If you’re looking for the best Bitcoin trading bots to help you execute trades based on pre-programmed rules, then you will find the answers by reading this extensive article.
Bitcoin has evolved from being an inconsequential asset class into disruptive technology. With Bitcoin considered a store of value, several users have been looking for ways to increase their holdings. Investors have doubled their portfolios by trading BTC against smaller altcoins or penny cryptocurrencies.
Table of Contents
- What is a Crypto Trading Bot?
- How Trading Bots Work
- Types of Cryptocurrency Trading Bot
- Why You Should Consider Using a Cryptocurrency Trading Bot
- Best Cryptocurrency Trading Bots
- Do Cryptocurrency Bots Actually Work?
- How to Choose the Best Trading Bot
- How to Get Started with a Service
- Pros and Cons of Cryptocurrency Trading Bots
- Frequently Asked Questions (FAQ)
Since the crypto market functions on a 24/7 basis, it is impossible for traders to constantly monitor the market and make the best decisions within this period. This shortcoming has seen traders adopt Bitcoin trading bots that will help them keep tabs on the market and execute trades at the appropriate time.
What is a Crypto Trading Bot?
A cryptocurrency trading bot is an automated trading software that analyses the market data and executes trade according to a pre-programmed set of rules made by the user.
A crypto trading bot helps individuals buy and sell cryptocurrencies at the right time and price. Since the trader is not always available, automated programs can be deployed to help increase their revenue while mitigating losses.
For instance, a trading bot can be instructed to buy or sell Bitcoin when its price reaches a particular level. The bot, having received the instructions, would have no alternative but to implement it without acting on any emotional impulse.
With this in place, users would be confident that they are safe because the bot is like automated trade assistance that does all the hard work. Others use bots alongside crypto signals to provide even more reliable results.
How Trading Bots Work
The essence of using bots to trade is to increase profit and reduce losses to the barest minimum. Achieving this feat would require the bot user to have a good knowledge of how these programs work.
Since there are several developers, each has its own distinct requirements on how they work, and it is best to carefully know the instructions of your chosen program to avoid losing huge sums of funds.
There are free and paid bots. Regardless of your choice, you would first have to download the code from the developer and finish the installation.
Generally, a bot user would first need to have a funded account on a supported cryptocurrency exchange to allow the program to work effectively.
Almost all trading bots have the same key components to function effectively, and they are:
- Market Data Analysis
The software takes advantage of its ability to quickly compile market data from different cryptocurrency exchanges to decide whether it is ideal to buy or sell.
Despite the fact that people develop bots, it is a tedious task for humans to compare market data across several exchanges in minutes. Humans cannot easily perform the job of critically examining the market as the bot would. Yet, they can input a set of instructions to the software that tells it the data that should be analysed to save time.
- Market Risk Prediction
This component allows the bot to determine the potential risk of the market based on the data gathered. The bot decides whether it is the right time to buy or sell.
For instance, should there be a constant price swing in minutes, the trading bot may have to hold on for a while until the market stabilises before executing a trade.
- Buying and Selling
This sums up the main motive while the program is being used. After the software has gone through the first two components above and is certain there is a window of opportunity to buy or sell a coin, the trade will be swiftly executed strategically. The module would either make a profit for the user or reduce the losses.
Types of Cryptocurrency Trading Bot
Since the first cryptocurrency trading bot was launched to help users buy and sell coins on exchanges, several other types have followed suit, focussing on the same goal – increasing profit and mitigating losses.
Here are some of the most frequently used types of cryptocurrency trading bots:
The arbitrage trading bot quickly compares a particular cryptocurrency price across various cryptocurrency exchanges to determine the best price to buy or sell the asset and lock in a small profit.
All the Bitcoin arbitrage trading bot does is buy a coin on one exchange and sell it on another.
For instance, while searching for trade opportunities, a Bitcoin arbitrage trading bot discovers that BTC is trading at $150 more on Binance than it is being exchanged on KuCoin, which would lead to the bot quickly buying the coin from the latter and selling it on Binance.
It is worth noting that for this bot to function, the trader would need to connect his accounts to both exchanges.
A market-making bot is an automated program that provides liquidity and fills the order book with buy and sell orders. This helps other traders to execute their trade orders whenever the need arises, thus building trust for all market participants.
