HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
MultiBank Group information and reviews
MultiBank Group
84%

Automated Crypto Trading: The Ultimate Guide


Cryptocurrency trading first started in the beginning of the 2010s and has been actively growing in popularity ever since. Currently, the crypto market has thousands of cryptocurrencies in circulation and around 300 million cryptocurrency users around the world. Crypto trading is now considered one of the most profitable ways to earn money as a trader. So it’s not surprising that there are so many traders willing to capitalize on short-term price movements within the crypto market.

However, not everyone has the time and resources required to engage in crypto trading consistently. Luckily, this is when automated crypto trading can come in handy. In this article you’ll learn what automated crypto trading is, how it works, the advantages and disadvantages of automation, and how to use automated trading to maximize your profits for a more successful trading experience.

What is automated crypto trading?

Automated crypto trading is a style of trading that involves utilizing specialized software (trading bots) to automatically buy and sell cryptocurrencies when certain conditions are met. Cryptocurrency trading bots allow traders to take advantage of price movements without having to monitor the market on their own.

When you trade without using any automated programs, you have a lot of multitasking to do: watch the charts, analyze the data, use various tools and indicators to find the best opportunities for entering the market, calculate potential risk, place buy or sell orders, etc. All of this can be quite stressful to manage at the same time, and it’s not uncommon for traders of all levels of proficiency to lose focus and miss an important piece of information that can make or break a trade.

However, crypto trading bots are immune to this problem. They can automatically (and much quicker) gather and analyze necessary data and open and close trades if previously entered requirements are met. Automated trading software can help traders save a lot of time, energy and profit for a relatively low price.

How does automated crypto trading work?

Automated crypto trading software is based on algorithms. Algorithms contain a set of instructions and rules aimed to solve a problem. Considering that trading involves waiting for certain conditions to occur, the whole process can be automated by creating algorithms that can analyze the market and carry out trades when the current market conditions comply with the algorithmic rules.

There are many variations and types of automated trading programs. First, you can set yourself an expert advisor (EA). This software analyzes the market according to the settings you set up and gives you trading signals. For example, an EA may look after the RSI oscillator and send you a buy signal every time it reaches the “oversold” zone. Another thing you can use is a bot that trades while you are busy with other things. The bot searches for trading opportunities, opens and closes trades, and manages risks.

Trading bots are external applications and aren’t built into the exchange platforms by default. There are several ways to integrate automated trading software into the platforms, but when it comes to crypto trading bots, the most prevalent are Application Programming Interfaces (API) trading and decentralized trading platforms.

What exactly can trading bots do?

Regardless of the way an auto trading software is integrated into the trading platform, trading bots take care of the same list of processes:

Advantages of automated crypto trading

It didn’t take long for automated trading bots to take over the cryptocurrency market and become more popular than manual trading. In fact, even a lot of non-crypto traders have hopped on the trend and started using trading bots to maximize profits from their trades. And there are many reasons why automated trading has gained so much positive attention from traders, and we are going to look at them now.

Efficiency

As we already mentioned, trading is an activity that requires a great deal of multitasking. Trading bots can do many activities associated with trading, from gathering data about the current market conditions to calculating the potential direction of the price movement and executing trades. Trading bots also complete these tasks much faster than humans, which means they are able to execute a trade quicker and without delays as well.

Trading bots, unlike humans, don’t get tired and can work 24/7. The risk of making errors in calculation is also practically non-existent (unless the data entered into the software is incorrect).

Eliminating emotions

Emotions are complex neurophysiological reactions that humans experience in the course of their lives. Emotions are natural  and necessary for us as they help us process the world around us and make decisions based on what we feel. However, in trading emotions often hinder the process instead of helping. A lot of traders get attached to their trades, hoping against hope that the market will end up moving in the direction they want. But these emotional attachments do much more harm than good, causing traders to miss good trading opportunities or make bad trading decisions.

Luckily, emotions (or lack thereof) are also one of the main differences between humans and machines. Trading bots don’t get attached to open positions. They clinically follow the established set of rules and instructions, and once the market moves past a certain point, they close the trade without hesitation often displayed by human traders.

Diversification

If you want to minimize the risks for your trading or investing portfolio, you can try and diversify it by investing your money in a variety of different assets at the same time. This allows you to protect your capital if one of your open trades or investments falls through. However, it is hard to keep up with one market, let alone several, so many traders and investors don’t use this opportunity.

This is another thing trading bots can help you with. They can monitor multiple trading accounts and apply different strategies to different markets. When one position starts to lose, they can quickly detect it and reallocate money to different trades or open new ones. Automated trading allows you to take advantage of trading opportunities across multiple markets without having to endure the stress from trying to juggle several trades at the same time.

