What are crypto trading bots?
These are automated trading software built on simple or complex predefined market indicators such as RSI and MA and other common parameters to execute a trade on behalf of its owner. Some of these parameters used by bots are price, time frame and order volume. A trading bot is used as third party algorithmic software deployed on exchanges using an API to execute trades without the usual human emotion. However, traders who deploy them still need to choose the trading parameters and indicators carefully. Once the market conditions conforms with these predefined set of parameters and market indicators, the trading bot opens the trade.
It's important to always place limitations on your API so that the bot doesn't execute actions that are not authorized by you. You also need to use a bot you trust. Hence, it's essential to back-test your trading strategies under different market conditions to improve your chances of making profits using the bot and before you deploy the bot.
Advantages of trading bots
They increase efficiency in trading by monitoring your assets while observing different market concurrently.
They offer a 24 hours trading effectively even when the market is volatile.
They give better trading accuracy and perfect market timing for entry and closing of trades.
They remove human emotion that usually affect efficient trading.
Disadvantages of trading bots
Trading bots are connected to your portfolio so you always run the risk of getting scammed
Since trading bots needed to running for it to continually trade, it means you could run the risk of non-execution of trade or trade loss when your computer run out of power.
A trading bot is as good as its programmer hence, if the trader isn't that good, he'll still make losses with the trading bot
In a bid to overcome this last problem, some exchanges particularly Bitget has developed some efficient trading bots such as:
I. Grid bot: This trading bot is designed to buy low and sell high for the spot variant and leveraging of your capital for the futures variant.
II. Martingale bot: This trading bot is designed to grow your assets in the long term by reducing the market timing impact for the spot variant and amplify your spending power by investing regularly in the futures market to build your profit for the futures variant
In this uncertain market conditions, a lot of experienced traders are now turning to these trading bots to increase their chances of trading with profits. One good side of these technology is that it can be modified continuously to make them better in giving better trading results and the cost of operating these bots are quite affordable.
This article is coined from CoinDesk and personal experience.
Image used was gotten from Google,