Operating a cryptocurrency automated trading system that generates earnings for you while you enjoy a tranquil time sipping a margarita on the beach is an alluring proposition. The convenience of having software manage your cryptocurrency or stock transactions seems almost unreal.
And it kind of is.
While labeling all trading bots as scams is unjustified, there are legitimate vendors offering automated trading solutions. These providers supply you with software to streamline and enhance your trading experience.
Despite investing in the priciest, top-tier, or expertly crafted trading bot available, remember that its effectiveness ultimately hinges on the quality of your trading strategy.
Let’s see why.
What Are Trading Bots?
As a crypto investor, I understand that no matter if we’re talking about stocks, collectibles, or cryptocurrencies, a trading bot is a piece of software I can use. I install it on my computer and configure it to execute trades for me when I’m not around and all my exchange accounts are connected to it. This way, the bot keeps working tirelessly in the background, constantly scanning markets and making informed decisions based on predefined parameters.
As a crypto investor, I need to provide a trading bot with specific settings, or parameters, and a well-defined strategy for it to follow in order to optimize its trading speed and accuracy.
An automated cryptocurrency trading bot program can manage multiple bots concurrently to monitor and trade various assets, allowing traders to avoid monitoring numerous screens at once for maximum market opportunities. Currently, there’s an option to test AI-driven crypto trading bots, which may provide a more tailored trading experience.
How Does a Cryptocurrency Trading Bot Work?
The choice of programming language isn’t strictly limited when it comes to creating trading bots for cryptocurrencies. You can use languages such as C/C++, Python, or even MATLAB for development. But keep in mind that the specific algorithmic strategy, its frequency, and volume will significantly influence the bot’s system design.
As a software analyst, I would advise investigating the specific features and capabilities of the trading bot to ascertain whether it is suitable for both day trading and long-term strategies. Without delving into excessive technicalities, this exploration will help determine if the tool aligns with your desired trading approach.
A trading bot program typically includes a backtesting feature, a portfolio supervisor, a risk control system, and an execution mechanism.
Using a historical market data repository, the backtesting instrument enables testing your trading strategy’s efficacy by simulating past market scenarios. This way, you can assess the strategy’s compatibility with various market conditions and gauge potential performance outcomes.
A portfolio manager is responsible for overseeing a collection of investments and fine-tuning their distribution among different markets and investment types based on elements like sectors, asset classes, risk levels, and more.
As a trading analyst, I recognize that risk in financial markets can manifest in various forms such as heightened volatility, interconnected asset price movements, or unexpected events known as “black swans.” To mitigate potential harm to trading capital, it is essential for a trading bot to be equipped with robust risk management systems. These systems aim to identify and respond proactively to the impact of these risk factors on our trading portfolio.
Eventually, the execution system is responsible for obtaining refined trading directives from the portfolio and risk management modules and forwarding them to a brokerage or another method for market interaction.
And no, it will not make a phone call to the broker.
The trading bot will use an API (Application Programming Interface) to link up with a trading platform. Once connected, it will gather data on asset prices and trading volumes directly from the exchange in order to carry out transactions on your behalf.
Trading transactions occur solely when market conditions reach certain thresholds, which is where the strategic approach comes into play.
The trading bot’s performance depends on the effectiveness of your strategies and settings. It merely executes trades based on the instructions you provide.
What Can and Can’t Trading Bots Do?
Trading can be likened to playing a strategy game in that you formulate strategies to achieve specific objectives, all while navigating unforeseen circumstances. However, unlike in games where your proficiency lessens the degree of uncertainty, in trading, market volatility and unpredictability remain constant challenges.
As a seasoned crypto investor, I can tell you that unexpected events, such as a harsh economic year or an invasion from a rival market, hold less weight in the final stages of my investment journey. With a well-prepared portfolio and a strong defensive strategy in place, no minor setback can hinder me from reaching my financial goals.
In the realm of strategy game design, there’s a limitation that doesn’t hold true for cryptocurrency trading or other asset markets. Despite devoting your entire life to mastering cryptocurrency trading, unexpected incidents such as the 2020 Pandemic, the 2022 Russo-Ukrainian War, or the 2022 bankruptcy of FTX can still take you by surprise.
Certainly, trading bots possess noteworthy advantages. Let me share some concrete facts about them instead.
What Can Trading Bots Do?
Execute Trades 24/7
A trading bot is capable of executing trades around the clock. Nevertheless, it necessitates regular supervision, and its settings must be fine-tuned continuously. It’s feasible for a bot to perform effectively during overnight hours, but attempting to leave it unattended for more than a week isn’t recommended.
Act Based on Previously-Set Parameters
As an analyst in the cryptocurrency market, I understand the allure of selling off assets when their value takes a sudden dip, especially when the price drops by 10%. However, adhering to such impulsive decisions could result in missing out on potential recoveries or even higher returns.
