The evolution of cryptocurrency is like a rollercoaster ride. At first, it seemed like a buzzword, but at present, the cryptocurrency is future. And for a couple of years now, trading Bitcoin and its alternatives has become a gold rush of the digital era. It is attracting more and more traders to engage in investing by making use of automated trading tools.
With the development of Bitcoin trading bots, it has become easier for traders to enter the crypto trading world without having specific skills. To make use of these bots, you shouldn’t be an expert in crypto trading who devotes much time in analyzing the current market trends. For successful crypto trading, you just need to use safe trading and the right crypto trading strategy. And, the solution to profitable crypto trading is making use of the best crypto trading bots which will open and close trades automatically.
Now, you might have some questions in mind:
- What are crypto trading bots?
- How do these bots work?
- How to choose the right crypto trading bot in 2022?
To get the answers to the above questions, let’s explore crypto trading bots in deep:
Table of Contents
Crypto trading bots and when should one use them?
Cryptocurrency trading bots are an innovative development in the world of crypto trading. We all have seen tremendous growth in the value in 2021 due to high demand from the investors looking for the best investment options outside of the traditional stock market. And, this trend will continue in 2022 too.
However, these are volatile assets with hourly fluctuations making it difficult for the traders to trade manually. But crypto trading bot allow you to execute trades automatically whenever the specific preset conditions are met, taking into account all relevant information like current prices and volatility levels, etc.
If you are looking for the best crypto trading tool which will help you trade smartly while minimizing risks and maximizing earnings, then you should try the crypto trading bot at Growlonix. Bots are computerized programs which execute trades in an automated mode based on the market conditions and parameters set by the user. These bots make use of diversified algorithms, patterns, signals, copy trading, and more.
As the crypto market is gaining attention, it has become easier than ever to get started with a bot to enhance your trading strategy. Most crypto trading bots work in a straightforward manner. The trader authorizes the bot to buy or sell an asset if and when it meets the specific conditions. The bot takes care of placing and executing your order so you need not to monitor the crypto trading platform all day long to see the market trends or the price movements.
One can also customize the crypto bot to execute orders according to their unique trading strategy. For example, you might your bot to sell any particular asset as soon as it reaches a price of $25, and buy them back, if the price falls to $22. Growlonix is one of the best crypto trading platforms that provide trading bots for all the major exchanges, and cryptocurrencies.
Do keep in mind that not all bots are profitable. So, you have to choose the bot smartly. It is estimated that 70-80% of the overall crypto trading volume is undertaken by the bots. These bots can monitor multiple exchanges at the same time and trade based on the predefined algorithms.
The strategies which crypto trading bots implement can do anything from automated trading to construct custom strategies to advanced real-time arbitrage. The possibilities are endless and the trading bot implements a strategy that relies on algorithms created by the developers.
Crypto trading bots can automate market analysis and interpretation easily. They gather data from the market, interpret it, calculate the associated market risks, and then execute the buying/selling of cryptocurrency assets. Choosing bot services is like hiring an expert to perform trading which allow you to sit back and watch the profits grow.
Example:
Let’s understand crypto bot trading with an example:
Mr. A decides that he wants to try using automated bot strategies to secure crypto profits and to grow his Litecoin (LTC) holdings. So, he invests in any crypto trading bot software at Growlonix to earn good profits. He decides to capitalize on the daily price movements and after setting up the bot on the exchange of his choice. He decides on a trigger on which the trading bot script will act on.
After looking at the charts, he is sure that LTC will at least be trading rather than just being flat, and then he sets the automated bot to buy it when the price drops down to 10% and sets it to sell when the price goes up by 10%.
Now, the trading bot knows the rules, and it’s ready to start trading. Mr. A heads off to his other work and the bot will start trading. Later, Mr. A checks how things are doing and sees that the bot’s trading strategy is amazing. And, making use of trading bots is really profitable without watching the market trends regularly.
Crypto trading bots can save lots of time and are even cost-effective than hiring the experts to trade manually.
How do trading bots work?
Each crypto trading bot has different software and hardware requirements. So, it’s important to check about these requirements before finalizing. In order to maximize the impact of crypto trading bot on your chosen cryptocurrency and exchange, one should know how these bots work?