While market-making automated programs help to provide liquidity, they also shield users from large swings in prices, especially when buy and sell orders are set close to the current market level.
- Copy Trading
Indeed, the crypto market is still very young compared to other financial instruments. However, the industry has seen the rise of professional traders over its more than ten years of existence.
These traders have a sound knowledge of market data and trends and know the best move to make. With crypto trading bots, the trading strategies of professional traders are automatically copied and deployed on your behalf.
For most copy trading bots, users can replicate the strategies of professional traders by clicking just a button.
- Momentum Trading
Also known as trend-following bots. Here, the trading bot follows a close surge in assets and sells when market momentum reverses.
Users of this bot believe that their acquired cryptocurrency will surge above the average purchase price, and the coin’s rally immediately indicates a reversal. The bot is expected to sell the assets.
Why You Should Consider Using a Cryptocurrency Trading Bot
There are two main reasons traders and investors consider employing a trading bot. These include:
It is common knowledge that the cryptocurrency market works on a 24/7 basis, and traders cannot be available at all times. The crypto trading bot assumes your position when you’re unavailable and executes deals using your pre-programmed rules on how it should analyse market trends and data.
Poor Emotional Intelligence
Regardless of how experienced a trader claims to be, recording a few losses may see his or her emotions come into play, leading to further losses. This is not the same for a trading bot because once it is programmed, it strictly follows the rules set by the owner and does not deviate due to emotions at any point.
Some traders rely on trading bots to amplify their profits. This approach involves customizing a bot to execute simple trading strategies, such as buying and selling several assets at specific prices. Doing so allows the trader more time for other exhaustive trading activities.
Best Cryptocurrency Trading Bots
We’ve compiled a list of the best cryptocurrency trading bots, features, pros and cons, and their supported crypto exchanges.
Exchange: Binance and KuCoin
Zignaly runs a platform that brings cryptocurrency traders together to share trade ideas and also has a trading bot for people who may fancy using the system to execute trades.
The platform has three types of automated trading: copy trading, trading bot, and trading terminal. Its users can choose any supported services based on their experience in the cryptocurrency market.
Zignaly offers a 30-day free trial of its bots to enable users to analyse the service's performance before deciding to adopt it.
- Cryptocurrency trading signal support.
- Multi-lingual support.
- Demo account support.
- Free Discord group
- Multi-payment support.
- Users are given free tests of the service for a period of 30 days to verify Zignaly's authenticity.
- Bots are equipped with trailing stop loss.
- Several cryptocurrencies, including majors and minors, are supported.
- Offers free educational content for crypto newbies.
- Extra costs are required to copy the best traders.
- Only two exchanges are supported.
Exchanges: Binance, AscendEx, Bithumb, Bittrex, and over 100 trading platforms supported.
Supealgos has some of the best easy-to-use trading software and free crypto bots.
The service does not require any form of technicality as most free bots would. Superalgos has made available open-source cryptocurrency trading automation in a visual scripting environment.
Users can contribute to the Superalgos trading bot and earn its native token, dubbed the Superalgos (SA) token.
- Free and open-source trading bot.
- Superalgos features node-based visual scripting
- It has a native cryptocurrency that rewards top contributors.
- Community-driven bot.
- Trading software is free
- Networking between pro and new crypto traders is made possible through a vibrant community.
- Suitable for non-technical users.
- There is transparency about the bot's development.
- Free bots may not have the same positive results as paid ones.
- The platform offers little to no customer support.
Fee: $19/mo for a Standard Plan, $19/mo for a Plus plan
Exchanges: Bittrex Global, Binance, KuCoin, Huobi, OKEx, Gemini, Bitstamp, etc.
Shrimpy is a cryptocurrency portfolio management platform that enables users to manage their trades and balance from different cryptocurrency exchanges on one platform without complication.
The platform has integrated all the vital crypto trading tools necessary for investors' and traders' success while mitigating the industry's risks.
- Automated trading with popular indicators and tools.
- Demo plan
- Copy-trading support.
- Backtesting strategies
- Secure storage of API keys using FIPS (Federal Information Processing Standards) 140-2.
- Offers stats on portfolio performance.