Tests Strategies Based on Historical Data
As a crypto investor, I frequently assess trading strategies by backtesting them against historical market data. However, it’s essential to remember that past performance does not guarantee future results. In fact, what works in the backtest might not perform as well or even result in losses when applied to the live market. This discrepancy arises due to the unique and ever-changing nature of market conditions, despite their apparent similarities and cycles.
Help You Save Time
By handling the task of placing an order and monitoring its progress for you, the bot can save you anywhere from a few minutes to several hours.
On the other hand, there is a lot of fiction surrounding falsely advertised cryptocurrency bots.
What Can’t Trading Bots Do?
The Don’t Come up with New Strategies on Their Own
A trading strategy may generate profits in the initial phase, but its effectiveness is likely to wane as market conditions shift. Trading bots don’t autonomously create new strategies; they merely execute predefined instructions based on user-set parameters.
The Don’t Correlate Real-World Events with Market Conditions
As an analyst, I would explain it this way: A trading bot, just like me, follows a predetermined strategy without emotions clouding its judgment. However, when it comes to certain situations such as travel restrictions impacting airline stocks or network compromises in cryptocurrency markets, it’s unable to adapt because its programming doesn’t account for these specific events. Unlike human traders who can make quick correlations and adjust tactics accordingly, the trading bot remains loyal to its initial plan.
It Doesn’t Foresee the Future
As a researcher studying probability and statistics in the context of financial markets, I can confirm that these fields provide valuable tools for analyzing trends and making informed decisions. However, it’s important to note that no trading algorithm or bot can accurately predict market behavior or future price movements, be it cryptocurrency or stocks. Instead, risk management components and indicators offer probabilities about potential market outcomes. These tools help minimize risk, but they cannot eliminate uncertainty entirely.
Are Trading Bots Legal?
Prior to the emergence of cryptocurrencies, the debate centered around the legality of automated stock trading systems. With the growing popularity and scale of cryptocurrency markets, however, the use of Bitcoin trading bots has become increasingly common.
Trading bots aren’t explicitly outlawed on a global scale, but it’s essential to verify if there are any relevant regulations in your specific location before using them.
But generally, cryptocurrency trading bots and stock trading bots are legal.
Additionally, it’s important to review the specific guidelines of the trading platform you intend to use, as some may have restrictions on automated trading systems.
Legitimate automated trading firms typically disclose the trading platforms they work with.
When using trading bots, which are lawful, remember to exercise caution against potential scams. Be wary of deals that seem excessively enticing as they might not deliver on their promises. No trading bot can ensure consistent profits or operate based on magical powers. Algorithmic software simply follows a pre-programmed strategy.
Top Crypto Trading Bots You Should Look Out for in 2024
Here is a list of the best trading bots that you might find:
Bitsgap
Year Established: 2017
KYC/AML: No
Supported Exchanges: Binance, KuCoin, Coinbase, Kraken, HitBTC, Bybit, OKX, HUTX, etc.
I analyze that Bitsgap offers a streamlined solution with an intuitive interface, aiming to deliver a hassle-free trading experience for its users. The Bitsgap trading bot stands out as a distinct advantage – it enables users to capitalize on market fluctuations by earning small but consistent profits.
Furthermore, Bitsgap offers a safe and swift user interface, boasting over 10,000 different cryptocurrency trading options. You can also review past transactions, monitor ongoing trades, and adjust your account balances across connected exchanges.
The platform utilizes robust RSA 2048 encryption for enhanced security, ensuring data is twice as protected as typical bank systems. Employees are restricted from accessing confidential information. Bitsgap provides three subscription options: Basic Plan at $25 per month, Advanced Plan priced at $59 monthly, and Pro Plan costing $129 a month. Additionally, it offers a complimentary plan featuring unlimited manual trading, a 30-day free trial, ten active bots in demo mode, and a versatile multi-exchange trading platform.
HaasOnline
Year Established: 2013
Supported Exchanges: Binance, Bitstamp, CEX.io, Coinbase, HTX, Kraken, KuCoin, etc.
Amongst the crypto trading bots with a long-standing history in the digital currency market, HaasOnline is recognized for its high reputation. Seasoned traders often opt for this bot due to its proven efficiency and profitability. Moreover, users have the flexibility to connect HaasOnline with leverage platforms and various crypto exchanges using their API keys.
With HaasOnline, you can set up your trading strategy using fifteen bots provided. Strategies like dollar-cost averaging and paper trading are included. Moreover, HaasOnline utilizes advanced marketing data and extra tools to amplify profits. Indicators such as MACD and others are also at your disposal. The pricing structure for HaasOnline consists of three tiers: $9 for Lite+, $49 for Standard, and $99 for Pro.
