The expression “time and tide wait for none” needs to be changed to “time, tide and financial markets wait for none”. Trading is considered to be difficult and the volatile nature of cryptocurrency makes the research, gathering data, and investment painstaking. You need to come up with a secure, trustworthy and cautiously curated trading strategy.
Cryptocurrency trading differs from the conventional stock markets, such that it never sleeps. This makes it next to impossible for the private traders to diversify risks, track market swings, decrease mistakes, and maintain trading discipline 24 hours a day, 7 days a week, 365 days a year.
Enter crypto trading bots. These come into play in such scenarios where you can stay on top of your trading game without having to lose your good night’s sleep or staying on the edge of your seat all day long. So let’s dive right into the what, why and how of crypto trading bots and how you can choose the appropriate one for maximum benefits.
Crypto bots: The appealing solution
The crypto bots are a collection of codes created to automate your cryptocurrency trading. The bots are programmed to accomplish repetitive tasks more efficiently than humans using Artificial Intelligence. They collect trading and market data through pre-established parameters and trade on your behalf through algorithmic rules.
The decisiveness of crypto bots is based on the fluctuations of price, orders, volume, and time. They can be fine-tuned by the users to make the best out of a coherent trading strategy with the algorithm. To sum up the definition, these bots are computer programs that buy and sell different cryptocurrencies automatically, at the appropriate time to generate maximum profit.
Now that you are aware of what a crypto trading bot is, you should know how to evaluate its effectiveness. You can consider the following elements while doing so and create a well-thought-out rubric for choosing the crypto bot for your trading.
Trading strategies
Every experienced trader has a plan for their transactions. Coherently, you need to pick the crypto trading bot that reflects your style in terms of purchasing and selling the currencies alongside effective risk management and portfolio diversification. Here are a few common strategies you can look for in crypto trading bots.
Momentum trading
The bot programmed with this strategy estimates the ebb and flow of the trading arena through its momentum. If you have a similar investing strategy wherein you ride the rising momentum wave with your assets and then promptly trade them off as the momentum overturns.
The investors understand that the timing of buy-in and sell-off needs to be immaculate while implementing this technique. The crux of this philosophy is that the cost of an asset will skyrocket over its average and then quickly lose momentum and fall.
Arbitrage trading
This one is an ideal strategy for those looking to invest in fairly low-risk trading and investment. Here, the bots do not rely on the performance of the cryptocurrency on the market, but rather cash in on the price difference between different exchanges before they close up. The bots functioning through arbitrage trading strategy make for a very handy tool in such cases wherein you need to conduct simultaneous trades at the speed of lightning.
Mean Reversion trading
If your style is more poised and stable wherein you believe that even if the price of a coin oscillates from its average, it will eventually come back to the average value. This trading technique is based on the buy low, sell a high concept and having an automated algorithm can aid in calculating the median and function as traders on your behalf. This leads to saving time, cost and decreasing the risks.
There are a few other strategies based on Machine Learning like Naïve Bayes and various Natural Language Processing implemented by the crypto bots. You can examine the ones that match your process to evaluate the effectiveness of the crypto bot you might choose.
User experience
This is something you should look at ardently while checking the efficiency of any crypto bot. These bots are designed to make the investor’s life easier, such that the technology can be used by both advanced and novice users.
Possessing an intuitive interface and straightforward user settings make for tell-tale signs of the best crypto trading bots. Ideal software provides you with an explanation behind their trading action at every step and has easy to follow operations.
Transparency
As discussed, an effective crypto bot makes all the transactions as democratic, distributed and transparent as possible. You should check that it has an open-source development process and an active support team.
Having experienced seniors on the bot development team gives you a sound idea of the efficacy of the crypto trading bot itself. Transparency is critical when trading in the cryptocurrency market as having a trustworthy company history of automated bots can make it easier for you to make profits as well as seek help whenever needed.
Security
This one is a standard necessity for the kind of tech that has access to and can handle the flow of your funds. Reports indicate a median loss of $1.9 billion in the year 2020 due to illicit criminal activities. Though the number has decreased significantly from the record-making $4.5 billion in 2019, it is never a great strategy to neglect the security measures. Therefore, the reliability of the crypto trading bot is the make or break of your trading journey in the cryptocurrency market.
They need to be dependable in terms of secure payment gateways and minimum or no downtime. This factor is an obvious indicator of any crypto bots efficacy. Lousy bots defeat the entire purpose of automation of your trading strategy. Make sure that you are not losing out on your investments or time due to the bot’s shortcomings.
Pricing
You can compare the different services of the shortlisted crypto bots to understand if you’re gaining the best value for your money. The bots have subscriptions of varying prices and you can get free demos of almost all the crypto trading bots. You should understand the functions, customizable, and profitability to evaluate the effectiveness of the automated software that you wish to engage with.
Wrapping up
A crypto trading bot makes for a worthwhile investment when it is easy to use and adapts itself to the ever-fluctuating market conditions. The bots are not a feasible solution unless you modify and program them according to your trading strategy. But it can be a much better alternative to the stressful crypto trading, repton of the tasks, and boredom of having to keep up with the numbers at all times.