- Users earn a commission when other members follow them via social trading initiatives.
- Free account registration.
- Traders can choose to copy the trading strategy of other professional traders.
- Very rich educational materials are available
- The free account has very limited features.
- API access is not available to Standard subscribers.
Price: $12/mo for starters, $20 advanced, and $40 for professional accounts monthly.
Exchanges: Supports over 23 exchanges, including Binance, Bittrex, and KuCoin
3Commas ventured into the crypto industry in 2017 with a transparent trading program that helps its clients execute trades as they deem fit.
While the firm has its pre-configured program, 3Commas allows its clients to set up trading software according to their preferences and risk appetites.
- Mobile apps available on Android and iOS
- Copy-trading feature supported.
- It has a unique trading terminal
- Users will be notified of any successful trades conducted by the bots.
- 3Commas supports backtesting, dollar-cost averaging, and crypto signals.
- Affiliate Program
- The bots can be integrated across 17 cryptocurrency exchanges.
- Users can set up trailing stop loss and take profit while sleeping.
- Availability of a free trial account.
- It has rich educational content.
- Excellent customer support
- The platform has suffered a security breach leading to the leak of customer API keys.
- The custom three-day free trial for customers is unavailable to customers who pay with crypto.
Fees: €9.99/mo or Knight, €39.99 for Rook, and €59.99 for Queen account
Exchanges: Binance, Bitpanda Pro, Coinbase Pro, and Kraken.
Trality is a cloud-based trading bot that is widely used by beginners and advanced traders. The platform uses two basic features to automate trades: the code editor and the rule builder. While the former is suitable for advanced traders, the latter is for traders still trying to find their foot in the market.
- Blazing-fast backtesting
- Cloud-based live trading
- Code Editor
- Rule builder, which helps non-coders to drag and drop different tools.
- Marketplace for investors to back successful traders.
- Support both coders and non-coders
- A free account is available to all users
- End-to-end encryption to guarantee funds’ safety.
- Suitable for crypto beginners.
- Does not have a mobile app
- No educational resources for crypto novices.
Fee: $23/mo for a Basic account, $59 for an Advanced account, and $119 for a Pro account.
Exchanges: HitBTC, Gate.io, Bitfinex, OKEx, Binance, and many others.
Bitsgap trading bots are mostly focussed on arbitrage trading, finding the best rates across several exchanges, and taking advantage of price differences to help traders lock in a profit. The platform boasts some 500k users.
Users can connect multiple accounts to the platform with one click, leaving the system to execute the remaining processes.
- Basic and advanced order type
- Multi-cryptocurrency support
- Arbitrage trading
- Bitsgap also features a signal service.
- Affiliate Program
- 7-day free trial account.
- Demo account support to boost users’ confidence
- Trading signals for over 10,000 cryptocurrency trading pairs
- Supports integration with 18+ exchanges.
- Allows users to DCA into trading positions.
- Not suitable for new cryptocurrency traders.
Fee: $29.99/mo for a Hobbyist account, $59.99 for a Trader account, and $449 for a Pro account.
Exchanges: Bitstamp, OKEx, Poloniex, Kraken, BitPanda Pro, Binance, Liquid, and Coinbase.
Launched in March 2018, Coinrule is among the best crypto bots in the market, with many positive reviews from happy customers. Users can automate their trades to maximise profit using several basic and advanced tools such as buy and sell orders, take profit, and trailing stop loss, among other things.
Although it is relatively new, Coinrule has succeeded in becoming one of the most trusted crypto trading bots among traders.
- A variety of plans for all levels of traders.
- Supports several trading tools.
- No coding is required for the initial setup.
- Support for an investment management strategy.
- 24/7 customer support
- Provides military-grade encryption to keep users safe.
- Free account setup available
- Free education material on several crypto-related topics.
- Accepts crypto payments for subscriptions.
- Trade notifications are available on both Telegram and text.
- The fee may be too expensive for small traders.
- The bot supports fewer exchanges compared to other competitors.
Price: $16.58/mo for an Explorer account, $41.58 for Adventurer, and $83.25 for a Hero account
Exchanges: Huobi, Binance, Poloniex, Bittrex, Coinbase Pro, Kraken, Bitfinex, Kucoin, and Cryptopia.
