can sit back (or sleep) and let the magic happen. Easy, right? Let’s look under the hood of how these bots function. 

How do Crypto Trading Bots Work?

Trading bots use APIs to interact with a trader’s account. They allow a trader select specific instructions from a set of pre-defined criteria. Want to make a bitcoin trade at exactly 2.1% price gain? You only need to set the instructions and let the bot take over. Crypto trading bots can interpret market trends and data. This lets them understand where the market is going, and execute your trades automatically. See the CoinMetro API docs here.

Trading bots are capable of executing a number of market strategies. These include arbitrage – profiting from price differences of a single asset across different exchanges, and simply following the general trend. Bots can also carry out a market making strategy. This involves continuously buying and selling an asset on both sides of the market as the price fluctuates. Other tactics that bots may be able to execute include copy trading and swing trading. 

There are tons of paid and free crypto trading bots you can check out. Some of the most popular crypto trading bots around include 3Commas and Cryptohopper. 

Do Crypto Bots Make Sense For You?

Although they are quite useful, crypto bots may not be perfect for everyone. Certain bots may bring the possibility of scams and hidden fees. Others may come with limited trading customization or limited ability to read market stimuli. 

However, a great trading bot can be an asset. They help you take the emotion out of trading. They can also be great for finding sweet trading opportunities on auto. And they save time on trades, which is often a critical point in crypto trading. 

For a bot to work profitably for you, it needs a strategy. It’s great to try it out but without sound skills and knowledge in trading, programming a bot doesn’t usually work out well. Whilst you build your warchest of crypto trading up it may be a better idea to practice on a demo account or with small amounts of money. You can also use copy trading, where you simply copy the trades of a professional trader.

Want to see if a crypto trading bot can work for you? Get a CoinMetro trading account and try out your favorite bots for a practical experience. If you have any questions, our support team is here to help 24/7.