Trading bots have made their way into the cryptocurrency world and are now a hot topic of discussion all around the world. They have gained popularity among crypto traders as they allow them to automatically trade even with the owner’s absence, with a few pre-programmed clicks. While the world has been amazed by the great potential of crypto, the widespread use of trading bots has been inevitable.
What is a crypto trading bot?
Crypto trading bots have been around for a while now and they’re evolving and growing daily as the adoption of trading bots for crypto has received quite a lot of coverage. They have proved to be one of the most vital components of the crypto trading world. A crypto trading bot is a program that analyzes the market and based on the user’s preferences and risk appetite carries out trades. It is a legitimate activity that can be used by both newbie crypto traders and experienced traders as well and some are available for free, others are bought, while others can be leased.
How does a crypto trading bot work?
The crypto trading bot is an automated software program that executes buy or sell orders on behalf of a user. They take these actions based on some preset rules of the user as well as observing the crypto market trends. A user has to first create a trading strategy. Once this is done, backtesting comes in to verify the profitability of the strategy. Backtesting is an automatic process that uses APIs exchange to acquire useful market data. After the strategy is decided upon, the trading bot executes a trade. They work in a variety of ways; through browser plugins, infusion in crypto exchanges, operating system servers, and trading servers.
In terms of trading strategy, most crypto trading bots work by exponential moving strategy (EMA). An EMA tracks market movements over a predetermined period of time and the trading bot is set to carry out trading based on the price changes during that time.
How profitable is a crypto trading bot?
It is very important to understand that a trading bot is merely a tool and not an easy way to make an income while sitting back. First, a user is required to come up with a trading strategy. Secondly, a user has to be keen to the fact that successful crypto trading is not only dependent on technical market analysis but also on prevailing market conditions and market trends such as rumors. With this in mind, generating income using a crypto trading bot is feasible.
The sky is the limit when it comes to using a crypto trading bot. However, a user has to be very careful to avoid incurring huge loses. This involves having basic knowledge of the market and how he can modify his trading bot depending on the prevailing market conditions and risk appetite. The future shows lots of promise for crypto trading bots.