Cryptohopper, which started out as a personal cryptocurrency trading tool by the Feltkamp brothers in 2017 has become one of the best services in the industry in recent times
The service is an all-in-one solution that automates trading processes for users. With Cryptohopper, users can copy professional traders, set signals and alerts, and stay on top of the market as the bot does all the hard work for you.
- Automated trading.
- Algorithm Intelligence
- Arbitrage trading
- Mirror trading
- Paper trading
- Mobile App support
- Users can build their confidence with the simulated trading features.
- Suitable for every trader.
- Resourceful cryptocurrency educational materials
- Users are given access to advanced trading tools and processes.
- 24/7 customer support.
- Users can trade up to 20 positions with a Free plan
- Users must purchase a monthly plan to enjoy its advanced features.
- It would be better if more exchanges were supported.
Price: Free basic account, $13.99 for a premium account, and $29.99 for a professional account.
Exchange: Binance, Bittrex, Huobi, OKEx, FTX, Kraken, Bitfinex, Coinbase Pro, Gate io, and Kucoin
Launched by an experienced team of financial instruments investors, CryptoHero uses Artificial intelligence technology and proprietary algorithms to automate trades on behalf of its users.
The service does not require coding skills, as anyone, irrespective of your experience can easily use it. CryptoHero trading bots have several advanced techniques that can be used to get the most out of the market.
Aside from the bot’s unending capabilities, traders can choose to use technical indicators, including Bollinger Bands (BB), Exponential Moving Average (EMA), Relative Strength Index (RSI), etc., to check market volatility and then decide whether it is the ideal time to trade.
- Multiple indicator triggers.
- Mobile app
- Simulated paper trading
- Referral program
- Backtest strategies.
- CryptoHero offers support services, including the LiveChat widget, Telegram, and WhatsApp.
- It offers an easy-to-use service bot.
- Suitable for all traders.
- Users’ confidence to venture into real-world trading has been boosted via paper trading support.
- There is a dedicated free account for traders with very low trading funds.
- CryptoHero offers insightful educational material for beginners.
- Users must pay for mobile and web subscriptions differently.
- Only one trading bot is available for unsubscribed clients.
Price: 0.0014 BTC for a Standard package, 0.0025 BTC for Pro, 0.025 bitcoins for an Ultimate account
Exchange: Supports over 15 exchanges, including Binance, Coinbase, and KuCoin.
This service allows users to execute trading techniques automatedly, focusing solely on profit maximisation and loss mitigation.
Gunther De Niro launched Gunbot in 2016 to help crypto traders who had little time to monitor their trades repeatedly while giving them the assurance of making significant gains. Gunbot uses high and low techniques to trade various cryptocurrencies across notable exchanges. Users can customise the trading strategy to suit their style or use a pre-programmed technique built into the bot.
Unlike most developers, Gunbot only accepts payments in Bitcoin (BTC).
- Pre-programmed trading strategy support.
- Unlimited cryptocurrency pairs.
- DeFi trading bot
- Gunbot is equipped with a web browser interface.
- 16 buy and sell methods.
- The bot can be integrated into your Telegram for easy notification.
- All plans give users lifetime access.
- Good community support
- Bots can be customised to suit your trading needs.
- The bot can run on more than 15 exchanges.
- Gunbot offers educational material for paid subscribers.
- Plans priced in BTC
- No mobile app support.
- Not suitable for crypto newbies.
Exchange: Binance, Bitfinex, Bitstamp, Bittrex, CEX.IO, GDAX, Gemini, HitBTC, Kraken, Poloniex, and TheRockTrading
Launched in 2017, Zenbot is an open-source artificial intelligence crypto trading bot that can execute high-frequency trading through deep market analysis. The service uses a combination of Node.js and MongoDB to deploy a command-line trading bot.
Users can modify, organise and update the bot’s codes based on their preference, and all these services are given at zero cost.
In addition, Zenbot can be integrated into different chat platforms like Facebook Messenger, Slack, and Skype, with users required to provide the criteria in their console.
- Simulator for backtesting strategies.
- Paper trading support
- Natural language engine
- It can be integrated into different messaging apps.
- It's free to use.
