Trading bots for crypto trading

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Complete guide

In essence, such robots are software that is bidding on your behalf. They buy and sell your cryptocurrency based on market data and pre-user settings. Trading robots are not so new. Analysts at JP Morgan estimated that 90% of stock trading is algorithmic. The advantage of automated programs is their speed and ability to provide access to the table of limit orders in the stock market, which cannot be viewed otherwise.

At the same time, exchange trading bots can be unreliable, they require constant monitoring and are very expensive. For example, Bloomberg Terminal, one of the most popular financial applications, costs $ 24 thousand per year.

This program provides real-time quotes for securities, news, and other useful financial information. Bots for trading bitcoins work on the same principle: they can trade on the cryptocurrency market for you while you work or sleep. But unlike exchange robots, they are usually cheaper or even free.

Types of bots for trading bitcoins

Regardless of whether you want to automate your purchases of USD / BTC or other cryptocurrencies, you need to know how cryptocurrency trading robots differ from each other. The main difference is that some are free, while others are not.

Free Open Source Robots

One example of a free cryptocurrency bot is Gekko, an open source plugin that works with Bitfinex, Bitstamp and Poloniex cryptocurrency exchanges.

Gekko developer Mike van Rossum tells: “Gekko is all the necessary software for the trading bot, with the exception of the“ secret ingredient ”(called the“ strategy ”), which is part of the bot and is responsible for making decisions about buying and selling at a certain stage. Most Gekko users create their own strategy, and then connect Gekko to simulate / test / develop and launch the bot. ” In particular, Gekko analyzes exchange transactions and can predict the results of a specific investment strategy when working with it in a certain period of time.

You can install such a trading bot for bitcoin to independently perform operations. According to Gekko Plus, an advanced Bitcoin trading program that is just awaiting release, Gekko, the initial project, ranks fifth in the list of popular Bitcoin projects on Github. In other words, cryptocurrency trading bots are widespread and actively used by advanced traders.

 “A simple bot controls one pair, and a complex bot controls several pairs. For example, you have enough funds to conduct three trading operations in parallel, but at the same time you want to use 20 different coins in the auction. In this case, a complex bot will allow you to open three transactions with coins selected from the list. ‘

The choice of cryptocurrencies for trading is only the beginning. Using the bot, you can set limits for transactions, the desired level of profitability for one operation, an algorithm for calculating profit / loss and much more.

How trading bots work

So how does automated cryptocurrency trading happen? Above, we described some possible settings for bitcoin trading bots. And here is what one of the pre-configured 3Comma bots looks like – however, if you wish, you can set everything from scratch.

In particular, this is a simple trading bitcoin bot with the expectation of a long-term investment strategy. Here is what each element means:

Name: the way you decide to name your bot.

Exchange: the account from which this bot trades.

Recommended pairs: for this bot, it is recommended to trade on a pair of BTC / MDA and others.

Pair: we trade BTC / ETH.

Strategy: this bot is not programmed for short-term, intraday trading, only for long-term investments. For all bots, different algorithms are prescribed.

Currency of profit: profit will be expressed in the second currency of the selected pair. In this case, the quote currency is ether.

Base trading volume: starting trading order volume.

Safe trading volume: average volume of orders following the starting one.

Target profit (%): the amount that the bot must earn during the transaction, taking into account exchange fees.

Type of fixed profit: “percentage of the total volume” means that the profit at the auction increases with an increase in their volume. Another option is “percentage of basic trading”, meaning that the bot will ignore the trading volume.

Maximum number of safe transactions: the bot will not be able to exceed the specified number of safe orders for one transaction.

Maximum number of active safe transactions: the total number of safe orders that the bot will keep open at the same time.

Price deviation for opening safe transactions (% of the starting transaction): in order to start a safe transaction, the price of the next transaction must be higher by the specified percentage.

If you are a beginner and are not yet well versed in bots for trading bitcoins, choose a bot based on your trading strategy (long or short positions). You also need to determine the difficulty: do you want to trade only on BTC / ETH or use different pairs? Keep in mind that some bots will use amounts in excess of those that have on your account. Make investment decisions yourself and do not leave your bot unattended for a long time.

 Investment strategy

As mentioned earlier, first you need to decide on an investment strategy. Let’s start with the difference between intraday trading and holding investment positions, or HODLs. Intraday trading is when you buy and sell something within one day.

This type of trading depends on short-term price hikes. Cryptocurrency trading bots can be especially useful for intraday trading, as they can perform instant exchange operations 24/7. The long-term retention strategy in the cryptocurrency market is called hodl. The term comes from a typo in the word hold (English “hold”) and bears a semantic connotation of hope for an increase or even rise in the exchange rate.

Cryptocurrency Only Strategies

The above trading methods apply to securities and cryptocurrencies. However, the strategies applicable to cryptocurrency transactions are not limited to this. An arbitrage transaction is the purchase of cryptocurrency on one exchange solely for the purpose of selling them on another. For example, in January 2018, the price of bitcoin (Bitcoin: BITOCIN) in South Korea was 43% higher than in the United States.

That is why the simultaneous viewing of various cryptocurrency exchanges using a trading bot is a very useful feature. Market making is another common trading strategy when a trader opens limit orders, that is, a request to buy / sell cryptocurrency at a certain price. In fact, traders who resort to this strategy try to buy cheaper and sell more expensive.

They create a spread between bid and ask prices – the difference between the maximum and minimum transaction prices. A trading bitcoin bot will come in handy with a marketing strategy, as it can constantly place limit orders. In addition, speed is a big advantage, as trading in cryptocurrencies, especially bitcoins, is becoming increasingly popular. Cryptocurrency trading bots are on the market 24/7, which allows them not to lose their advantages.

Having access to data from several exchanges and adhering to predetermined investment strategies, robots can make thoughtful transactions faster and more often. Regardless of whether you create your own algorithms for bitcoin trading bots or choose from ready-made settings, you should be well versed in the cryptocurrency market and your own finances.

 

 

 

 

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