3Commas
Year Established: 2017
KYC/AML: Yes
Supported Exchanges: Binance, Bybit, OKX, KuCoin, Bitfinex, Bitget, Bitstamp, Coinbase, Gate.io, Gemini, HTX, Kraken
3Commas supports over ten crypto exchanges and provides users with dollar-cost averaging plans as well as a consolidated trading perspective from external sources. With its user-friendly interface, 3Commas is one of the go-to trading bots for those seeking to maximize profits in the cryptocurrency market with minimal input. Some of its appealing features include the ability to duplicate settings from other bots, and portfolio management through coin ratio maintenance. Additionally, it offers a paper trading option for risk-free practice before implementing strategies in live markets.
3Commas simplifies profit-making for users in various market conditions, including Bull, Bear, and Sideways markets, through its advanced crypto trading bot. Notable features include an intuitive interface with streamlined buy and sell functions on a unified dashboard, as well as the ability to trade options on exchanges. However, it may present a challenge for newcomers.
As a researcher examining the pricing plans of 3Commas, I can describe it this way: 3Commas provides three distinct packages for its users. The Pro plan, which costs $49 monthly, offers a specific set of features. The Expert plan, priced at $79 per month, includes more advanced features. For those who require even greater limits, the custom plan is an option; however, it necessitates contacting the 3Commas team for further discussion.
Significantly, the 3Commas trading bot is compatible with both iOS and Android platforms, enabling users to execute trades on-the-go. The growing recognition of 3Commas positions it as one of the top crypto trading bots in the market.
Cryptohopper
Year Established: 2017
Supported Exchanges: KuCoin, Bitvavo, Binance, Crypto.com, Coinbase Advanced, Bybit, Kraken, BingX, BitMart, OKX, EXMO, Bitfinex, Polonium, HTX, HitBTC
Cryptohopper is a well-known automated crypto trading tool that enables crypto investors to oversee and manage multiple accounts from a singular platform. Being a cloud-based solution, Cryptohopper applies an algorithmic programming methodology to help users make astute trading choices.
At present, Cryptohopper enables users to link with a maximum of nine diverse cryptocurrency exchanges. This platform offers a range of advantages, such as an automated technical analysis tool, robust security measures, and prioritization of data confidentiality. Additionally, Cryptohopper boasts a user-friendly interface that’s simple and intuitive for even novice users to navigate.
“One major advantage of using Cryptohopper for crypto bot trading is the simplicity of its setup process, which does not involve providing credit card details for new users. Additionally, since Cryptohopper manages all cloud storage services, traders can engage in risk-free paper trading.”
Despite its advantages, this bot comes with some drawbacks. For instance, it has a relatively small technical support team. Additionally, there are fees associated with Cryptohopper for accessing its full features. The Pioneer Package is available to all users at no cost, while the Explorer Starter package offers a complimentary 3-day trial, followed by a monthly charge of $29.
The Adventurer and Heroplans each require monthly fees of $69 and $129 respectively. Despite this, they remain top contenders among crypto trading bots.
ZIGDAO
Year Established: 2018 (launched DAO in 2023)
KYC/AML: Yes
Zignaly, now known as ZIGDAO, is a relatively new player in the cryptocurrency trading bot scene. It offers users the ability to create their own unique trading strategies. Based on its features and cost, ZIGDAO is a strong contender for top choice among crypto trading bots.
At ZIGDAO sign-up, you gain access to all free resources without incurring costs until you achieve profitability. Users are empowered to fully automate or partially oversee their trading activities. Nevertheless, the platform connects to over eight exchanges, which could be a drawback since the number of available options might not be sufficient for some users.
ZIGDAO offers several noteworthy features for its users. Among them is the trading view integration, which enables real-time tracking of ongoing trades. Additionally, the platform supports copy trading, empowering less experienced traders to mimic the actions of seasoned and prosperous investors.
Additionally, ZIGDAO provides both complimentary and fee-based signals that can be beneficial for traders. Furthermore, for those looking to enhance their trading proficiency via automated bots, ZIGDAO stands out as a top-tier cryptocurrency trading bot platform.
Related articles: Best Cryptocurrency Exchange | Best Cryptocurrency App in India
Key Takeaways
- A trading bot is a software that executes trading orders automatically when it meets specific parameters according to a strategy;
- A trading bot software usually contains a backtesting tool, a portfolio manager, a risk manager, and an execution engine. The software connects to trading platforms through APIs;
- Regarding facts about trading bots, they can trade 24/7 according to the strategy, only act on parameters, test strategies on historical data, and save you time;
- Blowing up the fiction, trading bots do not: come up with new strategies on their own, correlate real-world events with the market conditions shown in the exchange platform’s charts, or foresee the future;
- Trading bots are legal in most places, but check for any mentions in your area. Also, stay away from bots that seem fishy and inadequately programmed software;
- Also, some of the most recommended bots in 2024 are Bitsgap, HaasOnline, 3Commas, Cryptohopper, and ZIGDAO (Zignaly).
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2024-05-27 14:59