- It is open-source, making it easier for traders to edit it to suit their trading strategy.
- Pattern matching support to generate flexible and full management alternatives.
- The platform rarely releases upgrades to keep pace with the crypto market.
- It is also not suitable for beginners.
Fee: $4.75/mo for investors with not more than a $3,000 portfolio, $9.50/monthly for a $3K to $10K balance, $14.25 for a $10K to $50K account balance, and $19 monthly for a $50K to $100K portfolio.
Exchange: Binance, Coinbase, OKX.
Botsfolio is a relatively new cryptocurrency trading bot. The service launched in 2020 and has been consistent in helping users make significant gains by automating market analysis to spot trading opportunities.
The bot accepts several crypto payments for its services, including BTC, Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).
Botsfolio is structured in a way that helps traders diversify their net investment into a combination of long and short-term strategies to align with their financial goals.
- 15-day free trial
- Portfolio calculator
- Risk management system for every client
- Telegram channel to keep users updated about the latest information.
- Botsfolio uses advanced security techniques to keep users safe.
- Suitable for every trader.
- Easy to use
- No programming knowledge is required.
- The bot cuts risk for amateur investors.
- There are relatively lower fees compared to other services.
- Works only on one exchange.
- Users require a minimum of $1,000 to get started.
- Unlike competitors, Botfoilo’s offering is priced based on a client’s portfolio size, not necessarily features.
Fee: $13/mo for a Basic account, $23 for an Advanced account, and $35 for a Maximum account.
Exchanges: Binance, HitBTC, Bitfinex, Bittrex, Upbit, Huobi Global, and OKEx
TradeSanta has all the necessary trading tools and strategies for modern-day cryptocurrency bots. With TradeSanta, traders can create, monitor, and adjust the service to buy and sell cryptocurrencies for them.
There is absolutely no need to acquire programming skills before using the service because TradeSanta is designed to be adopted by everyone. It features many trading tools, such as martingale and trailing stop loss. The bot also analyses the market using three indicators: Bollinger signal, RSI, and MACD.
- Free trial account
- Copy Trading
- Multiple payment support, including BTC, Tether (USDT), and ETH.
- Mobile app support.
- Supports advanced technical indicators and trading strategies.
- Setup is simple
- User-friendly interface, which makes it easy to monitor trade performance
- Relatively low subscription fees.
- Users can pay for subscriptions with fiat or crypto.
- Excellent customer support
- The free trial only lasts for three days.
- TradeSanta supports fewer exchanges compared to some competitors.
Fee: Access levels linked to user holdings in QUAD tokens.
Exchanges: Binance, Bittrex, Kraken, KuCoin, Liquid, OKEx, Bitfinex, Coinbase Pro, Gemini, HitBTC, and Poloniex.
Quadency is a cryptocurrency platform that automates trading and portfolio management for its clients. The platform combines a variety of tools and strategies to ensure its users get the most out of the crypto market, especially to increase their portfolio.
- It offers several trading indicators like MACD, Market Maker Plus, multi-level RSI, etc.
- Portfolio management
- Automated crypto bots.
- Advance charting
- A mobile app is available for Android and iOS devices.
- Free account
- Two support channels, including LiveChat widget and email.
- Neat and classy interface.
- Support over 4,000 trading pairs.
- Supports both crypto and fiat payment for subscriptions.
- There are very limited features for the free account.
- The QUAD token pricing model is complex as user access is affected by market volatility.
Price: $7.98/mo for Basic accounts, $15.98 for Pro traders, and $35.98 for Premium users.
Exchange: Binance, BitMEX, FTX, Deribit, Bybit, KuCoin, OKEx, HitBTC, Kraken, Bitpanda, and Bittrex.
Wunderbit is a German-based fintech company allowing users to purchase Bitcoin using their credit cards.
The exchange has evolved from offering only Bitcoin purchases to the creation of trading bots, which help traders streamline the cumbersome process of interpreting charts to determine the best trading opportunities.
- 7-day free trial
- Smart trading terminal
- Automated trading
- Support several technical indicators
- Crypto portfolio tracker
- It offers a resourceful cryptocurrency education program
- Clients can buy BTC from the platform
- Free account supported
- 24/7 customer support
- Limited features for free account holders
- The trading interface isn’t easy-to-use for first-timers.
