If you are a trader in the digital currency market, you must have heard of crypto trading bots. These robots are designed for automatic trading in the digital currency market and their use is very practical. We have created a list of the best trading bots for you to use in your transactions at the end of this post.
What Exactly are Crypto Trading Bots?
Crypto Trading Bots are computer trading programs used in the digital currency market. These trading bots can buy and sell different cryptocurrencies at certain times based on certain indicators such as moving averages. They can be used 24 hours a day, 7 days a week, and their response to the market could be much faster.
Trading bots execute certain trading strategies. They buy and sell automatically at the right time for the purpose of making more profit. You may think this is the best program for beginners, but it is not. It is difficult to find the right strategy in a volatile market and robots can not accurately predict it and always be profitable for their user.
But using these bots and determining their strategy with less profit can be a better way for those who only want to trade digital currency. In fact, they can both store that digital currency and make a good profit from it throughout the year with the help of crypto trading bots. Nevertheless, it is important that the trader have good experience and knowledge of the market before they use bots.
Types of Crypto Trading Bots
The simplest kinds of bots are the ones that look for a market trend by observing a price history, and using decision logic to execute a buy or sell. This is the kind of bot that most people are interested in, and they are usually tied to only one exchange.
The other type that’s used is the arbitrage bot. It is one of the most common crypto trading bots in the world of digital currencies. This bot can check the differences in prices of a crypto asset in different exchanges and make trades. Accordingly, it is not tied to trading on a single exchange.
So using these types of bots in digital currencies such as Bitcoin, which could have a marginal differential in value across exchanges can work very well. That is why these bots are common. There are other bots that use historical price data to test out strategies.
They also come in both free and paid versions, and certainly, free bots have poorer performance and more limited usage.
How Do Crypto Trading Bots Work?
Crypto trading bots use an API that is created by either an exchange or a developer, to send buy and sell requests to en exchange. Many exchanges provide and document their own API which users can use to make programmatic calls to an exchange, and usually, these are what the bots are based on.
Signal Generator
The data enters the Signal Generator and receives buy and sell signals. These signals come from a variety of market trends, which are out of the scope of this article.
Risk Allocation
At this stage, using the signal obtained in the previous step, it automatically decides how much to buy. This stage can use all or part of the capital for investment.
We should emphasize though that it is often not a good idea to make a bot use all of your capital at once. When a bot manages a large amount of money, price changes often cause them to sell at a loss, which is made bigger the more capital you used.
Execution
At this stage, trading is done automatically using previous data. Lag can delay the trade by several milliseconds, or even a few seconds. This usually brings catastrophic results so most trading bots are hosted on well-connected servers with fast networks.
Also, lag on the trader’s computer can sometimes cause the trade to be late, so most of the time, the API has a timeout for receiving an API call. If the call is made too late, it is rejected by the bot.
Benefits of Crypto Trading Bots
Trading Time
Crypto trading bots can work 24 hours a day, 7 days a week. But a human being does not have such capability. Only institutional investors with many staff can outwork a bot.
Market Reaction
Using statistics and algorithms, they always consider the best way and can be more sensitive in the market. With this sensitivity, they can react faster.
Processing Time
Trading bots can use up to several gigabytes of price data for multiple digital values. But human beings certainly face such limitations and cannot examine a large amount of data. Again though, institutional investors that have complex software can analyze more price data than a bot.
Disadvantages of Crypto Trading Bots
Low efficiency
Many of the bots have a low efficiency and can only detect simple price patterns. Also, many of these crypto trading bots (especially free bots) are not well designed and users lose more money than they gain. If you are running low on funds though, we also have a guide on how to deposit more on the most common exchanges.
Requires knowledge
You can’t just turn on a bot and start making money. Then again, this is true for all methods of making money. As the saying goes, “money doesn’t grow on trees.”
If you want to succeed in the market, you need to have a deep knowledge of how it works, and a great investment plan.
Are trading bots illegal?
No, they aren’t illegal. In fact, cryptocurrency exchanges allow you to use them on their platforms. For stock brokers however, it is a different story, as only some brokers allow you to use trading bots on their platforms.
