Profitability in crypto trading is mainly determined by how quickly a trader purchases and transfers digital assets. As a result, even slight delays in these trade-offs might result in significant losses. This is where crypto trading bots come into play.
These bots autonomously trade one or more cryptocurrencies across different marketplaces. They are used to automate trading techniques and increase profits. Let’s look at how these trading bots function and whether they are worth it.
What are Cryptocurrency Trading Bots and How Do They Work?
Cryptocurrency trading bots are advanced systems that execute trades following certain algorithms. Since the crypto market is always operational, traders often use bots to buy and sell cryptocurrencies.
These sophisticated trading bots can collect market data. They can also determine market risk and make trades. In this manner, crypto trading bots can frequently save you significant time. It is like hiring a professional to buy and sell cryptocurrency while you relax and watch your profits grow.
Trading bots can be programmed in different ways to perform various functions. Platforms such as Cryptohopper, Coinrule, and others host cryptocurrency trading bots. These systems produce cryptocurrency trading bots with predefined rules that are applicable to trades, but you can customize them to fit your goals. Automated crypto trading bots require access to the wallet and exchange on which they will trade. This entails connecting the bot to your preferred platform using its API key.
Furthermore, some bots have unique features that distinguish them, such as 3Commas’ HODL function. It not only trades, but also allows you to automatically acquire and keep currencies at lower costs. It is up to you to determine the coins you want and which bot will assist you in obtaining them. You may want to leverage of resources from top crypto educational platforms and crypto trading or investing coaching programs to help gain or increase proficiency in use of trading bots.
Pros of Trading Bots
Every choice made by a trading bot is supported by data. It lacks the greed for profit and the fear of loss that humans do. Professional traders may be able to suppress their emotions and make reasonable decisions, but this could backfire for newbies. Hence, a trading bot always removes emotion from the equation.
The quantity of data that a human trader can handle at one time is limited. Therefore, even if they process all the data, it is not easy to get insights from it. On the other hand, trading bots can readily handle large amounts of data and draw reasonable conclusions.
Cons of Trading Bots
Difficult To Program
Given the cryptocurrency market’s volatility, it is impossible to program trading bots to make the right decisions every time. Therefore, if there is a severe market crash or a circumstance for which a robot has not been prepared, it may make the incorrect decision, putting your portfolio in danger.
Human Element is Gone
Using trading bots removes the human element from trading. This can be a bad or good thing, depending on your perspective. Some people believe that the human element is an essential part of trading and prefer using their minds to decide when to buy and sell. However, certain traders trust software and algorithms and believe that crypto trading bots are more likely to provide successful trades.
In a nutshell, cryptocurrency trading bots can assist you in your trading endeavors, particularly if you are a beginner. Take the time to learn how each cryptocurrency trading bot operates on the platform of your choice. Furthermore, keep in mind that using a trading bot does not guarantee that you will succeed. These automatic traders are mostly employed to generate little profits that stack up over time.