Price: $3/mo for a portfolio below $500, $6 for a $500 to $1,000 portfolio, and $14 for an over $1,000 portfolio
Exchanges: Binance, Kraken, KuCoin, and Bittrex.
If you are looking for a paid but very affordable cryptocurrency bot, then Hodlbot is your best bet. Despite offering one of the best crypto trading programs for users to customise portfolios for over 300 coins, its entry fee is still the cheapest compared to other platforms.
The service has its own set of unique features that have helped it remain relevant since its launch. Its main focus is automatic rebalancing and indexing users’ portfolios to suit the market.
- 7-day free trial
- Customised portfolio tracking and management.
- Automated rebalancing to keep your portfolio on track during and after market fluctuations.
- Backtesting support
- Coin blacklists help traders remove cryptos they do not want in their portfolios.
- Easy to use
- Users keep all their returns
- Hodlbot provides detailed information on how to use the service
- Not suitable for advanced traders
- Only usable for portfolio diversification.
Price: 0.006 bitcoin per quarter for Beginners' accounts, 0.008 BTC quarterly for Simple accounts, and 0.014 BTC per quarter for Advanced accounts.
Exchanges: Supports more than 20 exchanges, including Binance, Bybit, and Deribit.
This trading bot is different from the usual. Here, clients must download HaasOnline software from its Trade Server. Haasbot allows users to automate trades by choosing from a list of pre-programmed bots and also enables the trader to customise their unique strategy using the Haascript feature.
- Customisable Haascript
- Multiple support channels for all subscription plans.
- Paper trading.
- Leverage automation
- Over 100 bots are available.
- Users can utilise customised Haascripts to tailor their trading needs.
- Protecting users’ privacy is important to Haasbot.
- Supports several indicators.
- The platform only supports Bitcoin payments.
- Subscription plans may vary based on the price of Bitcoin.
Price: Free Basic account and $19/mo for a Premium account
Exchange: BitMEX, Coinbase Pro, OKEx, Deribit, Binance, and Bybit.
Mudrex, originally launched as a cryptocurrency exchange, later upgraded its services to include cryptocurrency trading bots. The bot uses advanced trading strategies like RSI, MACD, BB, and a host of others to select the best cryptocurrency with the potential for greater gains. Anyone can create an account on the platform and publish strategies that other investors can choose to copy while trading.
- Zero-coding knowledge is required.
- Drag and drop support.
- Over 200 technical indicators.
- Bundled Crypto Bluechip, Metaverse, and NFT baskets for investors.
- Mobile app available for Android and iOS
- Performance calculator
- Easy to use
- Free account
- Intuitive strategy
- Suitable for new investors
- Backtesting is fast.
- Customer support is only available via email
- Not ideal for advanced traders
- There is a $500 minimum withdrawal limit for strategy publishers.
Price: Users are charged based on KRL token holdings, the number of hours and traded amount.
Exchanges: Binance, Bittrex, Liquid, KuCoin, Kraken, HitBTC, and Binance.US.
Kryll is a crypto trading bot that launched with a different model. Although it is a paid program, users are not charged a fee monthly, instead, the platform allows traders to pay according to the number of hours the bot spends executing trades on their behalf.
The platform has its own cryptocurrency, dubbed the KRL token, used to pay for various services on Kryll.
Crypto newbies can follow professional traders and rent existing trading strategies on the Kryll marketplace. On the other hand, experienced traders can use an editor to create their own set of strategies that align with their style.
- Cloud computing
- Pay-as-you-go subscription.
- Mobile app
- Users are not charged a dime when they are not trading.
- The service is suitable for everyone.
- There is an intuitive editor to customise your strategy.
- Backtesting is free.
- The dynamic pricing approach isn't ideal for all traders
- Customer support is not available via LiveChat
Exchanges: Binance, Bitfinex, Bittrex, and Poloniex.
Catalysts Enigma is a Bitcoin trading bot that uses community-curated datasets, allowing users to select the best strategy developed by professionals. The platform is written in the popular programming language Python and has its own cryptocurrency dubbed ENG Token.
- Live-trading functionality
- Backtesting support
- Statistic and machine learning library support
- The service is free.
