Automated Trading Dominates the Crypto Market

Image by Gerd Altmann from Pixabay

Day trading cryptocurrency can be a wearisome experience. The market is volatile, prices can change within minutes, and the market is open for 24 hours per day, 7 days per week. For a professional trader, the latter is the best part, since it allows them to trade all the time, wherever they are. However, for you average crypto trader, it can be overwhelming, and it may take up too much time.

You want to avoid ending up with a crypto addiction. Hence, we see that many automated trading machines, or bots, are joining the crypto space. These bots are robots that use specialized software which allows them to trade in cryptocurrency.

If we look at the stock market, trading bots have taken an astonishing 70% market share. We can see the trading bots and robots also gain in popularity in the crypto trading markets.

What is automated trading?

Automated trading is software that is programmed in such a way that it can trade on your behalf. Trading bots are another name for this software. A trading bot analyzes and interprets the market in an automated way. Within seconds, they can execute technical analyzes that include moving averages, the Ichimoku Cloud, the Fibonacci indicator, and a variety of other indicators. They can independently collect market data, combine, and make sense of the collected data, make a risk calculation, and buy or sell cryptocurrency accordingly for you.

Usually crypto bots work as an API, working and trading on your behalf on exchanges you connect to. An API is an application programming interface, which connects computers with computer programs. To have a greater understanding of how they work, you can have a look at this detailed guide.

The great thing about these bots, is that they are like robots, there is no room for error. They are programmed to pre-set conditions, which eliminates the possibility of mistakes or miscalculations.

It will take some time to program the software in such a way that it works to your liking. Once you have this set up, you can relax, and see how your profit grows, all with first class seats in front of your computer or on your mobile. It is a great way to generate passive income.

Trading bots come however with a price tag. If you are not familiar with how to set up your bot, you may face extra expenses for the programmer. The alternative to buying a trading bot from the programmer, is to sign up at automated crypto trading platforms. Those allow you to easily create your own bot with the help of an intuitive and user-friendly interface, or simply rent one from other creators. 

The rise of automated trading bots in the crypto space

Markets are always changing, and the crypto market is not different. It is still a very new market, and it is gaining in popularity. Nonetheless, for beginners and advanced traders, the amount of time you need to invest in trading, may not outweigh the profit you make. 

In essence, trading is straightforward, you buy when the price drops, and you sell when the price goes up. However, you need to make use of many aspects of trading. You need to look at the historical data, use TA (technical analysis) indicators, be aware of volume and price fluctuations, define patterns and trends, and a few more variables that come into play. This needs lots of experience, time, and dedication.

The advantage of using an automated trading bot is that the software can do all of this in seconds. The trading bots are getting more and more advanced, and they can monitor the market all the time, on your behalf.

Once you set up your trading bot correctly, it saves you time, and you do not have the associated stress that comes with crypto trading.

These are all factors that explain the rise of automated trading bots in the crypto space.

What are the advantages of automated crypto trading?

Advantages of automated crypto trading can benefit you for various reasons. Let us have a look at some of them:

  • Efficiency

Trading bots keep trading 24 hours per day, 7 days a week, all year round. They do not get tired, fall asleep or need sleep for that matter. They are slaves to the algorithm. Human errors are not an issue and there is no delay in trading activities.

  • Emotionless

Bots are robots and do not know any emotion. They have no FOMO (fear of missing our) or FUD (fear, uncertainty, and doubt), emotions that can interfere when humans start trading. Only available data and information will lead to decisions made by a bot.

  • Reaction time

Bots can trade faster compared to humans, since they trade based on programmed software. They look at facts presented to them and make quick decisions, especially if you trade using indicators.

  • Consistent

A trading bot can keep doing the same job or function over and over and will come to the same conclusion every time. They can handle lots of different data from various resources at the same time and keep performing, without faltering.

What are disadvantages of automated crypto trading? 

There are various disadvantages of automated crypto trading, like the size of the returns or the level of your trading experience. Let us have a more in-depth look at this:

  • Returns

Many bots only generate small returns. Using bots is not a ‘get-rich-quick-scheme’.

  • Security

When trading with bots, you keep your funds at a crypto exchange. There is always a possibility that the exchange that you use will be hacked. In that case, it is likely that you will lose all your funds. Generally, you can say that the bigger the exchange, the lesser chance of being hacked.

  • Monitoring

The trading bots do all the work for you. However, you still need to monitor the general market developments. Because the crypto market is volatile, your trading strategy may not be in sync with the market conditions.

  •  Your experience levels

You must understand the indicators that are being used by the bot. Furthermore, it is important to have a good understanding and knowledge of the crypto market if you want to get the most out of your trading bot.

Conclusion

Just as in stock markets, we see an increased use of trading bots in the crypto space. They are programmed software that can handle all kinds of different trading strategies for you, with various cryptocurrencies and on different exchanges.

Trading bots are a rising factor in the crypto space. More and more people use them because they provide passive income and are easy to use.

There are various advantages and disadvantages for using automated trading options. An advantage is that they trade 24/7 and have no emotion, they just follow the program. A disadvantage is that it can be challenging to set up a trading bot to your specifics. Here is where crypto trading bot platforms, e.g. Trality to name a few, come to the rescue!