Unlike the stock market, there are no circuit filters in cryptocurrency market, which could be a cause of concern for the traders and casual investors. The people familiar with this kind of trading knows the kind of tremor or excitement that it brings when they wake up from a deep sleep. This has resulted in the launch of automated trading bots that helps the traders to control their trading at specific time intervals. Additionally, the bots when nursed with specific instructions trades faster and in a more efficient way.
With the explosion and rising popularity of cryptocurrency now a wide range of cryptocurrency bots are available, either on free of cost basis or for flat fees.
What is Automated Trading?
As told above, a trading bot is a robot that interacts with financial exchanges on your behalf by monitoring the price movement and makes the decision (buy/sell) based on it.
Types of Bots
There are several kinds of trading bots available in the market including arbitrage bots that generate profits from the difference in price across the exchanges. The price of Bitcoin is different from other exchange, Bitstamp, for example, displays a lower price than Bittrex. The movement of cryptocurrencies is reflected in the exchange, so if there is a massive buy order on Binance, you can expect other exchanges to trail on the same path. Bots squeeze the money from delay it takes to update price on the exchanges.
Do they Really Work?
Unlike humans, trading bots work by collecting the data and analyzing it, and making the decision. However, when it comes to cryptocurrency, it tells half the story, as this exchange is highly volatile in nature. There are a lot of factors that an investor need to consider before making buying or sell decision that cannot be programmed into the bots.
In the end, we would like to conclude though bots have immense power to make the human traders obsolete, but they can’t do fundamental analysis, make decision- based on insider knowledge, etc.