- It uses advanced trading tools and strategies to generate profit.
- Catalyst uses advanced security protocols to keep users protected from hacks
- Coding knowledge is required.
- The service seems too complex for crypto beginners.
Do Cryptocurrency Bots Actually Work?
Trading bot developers claim to offer the best service with a remarkable success rate. However, it is vital to note that the crypto market is still nascent and is susceptible to Fear, Uncertainty, and Doubt (FUD).
It does not matter how effective the trade analysis made by the bot was, as long as there is a sudden negative update about the coin, the trend will likely go against the bot.
Additionally, during periods of peak volatility, trading bots may not work efficiently and can result in losses if owners do not step in to manage their risks.
When the market stabilises with no strong fundamental analysis that could shake the asset's value, its price level may reach the expected level set by the bot. It is at these times that trading bots make massive gains.
How to Choose the Best Trading Bot
The growth of the cryptocurrency industry over its more than twelve years of existence has given rise to the launch of several innovations, among which are trading bots.
There are numerous cryptocurrency bots on the market, each promising to offer better services than others. While the competition is ideal to an extent, it has created a problem of choice for several investors as many people now find it difficult to know which bot provider is legit.
Fortunately, you do not need to worry anymore because we’ve compiled some criteria to guide your verdict in choosing the best trading software.
Since the bot needs to be available most of the time you’re idle, you will need to select one that is reliable and execute trades that would be in your best interest.
Also, its capacity to effectively review market data and execute trades should be considered because the success of your trading journey using this special software is heavily reliant on it. You may also review historical records for the bot to make a data-driven decision.
This is one of the most important criteria when choosing trading software. With cryptocurrencies becoming highly valuable, hackers are constantly on the lookout for loopholes that will help them acquire more of the asset class, and as such, it is necessary to use a trading bot that is highly secured.
Trades involving such tech, in most cases, don't require human intervention, and hackers may gain unrestricted access that could see you lose your funds.
Intending tech users should look for background information from the developers to know whether they have any past or present affiliations with shady practices.
You must conduct due diligence with the company before considering using the service. Past users’ experience would guide your judgment, which can be gotten by searching on Google the developers’ name alongside the keyword ‘scam’. You may also consider researching if the company has a previous record of a security breach.
It is true that people require some learning to use bots to their full potential. However, the learning should not be so complex that it may only be used by advanced crypto traders who have been in the industry for many years.
The developers should design the program with every cryptocurrency trader in mind.
There are paid and free crypto bots. Experienced traders prefer a paid bot mainly because its developers would commit more resources to create a reliable solution capable of amassing profit for the user.
It does not mean that free trading bots are not worth it. However, paid bots have proven to be more reliable than free ones.
- Supported Exchanges
Lastly, the bot you’re opting for should be the one that supports several cryptocurrency exchanges and wallets. This should include the popular ones because you may want to switch from one platform to another as your trading journey advances.
Also, conducting arbitrage trading requires the user to connect more than one exchange to the Application Programming Interfaces (APIs), thus simultaneously trading on both.
How to Get Started with a Service
After carefully selecting a cryptocurrency bot, the next thing to consider is setting it up to suit your trading needs. The entire process may seem easier for experienced traders. However, crypto novices should acquire knowledge on how to use the service unless they intend to use a pre-configured trade strategy.
Whether the service is paid for or free, the developers may provide a guide to help you get started. The entire process typically begins with downloading the bot code from the developer and implementing the following procedures:
Before using the bot to trade, it should be compared against historical market data to measure its performance. The entire procedure used should be as realistic as possible.
Backtesting should include key considerations like latency, trading fees, slippage, and supported exchange.
- Strategy Implementation
This is where you specify what market data the bot should analyze to have a perfect trading strategy. The bot is only a program; you must specify what and when it should trade. Once the process is complete, you must repeat the first step to see how it works.
Here, your code will be added to the API in an efficient way that the exchange can understand. For most bots, users can conduct paper trading using fake money to see its performance.
- Job Scheduler
If you’re satisfied with the results, it is time to automate the process by setting a job scheduler for the bot, which will execute trades on your behalf.