Some types of crypto trading bots such as pump-and-dump bots are illegal though, because they manipulate the price of cryptocurrencies. You should avoid using these at all costs as they can get you in trouble. Unfortunately, there are some changes who, in fact, use these types of illegal bots to create false transaction volume, so they can be ranked higher on sites like CoinMarketCap.
Are trading bots safe?
Only the most trusted bots are safe to use. We have made a list of common crypto trading bots at he end of this post. These bots can automatically trade with exchange capital without you worrying if they will steal the money.
The dangers of using an untrustworthy bot is that they might ask for private keys for your wallet, or excessive API keys. Generally, they should not be asking for this information because they do not need it. Also, they might simply take away your capital instead of trading it.
Also, some of the more poorly designed bots will not pause when the price is extremely high or low, which leaves you in danger of losing a lot of money.
Do trading bots make money?
Yes. If they are used properly. As you might already know, you need a working trading strategy to make profit, and the same applies when having a bot perform your trades for you.
If you do not have a working trading strategy, you can always test new ones you discover on a demo account. Demo accounts give you virtual money to trade with and are risk-free.
Do crypto trading bots really work?
Yes, they do – there is nothing scammy about the concept of trading bots. But you must have a good strategy. Many traders are guilty of following their impulses and social media for their next moves, which are highly unreliable sources of information – and in the case of impulse, dangerous, even. So bots are not for you if you can’t control your emotions.
Are trading bots a good idea?
On paper, they look like a work of genius. Given that crypto currency markets are always open 24/7, a trading bot can perform a huge number of trades at once – much more than a human. As mentioned above, they can also crunch more price data than humans, which gives them more market insight – provides the bot was designed well.
Are bots good for trading?
Only the most well-maintained bots are suitable for trading. We do not recommend using outdated bots because they do not have information about the latest price adjustments hardcoded into their systems.
Can I make my own trading bot?
You can make a crypto trading bot in any programming language, as long as you can make network requests from it. The thing to note is that bots will only be in one of three states: “buy”, “sell”, or “do nothing”. You will make it go to the Buy state if you see buying trends, and in the Sell state if you see selling trends – and do nothing if no trends appear.
Of course, the buy and sell trends completely depend on what you want to use. That is why some bots are ineffective and flops – because they only use simple trading strategies.
How do bots make money?
Good question. You see, bots have a large number of configuration options you can set which will effect how, and when, it buys and sells. But generally, bots will make profit if they sell at a higher price than they buy. Over time, some bots will struggle to maintain that level of profit you see initially, and you’ll see profit levels declining.
Which is the best trading bot platform?
If you want a short answer, the two most popular bots are the KuCoin trading bot and Gunbot. It is hard to go wrong with those two in your arsenal, but we have a list of other good bots at the end of this post.
How do I start automated trading?
The easiest way to start is to sign up for an exchange which provides an API, and then visit the websites of one of the bots below to set it up for your exchange and start using it.
Best Crypto Trading Bots
We recommend using the KuCoin trading bot. We have a review about that here. This is for several reasons. First, it is maintained by the KuCoin exchange, so it will always be up-to-date with price patterns. Second, it provides different strategies for you to use – ones for Sell High and Buy Low, and ones for continuous investment. Finally, it is the most popular bot with over 3.5 million bots created worldwide.
The other popular trading bot is Gunbot. This is a bot that was created by bitcointalk user Gunthar, and was heavily promoted between 2017 and 2018. It supports a large number of exchanges including Binance, Kraken, Bybit and Bittrex (which, believe it or not, supports a host of other bots too). You can buy a license to use it, which will allow it to use exchange APIs to trade money on your exhange.
There are a couple other crypto trading bots worth mentioning:
- Coinrule
Coinrule has many strategies. It has more than 150 trading templates. It is a comprehensive bot and it is constantly adding new templates to its platform.
- Pionex
This is the best option for you if you need to trade in large volumes.
- Shrimpy.io
Using this platform, you can easily connect to 18 exchanges and manage your capital.
- CryptoHero
If you want to use a mobile phone, this can be the best option for you. It comes with a good user interface and attractive platform.
Other common bots are:
- Cryptohopper
- Wunderbit.io
- Botsfolio
- TradeSanta
- Quadency
