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Automated Crypto Trading What You Need to Know

Trading in crypto

July 24, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Get Into Cryptocurrency Trading Today

If you have operated in the traditional asset markets for a while, then you probably know that automated bots drive the vast majority of the trading.

In most cases, these bots belong to top-tier financial players, so they tend to come with sophisticated algorithms, making it hard for average investors to use them successfully. Thankfully, there are a lot of new commercial solutions designed to simplify trading for all experience levels.

Today, arbitrage, trend monitoring, mean reversions, and volatility have now got fully automated. 

Perhaps what is even more encouraging is that automated bots have made their way into the airy crypto trading space. Not only do these systems allow you to craft your strategy, but they also execute orders on your behalf.

You never know, some profitable opportunities may come when you are sleeping. 

What Is Automated Crypto Trading?

Automated Crypto trading entails utilizing bots to control the trading process. What it means is that these pieces of software will buy and sell orders on your behalf, mostly to increase your profitability.

They usually interact with crypto exchanges through an API. 

For it to execute trades, you have to feed your bot with customized parameters. For instance, you can set the bot to place orders when the RSI of a given coin is low and then offload it when its RSI is high.

So, adopting automated trading empowers you not only to increase your trade volumes but also to make the right moves, as the bot can identify opportunities on time.  

The Benefits of an Automated Trading System to Traders
Traders use automated cryptosystems for various reasons, but two main ones depending on your experience level are:

•    Experienced Traders: Automated bots allow expert traders who may already have developed investment manoeuvrings to perform multiple exchanges. These traders don't have to get glued to their computers 24/7.


•    Novice Traders: An automated trading system can also serve as an exciting option for novice traders. Inexperienced traders can take advantage of pre-built investment tactics offered by most third-party bots.  

So, if you believe an automated trading system is what will propel you to success in the volatile crypto trading ecosystem, then we'll dive a little deeper into it in the next section. 

Is It Legal to Work with Trading Bots? 

Trading bots are 100% legal in both crypto and stock markets. Using them is often encouraged. It is far much more beneficial to have more trades in ledgers. With that said, you can't use them to carry out illegality.

Anything forbidden in ordinary circumstances will remain prohibited in electronic trading. So, don't expect to use a pump and dump bot and get away with it. 

The profitability of Trading Bots

Automated systems can be insanely helpful in 24/7 and volatile markets, such as cryptocurrency, but they are not most profitable. Their effectiveness depends on many determinants, including: 

•    The efficiency of your strategy. As alluded earlier, you have to establish parameters for your bot to follow. It is also essential to recognize that one approach might be useful for one market type but fail in a different market. So, you should revise your bot according to exchange conditions.  

•    The reliability of the program: It makes no sense to miss out on critical opportunities or execute the wrong trades because the bot malfunctioned. Why should you keep monitoring the trades, yet you have a bot? 

•    Market factors: Sometimes, even when the exchange and bot are functioning optimally, you can still make bad trades if the market plunges. 

Features of a Good Automated Trading System

1. Easy Integration with Trading Platform
Most crypto exchanges allow traders to use APIs to interact with their platform. These exchanges usually have an interface that permits traders to adjust their accounts and extract data using trading bots.

In other words, utilizing trading bots and API lets you fulfil orders programmatically

So, a good trading bot should not only integrate with common exchanges but also allow you to access them as terminals to execute your strategies. Here is a good example. A savvy trader might want to watch the trend using a trailing stop-loss order.

Likewise, he might utilize stop-loss and take-profit tactics concurrently.  

2. Ability to Generate Trading Signals
If you are new to trading bots, then it is crucial to have a bot that enables you access to various trading signals.

It was only until recently that old-fashioned creation of trading signals was the norm, but a majority of new trading bots can generate signals and relay them to you. 

3. How Secure Is It?
The crypto ecosystem is not without evil characters. That is why you should be extra cautious when you are accessing the defence and reliability of a system. Explore various providers and compare what they offer.

Some of them may ask for withdrawal powers. If that is the case, then that is enough motivation to be suspicious. The ideal computerized platform should execute orders for you but give you abilities to trade right on your exchange. 

4. Does It Support Backtesting
Most automated trading systems today allow for backtesting. This innovation is essential because you can administer strategies based on previous price data. So, before executing a strategy, you should be able to put it to test.

The only issue with this trick is that it relies entirely on historical data, making it tough to predict the future. 

5. Hosted in the Clouds
Cloud-based platforms tend to be more reliable and user-friendly to investors. Rookies won't have to be concerned about server access. Moreover, all information is accessible online, which is more convenient. 

Top Crypto Trading Bots

If you don't want to test different trading bot platforms, you can go with our top picks.

Cryptohopper
This trading bot platform has getting created for traders of all experiences. While it was launched just recently, in 2017, the platform has already performed over 140,000 trades. Furthermore, it comes with a pleasant design interface, plus several excellent features.

For instance, you can test your bot before empowering it to execute on your behalf. 

3Commas
Just like the above platform, 3Commas also begun in 2017. This bot platform empowers you to customize a bot that is compatible with over 13 crypto exchanges. With 3Commas, you can choose a pre-designed strategy or create one anew.  

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