The cryptocurrency market never sleeps, but you need a break regularly. In this case, crypto trading bots look like a perfect way to extend your working day. In this article, we will explore how trading bots can help you become more efficient.
Oh, and make sure to stick to the end, where we list our top five trading bot software options.
TABLE OF CONTENTS
What Are Crypto Trading Bots?
A cryptocurrency trading robot (or bot) is a special program that integrates with your exchange and trades there on your behalf. This software uses technical analysis (TA) indicators you specify for making buy and sell decisions automatically.
So, should you outsource your trading sessions to a smart machine?
To help you decide, it’s important to understand what these programs can and cannot do for you. Also, we will talk about the risks you run while using a bot and the advantages they offer.
Let’s start with the pros.
Why Humans Need Bots?
From a practical standpoint, crypto trading bots outperform humans, because they:
Trade 24/7. 🕑 Even the most active human traders trade, sleep, eat, repeat. Robots are always working.
Act fast and process more data. ⚡ Automated trading software is lightning-fast. Unlike a human brain, it can process gigabytes of data per second.
Have no emotions. 😐 Humans can make errors due to FOMO, greed, anxiety, and anger. A machine does what the trading strategy and market logic dictate. Statistically, it increases your chances to win.
How Crypto Trading Bots Work
To start a trading bot on a platform like 3Commas, you have to provide it with your Application Programming Interface keys (API keys). They are unique identifiers that let the exchange know you authorize access to your account.
But isn’t it risky to trust a third-party service with your funds?
The point is, you only grant a bot the right to trade and collect your balance data. You can set these two parameters as you wish, to ensure the desired level of control.
Warning: ⚠️ one thing a trading bot cannot do for you is withdrawing funds. If a software requests this right, stay away from it. Otherwise, you could lose your crypto to scammers.
How to Set Up a Crypto Trading Bot 🛠️
The process of setting up a cryptocurrency trading bot looks more or less like this.
- Create an account on an automated trading platform of your choice.
- Add a new trading bot and give it a name. A beginner can use a template if there are any.
- On your exchange, go to your Account Settings and look for an API tab there. Generate a new API, checking all the options but Withdraw. The system will send you an email to confirm the permission to place and cancel orders. After it, you will get your API keys.
- On your automated trading platform, copy-paste your new API keys in a corresponding field. Then, configure your bot. The settings include Order type, Trading pairs, Amount, Max open positions, Strategy, etc.
- Enable the bot.
Strategies and Backtesting
Any trading robot uses a set of rules dictating when to buy or sell. The logic of these automatic decisions depends on the strategy you pre-determine.
When creating a bot, you can take a built-in strategy or design your own, using the available settings and TA indicators. For instance, Bollinger bands or moving averages.
TIP. 💡 After configuring your bot, give it a test-drive. Conveniently, all the major platforms offer the Backtesting tool. It gathers historical data from an exchange and safely tests your strategy against it.
How to Pick Out a Crypto Trading Bot
When choosing a suitable platform, keep the following things in mind.
- Functionality: your bot should meet your needs and be easy to use. For instance, you may want to monitor all your holdings across many platforms using one interface. Or you need a bot you can easily access from a mobile device, and so on.
- Supported exchanges: check the list of the exchanges on the website. Does it include the platform/s you have an account on?
- Developer’s reputation: the company behind the bot must be trustworthy and transparent. If the guys prefer to keep low-profile and don’t share important details about their software, ignore their product.
- Performance: search for user reviews and expert opinions to understand if the bot is reliable. Any malfunction due to a software fault can lead to missing a good trading opportunity.
- Pricing: normally, platforms for automated trading come with several subscription plans. Compare the prices across several major services. Check what their packages include, and if a free trial version is available.
Extra Features Trading Bot Platforms May Offer
To make a trader’s life easier, trading bot platforms may come with additional features. Here are some icing-on-the cake tools you can discover in their Features section.
Historical backtesting: test your new bot configs on the past data to evaluate its performance.
Bot templates: Apply the settings that have already been tested and shown good results.
Strategy design tools: Create a custom strategy using “building blocks” — the technical indicators and charts the assembler provides.
Portfolio management: Build, balance, and track your cryptocurrency portfolio.
Copy-trading/Mirror trading: Copy the buy and sell signals the best traders use to improve your results.
Notifications and reports: Receive deal notifications to your mobile or browser, and analyze your bot performance reports.
Sounds too good to be true? Sure, nothing is perfect. Below are a few things to be aware of before you start automated trading.
Things You Should Know Before Starting to Use a Bot
Automated trading sounds exciting for beginners who welcome ready-made solutions. But be aware of the following things:
- Bots are not money-printers. whatever an ad may be promising you, trading software doesn’t do magic. If it did, the developers would run these programs for themselves instead of selling subscriptions.
- There are no guarantees: unfortunately, bots may fail because of a software fault. Also, it cannot guarantee you any solid profits.
- A bot is unable to replace you completely: it’s not a smart sleepless trader who does all the hard work while you are relaxing on a beach. Neither it’s a set-and-forget trading tool. Humans should monitor the performance of their bots on the moody crypto market and be ready to re-adjust the parameters of their strategy when necessary.
- Using a bot means you keep your funds on the exchange all the time: yes, some exchanges are very secure, but anyway — they are less secure than a good hardware wallet. Centralized storages are the jackpots hackers would love to steal.
- Some ready-made bots are a scam: bad guys design their own “bots” to steal your data and funds. To persuade you to use their product, they make unrealistic promises, and inexperienced users often take the bait.
Still willing to try crypto trading bots? Let’s see how to create one!
5 Top Trading Bots
As a rule, any top-list includes these platforms:
- 3Commas: an automated trading platform, perfect for people with little tech background and trading experience. Supports 23 exchanges and multiple trading strategies. Prices range between $29 and $49/month.
- Cryptohopper: a crypto trading bot for more or less advanced traders. Supports 14 exchanges, including all the major ones. Free for Pioneers, $83.25/month for Heros.
- Shrimpy: a beginner-friendly platform for automated trading. Supports 16 exchanges. The prices range between $0/month (Hodler package) and $19/month (Pro package).
- GunBot: one of the oldest bots on the market, offering beginner-friendly interface and lifelong access. One-time payment of 0.02 BTC (GunBot Starter) or 0.125 BTC (Gunbot Ultimate). Supports 100+ exchanges.
- TradeSanta: crypto trading software, supporting 8 popular exchanges. Suitable for both beginners and experts, TradeSanta offers many useful tutorials. Prices start with $14 (Basic package).
Is it Time to Adopt a Robot? 🤖
Are trading bots profitable? In general, they are.
But remember that not all bots are created equal — many of them make little or even zero profits. Also, a lot depends on your own skills — more experienced traders know how to configure and reconfigure their robots for better results.
To know if they work for you, it’s better to try and find out.
As always, start small and don’t run any risks you cannot afford.