Trading bots are automated programs that perform online trading for you. The crypto market never sleeps, is open 24/7 and volatile prices can therefore change constantly. It is impossible to monitor and respond to the rates 24/7. Hence trading bots.
A trading bot is a computer program that uses indicators to identify trends in the prices. Such a software program communicates directly with the exchange you use, such as Binance, for example. Algorithmic trading software had been around for some time in stock, commodities and currency trading, but was too pricey for individuals. That has changed since the rising popularity of the crypto market.
How does a trading bot work?A trading robot automatically executes trades at pre-programmed points or moments on the price based on set indicators. The bot makes decisions by following and reacting to price movements.The bot collects the trading volume, orders, price and time, among other things. This way you have control over your trade at all times, without having to constantly be in front of your screen yourself. This saves a lot of time. As a result, trading bots are becoming increasingly popular among traders.
The trading bot trades based on a predetermined strategy and does not deviate from it. Moreover, a correctly specified bot can execute transactions more efficiently than you could (manually) yourself. This can be an advantage. When you are trading yourself, you can be carried away in your emotions, resulting in a buy or sell. But it can also have a negative effect, because a trading bot does not take current events, statements, speeches, news or elections into account.
Are bots profitable?Trading robots can certainly be profitable, but this is not the case for everyone. When you have worked out an effective strategy correctly, you can make more profit with the help of a trading bot than if you had to do everything manually. Using a wrong trading strategy and automate the trading bot on this, a series of bad decisions can follow.So it does require some knowledge and preparation to be able to make recurring profits with your trading bot.
The risk of trading botsA trading robot can be very useful, but there are also risks associated with trading bots. Whenever you give money to a third party, be it an exchange, software wallet or trading software like a trading bot, you run the risk of losing your cryptocoins. Not every trading bot is coded properly. For example, if you choose a relatively young trading bot, or a trading bot with errors in the software, the bot can crash or you can make losses. In addition, trading bots are prone to scams, which means you can fall victim to theft. That is why it is strongly recommended to choose a trading bot with a good reputation in the field of crypto trading.
Do not blindly trust your trading botA trading bot does the work for you, but it remains a tool. The cryptocurrency market is constantly changing and prices are usually so volatile that major price changes can occur within a short period of time. To continue to perform well, it remains important that you keep an eye on your strategies. If you do this right, the trading bot is certainly a useful tool. If you do this less well, a trading bot can give you more financial risks than if you traded without a trading bot.
We've collected links to some of the most used bots. Take a look and when you try it out, do it with small amounts to see if it works the way you want.
There are many useful instructional videos on YouTube on how to link a bot to an exchange of your choice and how to trade.