If you’re a cryptocurrency trader, you’re well aware of how quickly market circumstances may shift. Spend a weekend away from your computer, and you may realize that you’ve lost a quarter or more of your investment. So, what do you do if you want to invest in bitcoin but don’t want to devote all of your free time to market research?
One solution is to utilize an automated trading bot such as Bitcoin Evolution to perform your trades for you. Automated cryptocurrency trading uses complicated algorithms to buy and sell coins, and different bots will employ different methods. Market indicators, asset prices could trigger your transactions, or simply allocate to regularly rebalance your portfolio, depending on how you configure it.
Automated Crypto Trading Basics
A crypto bot is automated cryptocurrency trading software that automatically buys and sells your coin using its internal algorithm. The majority of bots will just perform your transactions for you. However, some offer the option of receiving notifications when the bot makes a recommendation.
The advantage of automatic trading is that the system operates without delay. Cryptocurrency markets are volatile, which means you must be prepared to react to changing market conditions. A bot can perform transactions in real-time in response to market activity. Depending on the design, this does not have to be done simplistically. Not just the price of a cryptocurrency but also it’s trading volume, buying and selling pressure, and sophisticated bots will track historical price trends. These and other variables can assist the bot in making a more informed decision, similar to that of a human trader.
How do Crypto Trading Bots Work?
A comprehensive explanation of cryptocurrency trading bots would require a big textbook. However, similar to an automobile engine, they are composed of a few fundamental components. The signal generator, risk allocation, and execution are all included in this. These components may have somewhat different names in different bots, but they all perform the same function.
The signal generator is the component of the bot that is responsible for making predictions. It collects price movement, trading volume, and other variables and feeds them into an algorithm. After that, the algorithm determines whether to purchase, sell, or hold. This calculation is repeated indefinitely as conditions change. Be cautious of bots that utilize imprecise terms such as “market indications” without clarifying what they imply. If you’re going to pay for a bot, you should be aware of the data it collects and the techniques it employs.
When the signal generator determines whether to purchase or sell, the risk allocation procedure begins. If the bot is purchasing, it must determine the amount to invest and whether or not to reallocate existing investments.
The execution procedure is the section of the bot responsible for actually doing the trade. For larger bots, trading may occur in a series of smaller trades. This is because larger bots may have hundreds of clients and significant investment amounts.
Advantages of Automated Crypto Trading
Before we conclude, let us discuss the advantages and disadvantages of automated cryptocurrency trading, beginning with the advantages.
- Automated trading saves you time
You are not required to spend your lunch break reading financial news websites or trading. A bot takes care of all the tedious labor for you.
- Bots don’t get sleep or get bored
If your approach entails a high volume of short-term trades, the repetitious activities will become tiresome. A bot is capable of trading cryptocurrency 24 hours a day, 365 days a year.
- Bots outperform humans in terms of speed
Even if you’re seated in front of a monitor and monitoring the crypto market in real-time, you will not be able to execute trades as swiftly as a bot. This also enables you to execute more accurate deals, as you will no longer be trading many seconds behind the market.
- Bots are emotionless
We all like to believe that we are astute, logical investors. However, deep down, we are all still a bunch of monkeys susceptible to fear, anxiety, and excitement. A bot is only concerned with the algorithm.