Perhaps you have heard this question being asked several times but still, you can’t figure out what really this type of trading is. Don’t worry. We are going to give you a clear picture of what this whole issue is, so that you can get a good starting point when you later decide to venture into digital currency trading.
Bot trading entails the use of automated software tools to conduct and execute transactions on human investor’s position. The use of such a trading technique came into being after humans had discovered their incompetence and challenges they have in making quick reactions to market-price fluctuations in order to attain optimum trades which are theoretically at their own disposal. When both exchanges and transaction periods slows down, it becomes difficult for human investors to make informed decisions which brings them profitable investment outcomes.
Let’s look at some few benefits of bot trading
· Available all the time
Unlike traditional financial exchanges which are only active during the day, digital currency trading markets are always open for traders. So humans cannot be able to monitor what happens across all the exchanges 24/7. They have some idle trading time when they will be resting, or away. Now there becomes the need for a trading bot which can continuously trade even if one has fallen asleep at night. Nevertheless, relying entirely upon an automated software tool could give you a big loss instead of the required profit. So you have to make sure that the strategies you employ are not risky at all.
· Bots enables emotion-free trading
Trading by yourself can exert a lot of pressure on your mind that sometimes you might end up selling your crypto at a loss due to some overwhelming emotions. Such is not the case when you use a trading bot.
· No mistakes
Once you provide proper instructions to your bot, you are sure enough to attain better results. The software is able to quantify all the figures and make decision in just a short period of time. But when you do the trading yourself, you will experience a lot of confusions and errors and, some of which may be very costly to recover.
One common type of trading bot available
· Arbitrage trading bot
This software trading tool examines discrepancies in digital currency exchanges and utilizes that as an opportunity to make money for its owner. For example, when the same coin is trading at different prices in two different market exchanges, the bot will take that as an advantage and buy a cheaper coin which it will sell to the other exchange with a higher priced coin. All this will be done as quickly as possible to avoid any necessary price match between those two exchanges.
Bot trading proves to be a success story for many digital currency investors. However, the use of such tools has its own limitations like high cost of maintenance and lower strategies as compared to human beings. More so, there is an ongoing debate as to whether these machines should be used in digital currency trading. Some parties perceives that form of trading to be unfair.