Modern traders do not need to spend all their time at the computer in order to make good money. Many market participants use tools to automate transactions – trading bots. They allow you to free up time without losing income.
There are quite a lot of factors to consider before trading with crypto bots. Choosing them, in many ways, stipulates your future trading process. In the following article, we will tell you how trading bots for cryptocurrencies work, and which robots you should pay attention to.
What are trading bots?
Trading bots are programs that allow you to automate trading. Such software can independently analyze market data and conduct transactions. To put it more simply, imagine you are washing the dishes by yourself, while a dishwasher can do everything for you.
Of course, crypto trading robots are not the same as you will see in Terminator movies or sci-fi films. These are just mechanisms that conduct trading operations by themselves and in many ways are effective. For sure, when you are embarking on crypto trading, finding the best Bitcoin bot trader can be a problem, however by having a close look at characteristics and checking carefully the numerous reviews, you are on the right track.
How trading bots work?
To operate, a trading robot needs access to the user’s wallet and permission to conduct trading operations. Here’s what the process looks like in detail:
- The user downloads and installs a trading bot for cryptocurrencies.
- The program requests access to assets and permission to conduct operations.
- Before starting work, you need to configure the settings for the trading bot. For example, you can set the cryptocurrency of interest and the limits for operations.
- After launching, the bot for the cryptocurrency exchange begins to analyze the behavior of digital assets and indicator signals. An option for the transaction appears, if there is a permit, the program makes it.
- Cryptocurrency trading bots save and transmit information about all completed operations in a report format to users.
- Depending on the features of a particular program, the process of its work can be slightly adjusted.
Types of trading bots
All crypto trading bots can be divided into two categories. The first is arbitration. This term hides earnings on the difference in the exchange rate. Earlier, we examined in detail the nuances of the scheme, as part of a review of the best programs for arbitration of cryptocurrencies.
The second category of trading robots is Market making. Such bots are needed to make money on the spread – the difference between the prices (in other words, sell/buy rates) when exchanging on trading currencies.
Advantages and disadvantages of trading bots
Market participants highlight a number of advantages and disadvantages of working with trading bots. The advantages of such programs include the following points:
- You can automate trading.
- A trading bot is a tool with which you can get a lot of free time without losing your work efficiency.
- A cryptocurrency trading bot can be customized to suit your trading style.
- A crypto bot allows you to simultaneously work on several digital asset exchanges and simultaneously perform operations on a number of trading pairs.
- Trading automation reduces the risk of missing out on opportunities to make a profitable deal.
- Robots have no emotion. Eliminating this factor can improve work efficiency.
Among the disadvantages of trading robots are the following points:
- Trading robots do not guarantee profitability.
- If the bot is inaccurately configured for trading, the operation of the program can lead to losses.
- Despite the high automation of the process, trading robots still need to be periodically monitored.
How to choose a trading bot?
There is no one-size-fits-all recipe. On the network, you can find negative reviews about all cryptocurrency trading robots available on the market, as well as scam warnings. The only way to choose the best trading bot is to test all available options yourself.