Disadvantages of automated crypto trading

Of course, nothing can be 100% perfect, so there are still some drawbacks that traders should consider before using automated crypto trading software.

Automated crypto trading: strategies

There are a variety of different trading strategies that you can apply to your automated crypto trading system. However, before implementing a strategy, it is crucial to backtest it. Backtesting shows whether a strategy is strong or not by using historical data to test it. If by the end of backtesting the strategy brings more profits than losses, then it can be used on the real market next.

As for what strategies to use while using automated crypto trading systems, here are some of the most popular ones that you can incorporate in your trading:

Knowing these strategies can help you understand better how automated trading systems work and what they are truly capable of doing.

Conclusion

Despite some imperfections, automated crypto trading is a great alternative to manual trading. Trading bots are incredibly time efficient and reliable, they can help you achieve the results that you never thought were possible.

This is for informational purposes only and does not contain — or to be considered as containing — investment advice, suggestion or recommendation for trading.

#source


RELATED

Oscillating Indicators

As their name suggests, oscillating indicators are indicators that move back and forth as prices rise and fall. Oscillating indicators can help you decide how strong...

Forex trading sessions

Currencies are available to trade 24/5, anywhere globally, while cryptocurrency is available 24/7. However, there is server maintenance when trading cryptocurrencies...

Investing vs trading cryptocurrency: What's right for you?

People often mistake investing and trading for the same thing. However, they are very different and each has its own characteristics when it comes to crypto...

Wrapped Bitcoin and relationship with Ethereum explained

The cryptocurrency industry and both the Bitcoin and Ethereum ecosystems are rapidly evolving, and have come to the point of converging together as Wrapped Bitcoin (WBTC)...

Relative Strength Index

The Relative Strength Index (RSI) is an oscillator that measures a particular financial instrument's current relative strength compared to its own price history...

Currency Pairs and Stocks: A Comparative Analysis

Currency pairs and stocks are the most popular assets for day trading, long-term, and medium-term investing. The daily turnover volume on Forex exceeds $5 trillion...

Choosing a Trading Instrument: How to Trade Indices

By now, you must be familiar with the names of the world's major stock indices: Dow Jones, S&P 500, NASDAQ, DAX30... But did you know that they can...

What Factors Influence Tezos (XTZ) Token Price?

Cryptocurrency continues to gain more and more attention with time. The systemic worries that accompany traditional assets, including stock fiat currencies...

Rules Followed by Professional Traders: How to Make Money Every Day?

How do professional traders spot great trading opportunities in the financial market almost every day? Which key traits separate experienced traders from beginners?

Day Trading While Maintaining a 9-5 Job: Strategies, Considerations, and Balancing Act

The world of day trading, with its tantalizing potential for financial gain, has become increasingly accessible even to those who hold down conventional 9-5 jobs...

APR vs. APY in Crypto: A Comprehensive Guide

Cryptocurrency investments have become increasingly popular in recent years, attracting investors from all walks of life. As the crypto market continues to grow and evolve...

Cryptocurrency Market: How to Choose the Best Platform

Do you have an interest in the cryptocurrency market? Do you want to start trading? Are you unsure of what cryptocurrency trading entails? Do you know how the market...

Speculating with CFDs

Typically short-term, speculative trades are generally coupled to major market events such as central bank interest-rate decisions and company results.

The Relationship between Gold and the USD

If you have been reading our research articles, you must have seen that our analysts very often talk about the negative correlation between gold and the US dollar...

Position Sizing Using the Risk Reward Ratio

Position sizing involves making an objective decision about...

What is a financial plan

A financial plan is a document that outlines a person’s present financial situation as well as their current and future financial goals. It contains strategies for achieving...

What New Crypto Coins Are Coming in 2022

The crypto industry has experienced an eventful 2021. The world's largest investment funds are actively investing in various crypto assets...

5 ways to get your strategy copied

Copy trading is one of the popular ways that allow professional traders to earn additional income on their trading by offering investors to...

What Are Crypto Liquidity Pools?

Liquidity pools are a massive part of DeFi, or decentralized finance, one of the essential parts of the crypto world. By understanding what is possible with the liquidity pool...

Ultimate guide to Dogecoin trading

Dogecoin is a highly popular "meme coin" that has even attracted the likes of Elon Musk to become a fan. Dogecoin is a cryptocurrency that was created in 2013 as a joke...

XM information and reviews
XM
82%
FP Markets information and reviews
FP Markets
81%
FXTM information and reviews
FXTM
80%
AMarkets information and reviews
AMarkets
79%
Octa information and reviews
Octa
79%
BlackBull information and reviews
BlackBull
78%

© 2006-2024 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.