Trading cryptocurrency assets can be complex for both newcomers and established traders. This difficulty can be due to crypto's price volatility and round-the-clock market operation. Crypto trading requires a lot of time and attention to maximize profits. However, if you can't commit most of your time to this financial undertaking, you might have to deal with an increased risk of losing your investment over a short span of time. This is where the concept of automated crypto trading enters the picture.
If you haven't heard of this before, below is a brief guide to automated crypto trading that you might want to familiarize yourself with.
What Is Automated Crypto Trading?
Essentially, automated crypto trading refers to a process of using trading bots to automate the steps involved in a trading process. Instead of manually carrying out certain positions by yourself, the bot will handle all aspects of trading. Automated cryptocurrency trading can be helpful when you're preoccupied with other things, but want to execute a trade to generate profit.
What Are Crypto Trading Bots?
Automated crypto trading is usually facilitated by trading bots. They're software programs designed to buy and sell digital assets at the right time to generate more profits. They also utilize an application programming interface or API, an intermediary software allowing two applications to connect with each other and perform some trading positions on your behalf.
Generally, crypto trading bots can help traders like you gain more profits without exerting too much effort. For example, if you're trading crypto on platforms like Bittrex, bots can send you signals when a crypto price reaches the level you've been waiting for. They can trade crypto assets, but you have to set some conditions first, including the type of crypto you're trading, volume, price, and even the trading position you want. Hence, if you're looking for the right trading bot for Bittrex and other platforms, visit some of your prospects' websites or read some reviews to get more information.
What Are The Essential Features Of Crypto Trading Bots?
To better understand the importance of bots in automated crypto trading, it's also crucial to get to know the essential features of these software programs. These can include:
- Market Data Analysis
Most trading bots are designed to analyze market data from several sources to determine specific trading patterns and trends. Once they have the relevant trading data, they forward them to develop trading signals, which are then sent to the trader in the form of notifications.
- Calculation And Prediction Of Market Risks
Aside from market analysis, crypto trading bots are also programmed to calculate and predict certain market risks. They process existing market data using pre-programmed algorithms intended for risk calculation and prediction to generate essential trading recommendations, including the best assets to trade and the amount of money to invest.
- Execution
As mentioned, bots have the ability to perform the essential aspects of trading known as buying and selling. They utilize the data gathered from risk calculations to determine which cryptocurrency assets would potentially generate more profits under certain market conditions.
What Factors To Consider When Choosing A Crypto Trading Bot
Now that you're aware of how trading bots work, it's time to choose the right one for your trading automation efforts. However, not all bots out there are created equal. Some options can benefit your trading needs, while others don't.
That being said, keep the following factors in mind to help you pick the trading software that’ll work best for you:
- Reputation
Since the market can be unpredictable, you need to find a reliable trading bot that won't lose any chance to execute trading positions and earn considerable profits. To know if the software program can be trusted, check its reputation in the market. You can do this by evaluating your prospect's performance from third-party review websites and other references online.
- Security
Due to crypto's excellent profit potential, cybercriminals have targeted Bitcoin and other cryptocurrency assets. Because of this, it's essential to choose a trading bot with advanced security features, such as passwords and a two-factor authentication setup. This means getting a bot that can protect your investment against hackers.
- Supported Exchanges
You should know that not all trading platforms accept all types of bots. That's why you need to select a software program compatible with the crypto exchange you're using. Otherwise, you may be unable to make the most out of automated trading. So, to avoid problems down the road, try to look for a trading bot that can integrate different platforms.
What Are The Advantages And Disadvantages Of Automated Crypto Trading?
Crypto trading is risky because of price volatility. But, with automated trading, you may be able to minimize the financial risks. Aside from it, using bots to automate crypto trading has the following benefits:
- Trading Discipline
With automated crypto trading, trades are carried out accurately and consistently. Since the bot performs the trade for you, there's no need to worry about missed profit opportunities. You'll also be able to develop trading discipline because instead of using your gut feelings, you take a structured approach to making certain financial decisions with the help of trading bots.
- High Trading Speed
Crypto prices change unexpectedly without any notifications. If you don't trade quickly, you may lose an opportunity to double your profits. This is one reason why automated crypto trading is beneficial. It offers a higher trading speed, which is crucial in maximizing profits and minimizing risks.
- Emotionless Trading
The financial losses associated with crypto trading are usually due to making irrational decisions based on anger, fear, or greed. But, with an automated crypto trading strategy, no emotions will be involved in the process, thereby avoiding decisions that can cloud your judgment and impact your trading goal.
Apart from the advantages, automated crypto trading has some disadvantages that you should be aware of. These can include:
- Mechanical Failure
Automated crypto trading can be more efficient and affordable. But, trading may become more challenging when mechanical failures, such as computer problems, slow Internet, power outages, and server issues. This is especially true when the algorithm you want to follow can no longer operate as it should be.
- Automation Anomalies
Automated crypto trading also has system anomalies that should be taken into account. These problems can result in duplicate or missing orders, affecting your overall trading bottom line. So, if you don't monitor this automated strategy, you may lose your investments over time.
Bottom Line
Cryptocurrency trading can be risky if you don't commit to doing so. If you want to take advantage of your profits, you need to watch out for the market round the clock to avoid missing any opportunity. Unfortunately, doing so can cause stress, health issues, and time management problems. Because of these circumstances, automated crypto trading would make a lot of sense.
Therefore, if you're looking to try this trading strategy, keep the information mentioned above in mind, and you'll know what to do to make it work.