Pros and Cons of Cryptocurrency Trading Bots
It would be unfair to downplay the benefits of trading bots today. While the advantages of free bots are nothing compared to the paid ones, both software types have succeeded in helping traders make significant amounts of gains.
Let’s examine the general pros of Bitcoin trading bots below:
- Good Data Retention
Despite being developed by humans, it is impossible for a trader to analyse cumbersome market data across several exchanges without feeling exhausted.
Sometimes, before the trader may finish reviewing the data on an exchange, a lot must have taken place that may prompt him not to continue with the trade.
However, this is not a problem for bots because the computer program has been developed to carefully process market data for different cryptocurrencies in a flash and reach a logical trade decision.
Experienced traders have seen so much in the market and may not react like a crypto newbie would.
Semi-pro traders may still be influenced by fear, greed, or loss, however, this is not the case for bots. They do not react negatively to trade outcomes like humans, especially when a huge loss is recorded. It acts solely based on pre-programmed instructions.
- 24/7 Availability
Bots are designed to work like the crypto market, where they constantly stay available (24 hours daily and seven days a week) to execute orders. It lives for its users, standing in for them when unavailable.
There is no room for mistakes, as it conducts operations strictly based on pre-programmed rules. Despite going through a huge chunk of data, the trades, devoid of human errors, are timely executed, giving users good value for their money.
Cryptocurrency bots execute trades at the speed of lightning. After reviewing market data swiftly, the bot also places a buy or sell order without the asset’s price losing its value.
Like every other initiative, crypto trading programs are not entirely perfect. They also have their own deficiencies that, if not managed properly, could lead to the loss of funds.
- Requires Constant Monitoring
Bots are programmed software that needs to be monitored steadily by the trader. Although the bot can work around the clock and understand market data and trends on its own, the user's attention should also be present to cover the aspect of fundamental analysis, like news updates.
Generally, bots are created due to computer programming to work according to how they were developed, mainly to analyse crypto market data and execute trades.
There could be a situation where the trader gets informed about upcoming negative news that could spell doom for the asset. The user will need to step in and make the necessary adjustments before the expected date of the news.
- Not Suitable for Crypto Newbies
All bots come with pre-configured trading strategies that could be used by anyone. However, for the trader to get a good value for the bot, the software should be configured to suit the trader’s preferences.
Unfortunately, these settings may not seem simple for someone new to crypto. The crypto terminology used could lead to costly mistakes.
- Security Risks
Bots are designed to work as automated trading software on exchanges remotely. It conducts trades with very little human intervention. This could see hackers take advantage of the situation to gain illegal access to users’ accounts and cart away their funds. For instance, an API leak at 3Commas allowed hackers to steal over $22 million in cryptocurrencies.
Based on this vulnerability, the user needs to take preventive measures that deny the bots the right to withdraw automatically.
Frequently Asked Questions (FAQ)
Are Trading Bots More Profitable?
It is true that trading bots could make better trading decisions because they are free from exhibiting emotions and are always available regularly.
However, there is a limit to their prowess. While they are generally designed to accurately analyze the market within a particular period, it does not know the type of news that could affect the coin’s market value.
So the level of profit the bot may lock in would depend on the users’ intervention, especially when he gets a hint about an update that could mar the trade’s performance.
I Just Started Trading Crypto. Should I Use Trading Bots?
No. New traders are always advised to attain a level of education about the crypto market and how it works to make better investment decisions.
When the crypto novice adopts the software, he or she may rely heavily on the program to fetch some profit without monitoring its performance. Doing this may lead to major losses because the crypto market is mostly influenced by fundamental components, including news.
Do Governments Consider Bots Legal?
It depends on established country laws where you want to use the service. If the government of that location has banned crypto trading, it will be illegal to trade or even consider using a bot.
Do All Exchanges Support the Service?
While some cryptocurrency exchanges support the service, others do not allow it on their platform. On the other hand, some developers could design their service to work only on specific exchanges, which is why you should find out what trading platform your chosen bot supports.
Cryptocurrency trading bots have proven to be beneficial for most traders. The service continues to receive notable upgrades to meet up with modern-day trading techniques.
Although bots are designed to automatically review the market and execute trades based on pre-programmed rules, users are tasked with selecting the best service to help them maximise profit and minimise losses.