All trading bots go through three major stages:
- Signal generator
- Risk allocation
- Execution
At the first stage, predictions are made. This module will save the raw market data from multiple resources and interpret it. On the other side, it will also decide whether to buy or sell any crypto asset. The next module is risk allocation where the bot calculates the potential risk in the market using the market data. Based on this information, the bot will decide how much to trade. The last module is execution. In this stage, the bot uses APIs to buy or sell crypto assets. At this stage, the signals generated are finally turned into execution.
Functions of trading bots
Crypto trading bots analyze data, predict market risks, and then buy or sell assets as per the calculations. So, trading bots can make your activities almost effortless. Though, if you are looking for a bot with maximum capacity, make sure the software performs a large number of advanced and basic functionalities. Here are the major functions that a crypto trading bot must have:
- Strategy implementing – The core of a trading bot is its ability to perform a particular strategy like setting take profit order, trailing stop buy, OCO order, or Trailing limit sell. It should be flexible and dynamic depending on the algorithm’s adequacy.
- Backtesting – This is an important feature if you want to check a new strategy by simulating its outcome using the past data obtained from the market trends. A backtest takes into account the latency, market fees, and other aspects which may have a direct impact on the crypto trading transactions.
- Market tracking and history keeping – These two functions are interlinked and enable collecting market data and storing it for reference and analysis. This data is important for developing new algorithms and improving the older ones. This functionality also involves presenting the data reports in the form of graphs and charts.
- Transaction data logging, archiving, and retrieval – These functionalities of a crypto trading bot keep the history of all the transactions done. Thus, it allows customers to track their past financial activity and recall when or at what time a particular transaction took place.
- Scheduler – This functionality allows a trading bot to operate autonomously, and only during the preset periods defined by the user.
Other important functions of a trading bot include sandbox mode and notifications. Sandbox mode is for trade simulation which is a training module allowing traders to gain practical skills in real-life market conditions without risking the real money. Security is another highly-demanded feature of any bot that ensures safety of accounts and transactions concerns.
How to use a crypto trading bot?
Firstly, you need to choose the type of crypto trading bot you want as there are many different types of bots available. Some bots are designed for the long-term investments while there are some that offer a set of pre-programmed trading strategies. Make sure to choose a bot suiting to your investment goals.
Next, you may choose the cryptocurrency exchange to use the bot. Many bots are linked to specific exchanges. You may go with Binance trading bots if you want to perform trades on Binance exchange. Once you have selected the exchange, it’s time to create an account. After opening the account, it’s time to transfer the funds to the exchange to use with your chosen bot.
Before starting trading with your bot, make sure to make various settings for your trading strategy. Growlonix also offers crypto copy trading which allows you to copy the trades of professional traders in your trades. Apart from this, your trading strategy must include currency pairs, time frame, trading amount, and more.
How to choose the right crypto trading bot?
Crypto trading bots can be the great way to automate your trading strategies and maximizing profits. But, if you don’t have the right strategy, or if you are not aware of using them, these bots may cause major losses. Before using a trading bot, make sure to consider its limitations and reviews from the other traders. Ask other traders that you can trust if they have experienced with the bot you are considering.
While selecting a bot, make sure that it meets your requirements. For example, if you are looking for a secured and high-quality bot for the long term investments, then it’s important to check which exchanges this bot supports. The following are some factors to consider when it comes to choosing the type of trading bot that will work for you:
- Do you prefer long-term or short-term investments?
- How much money you are willing to invest in crypto trading?
- What are the minimum deposit and withdrawals requirements on your chosen exchange?
Are crypto trading bots the future of crypto trading in 2022?
- Will bots really make you rich?
- There is no straightforward answer to this.
- But, can the trading bots make you rich?
And, the answer to this question is, Yes they can! But it’s not a magic! There are chances that you may lose money to trade operations overseen by the trading bot. Bots are not the Holy Grail and if they were, everyone would use them.
But they work smartly and offer a lot of advantages to expert traders as well as beginners if chosen wisely. With evolving technologies and exponential growth of AI sector, the trading bots will become more popular, better and stronger in 2022.
If you’re a beginner, then a considering Growlonix’s signal trading bot can be a great way to learn the ropes. They can help you make more informed decisions and prevent you from making costly mistakes.
