How Do Crypto Trading Bots Work? Mastering Crypto With Bots

In the past year, we saw a massive rise in AI-based software. From programs that can generate marvellous works of art in just a few minutes to the widespread use of ChatGPT, it is clear AI is here to stay, at least for the time being.

At its core, AI technology makes mundane tasks much easier to do. An increasing number of individuals are getting used to employing AI-based bots in their day-to-day. Crypto traders are no exception – they have been using the help of automated bots for a long time to help monitor and explore the crypto market in new ways. And with all this talk of AI, more people are inclined to try trading bots of different types. If you’re someone looking to familiarise themselves with this type of technology and discover the benefits of automated trading, our guide will be an excellent place to get you started.

What Are Crypto Trading Bots?

Let’s answer the number one question: what are crypto trading bots? They are programs that you can purchase or subscribe to which conduct trades on your behalf. They require that you have a minimal understanding of coding so you can customise your bot and set it up to work the way you like. You should also have some grasp of various technical analysis concepts so you can execute your own trades and form a strategy.

How Do Bots Work?

So, how do these bots work? Once you decide to use a trading bot, you can connect it to an exchange or trading software using a separate interface called API. Don’t worry. Those of you who decided to pair with a crypto broker using a reliable source like the Immediate Bitmasters website can also benefit from trading bots. In this case, you will connect the bot with whatever trading software you are using, for example, MetaTrader 5. From there, the API acts as a path that ensures any parameters you put through on the bot will reflect in your trades.

Speaking of these parameters, here is where things can get complicated. Trading bots give you full access to analysing market trends and conditions. There is so much potential in bot trading that it can feel like you’re falling down a rabbit hole. For example, if you are someone who works with moving averages and their crossovers, trading bots can be a dream come true. There are tons of strategies you can try, making bot trading as simple or as difficult as you want it to be.

For many, crypto bots are an easy way to monitor several markets simultaneously. For others, they are a way to explore complex trading strategies. As each trading bot is different, you will discover they come with their own set of user instructions, but there are plenty of beginner-friendly options to choose from.

Check out this helpful guide on setting up your own bot if you want to learn more.

The Perks and Drawbacks of Crypto Bot Trading

It’s no news that the crypto market is volatile. Therefore, while crypto trading bots may provide investors with some additional ease of access and control over their trades, we can’t ignore the possible setbacks. Let’s explore both the good and the bad sides of this trading method to help you decide if it’s a suitable option for you.

The Benefits of Crypto Trading Bots

• A crypto trading bot is perfect for people who want to make the most of the time they have. A trading bot can keep an eye on all your assets at the same time, so you don’t have to stay glued to a PC at all times.
• Your trading bot can also help you observe market movements at any point of the day, saving you from staying up all night waiting for a profitable position. You can program a bot to sell at a specific price, leaving it to monitor the market for the most optimal trading opportunities.
• Human errors are some of the biggest issues that modern traders face. Trading bots can help eliminate these by offering precise market timing and accuracy. If you’re into day trading, you know that finding the optimal time to sell is essential to making a profit, and a trading bot can ensure you catch the right price swing.
• Lastly, by leaving the trading to your bot, you can also better balance your emotions. Many traders make crucial mistakes due to their inability to handle their feelings. A crypto trading bot can eliminate this factor and enable you to enjoy optimal trading.

The Setbacks of Crypto Trading Bots

• Working with a crypto trading bot will require that you are familiar with some crypto lingo and technical indicators. The better you understand the crypto bot platform and possible processes, the easier it will be to execute trades.
• The best crypto trading bot is only as good as the trader behind it. You should feel comfortable adapting your strategy to the changing market conditions.
• Keep in mind you are relying on your electricity to conduct your trades. If at any point you go through some electrical failures, your PC might reboot, and you could lose out on some profitable trades. It’s important to keep an eye on your computer and ensure everything is working properly.
• Make sure that you choose reliable trading bot software. The crypto space is filled with scammers trying to rip you off, so stay vigilant and carefully review any recommended software you come across.

How to Select the Perfect Trading Bot for You

Studies say that only 38% of investors use crypto bots. If you’re here because you want to add to that percentage, allow us to help you find the perfect bot for you. We want to introduce the most important factors you should consider when selecting the best crypto trading bots for you. Take a look:

Features

Before you look for anything else, consider why you are using a crypto trading bot. Is it to work on a specific trading strategy? For example, range trading crypto? In that case, ensure that your bot has all the features you need to complete those trades. Most subscription-based bots come with free trials, which give you a nice bit of time to experiment and decide if the product is right for you. You can always unsubscribe before that period expires and move on to a different bot.

Examples of fully-featured trading bots: NAGA, eToro.

Beginner-Friendly

We all have to start somewhere, right? It’s only natural that novice investors will want some help to guide them through this new process. So, if you’re looking for beginner-friendly cryptocurrency trading bots, there are some standout features to keep an eye on. 

First, ensure that they have pre-set trading strategy templates that you can explore. Some might even offer demo mode, where you can use dummy assets to conduct trades and practise your skills. Next, the ideal crypto trading bots will also offer educational resources, like learning hubs and tutorials, to help you get started.

Examples of crypto bots for beginner traders: Coinrule, CryptoHopper

Advanced

Do you believe you already have what it takes to start making successful trades with your crypto trading bot platform? Then, you are likely looking for software with plenty of advanced features to get you going. In that case, look for a platform that includes an analytical dashboard where you can also track your position histories. Learning from your previous trades and spotting the trends will be very important. That’s why a bot with above-standard portfolio monitoring is a must.

Examples of advanced trading bots: Cryptorobotics, Trality

Price

It’s entirely possible to find some free crypto trading bots. However, they usually offer a lite software version that won’t work to its full capacity. So, if you’re on a tight budget, consider bots that will charge you once you make a profit. That way, you won’t be encumbered by subscription fees while still trying to learn the ropes. Alternatively, you can find trading software that you can purchase just once and enjoy for as long as you like.

Examples of budget-friendly bots: OKX, eToro, Zignaly

Security

Lastly, don’t forget to take a look at the software’s security measures. Is there two-factor authentication available? That’s a great start, but also try to find a reliable crypto trading bot that offers whitelisting, too. That way, you have other layers of security for your withdrawals. Additionally, ensure that you choose software with plenty of positive reviews from satisfied customers. You don’t want to use a trading bot that seems excellent on the surface but is a struggle to use!

Final Thoughts

There are numerous perks to using automated crypto trading bot software. You may track several markets at the same time and enjoy improved strategies and techniques. It’s no wonder trading bots are trending in 2023.

As artificial technology advances, it provides traders with more powerful and flexible tools at their disposal. Still, it’s important to remember that a crypto trading bot won’t guarantee successful trades. You still need to put some work into it. We hope our brief guide has shed some light on the topic of bots, what they are, and how they work. You are now one step closer to using one of your own!