What Is Automated Crypto Trading?
Automated crypto trading is the process of using trading bots to trade cryptocurrency on the market without any user input. With the current state of the cryptocurrency market being so volatile, it’s nearly essential to have an advanced computer help you out in trading. Unless you’re a veteran at trading stocks and you have an eye for seeing the patterns in the market, or you’re incredibly lucky in predicting what goes up and down. It’s much more reliable to rely upon the artificial intelligence of a computer to predict when exactly the prices are right for you to sell or buy cryptocurrency.
What are trading bots?
Auto trading bots are basically just automated computer programs that buy and sell cryptocurrencies at a precise time, that’s calculated beforehand, to get the maximum possible profit for the user. These calculations are done by carefully monitoring the trading market for a continuous period of time and adjusting their calculations based on the current state of the market. As per the user’s wishes and preferences, it’s possible to configure these bots to analyze various states of the market, things like time, price, volume, etc. and make the bot react differently to each of those things.
The original idea for trading bots didn’t actually start with cryptocurrency, but that’s no surprise. Richard Donchian thought of an idea of an automated trading system in 1949, one with a set of rules which regulate the purchase and selling of funds. This concept was taken further by some popular traders in the 1980s. Trading bots have existed in the market since then, but they’re never accessible to the average user. Since the cost to use them is usually significantly higher than the amount you’re going to invest in the actual market itself, usually reach up to $10,000+.
This all changed with the emergence of cryptocurrency in the current market. The crypto market is basically open 24/7 and incredibly volatile, so the need for automated bots became far more essential than ever before. With the rise of auto trading bots for the cryptocurrency market, it became possible for users to perform Bitcoin automated trading, which means that they didn’t have to dedicate their time to do any extensive research on the market; they could simply leave it up to the AI present in these trading bots to do it itself and basically get a profit for not doing anything.
What are the benefits of using auto trading bots?
The first purpose of using these bots is to simply make the process more streamlined for the user. The auto trading software takes care of things like portfolio diversification (not investing all your assets into a single portfolio to minimize risk and maximize profit,) index construction (a group of data points,) portfolio rebalancing (periodically buying and selling assets in a single portfolio to maintain the desired level of asset allocation/risk,) and many such things that take lots of time to be performed manually.
The second benefit is focused on the user programming the bot to actually predict the market and try to beat its prices to consistently make a profit. This is much harder to code because there’s no perfect AI. It’s not possible to code a bot that will generate you a profit 100% of the time, and the user is bound to lose some profits in the long run. However, with a lot of research, it’s possible to garner an eventual profit out of this system, and after that, it’s usually fully automated and the user gets a consistent stream of profit without batting an eye.
What strategies fit the cryptocurrency automatic trader?
Of course, everyone needs to code some strategy into their bots for it to work properly. These are some strategies that have been tried and tested and have been proven to work with the market. If you code any one of them into your bot, you’re bound to achieve some success.
Imagine if you have something with an average price of $100, assuming that the demand for the item is mostly consistent. If the price goes up to $125, the traders will start selling their current stock of that item. Now because the traders are selling their stock, the market supply is increasing and the price slowly goes back down to $100. Similarly, if the price drops down to $75, the traders will usually start buying as much of it as possible; the market supply of this item goes down and so the price slowly rises back to $100.
It’s possible to code an auto trading bot to recognize these “ups” and “downs” in the price and buy and sell accordingly for any cryptocurrency, making it a fairly straightforward strategy to gain some profits.
This is similar to the mean reversion technique, but instead of waiting for the price to go all the way to $125 to sell the currency, the bot starts selling it as soon as the momentum of the price increase starts decreasing. It’s possible to graph the increase of a certain currency over a period of time, and so it’s possible to visually see where the curve starts going down. Trading at this point requires incredibly specific timing, but it has its upsides.
For mean reversion, the traders wait to see the exact highest value that the currency goes to and then sell it when it starts dropping, so when it’s not actually at the peak value. By reading the momentum of the curve, it’s possible to start selling exactly when the currency hits peak value and gain maximum profits out of it.
This strategy relies on watching multiple marketplaces at the same time. Let’s use the same example of the item costing $100 from above. This item may cost (and sell for) $100 on Marketplace A, but it might actually cost (and sell for) $110 on marketplace B. So by coding this strategy into the bot, the bot would recognize this money imbalance, start buying currency from market A and sell it at market B.
Doing this consistently resets both markets to an average price of $105 as you raise the market price of A and drop the market price of B by decreasing and increasing supply respectively. So, it’s vital when you’re hard coding the bot to make sure that it recognizes this price imbalance as quickly as possible because other bots will be finding it and doing the trading as well.
The Naïve Bayes algorithm basically uses machine learning to see what the odds for something happening are. The downside to this method is that you have to constantly update your bot with the latest information, but it’s also much more likely to be mathematically right than the other strategies.
The best bots for automated crypto trading
These are some of the most famous bots in the auto trading bot scene. Find one that works for you and use it. If you’re not sure about which bot to choose, you can’t go wrong with any of them.
Bitcoin Era is a free auto-trading bot on the market. It’s suited for someone who’s newer to the trading market, as it prides itself on its simplicity and ease-of-use. Someone with no trading experience could easily start using Bitcoin Era to get into the cryptocurrency market. It’s one of the most popular bots on the market, as it doesn’t have any deposit/withdrawal fees and carries out payouts in a 24-hour time span.
Bitcoin Code is another free trading bot, and it’s been around for a while now. This bot also says that it’s very simple to use for someone who isn’t trade-heavy. It makes a lot of small transactions quickly, starting with a decent deposit of $250, and gets you a profit out of it. Besides, Bitcoin Code has some extra features that make it notable. It has the option to run multiple bots in parallel, it’s supported on all major exchanges, and it’s cloud-based.
Bitcoin System is similar to Bitcoin Code in that you need an initial investment to get started. Since the AI used is rudimentary to keep things simple, it’s entirely possible for someone to lose a lot of money by trading with these bots as well. The important thing is that the user gradually learns about the market, changes their bot accordingly, and starts making money at the right time.
Bitcoin Up, as the name might suggest, is an up and coming auto trading bot. It has an extremely advanced trading AI, one that’s beyond what’s available on the other trading bots. It’s not clear exactly what the formula behind the bot is, but it’s fair to say that the system does quite well in predicting future market trends. The platform is available internationally, except for some restrictions in some countries.
Bitcoin Circuit is a bit more complex than the other trading bots, and that may already scare off some potential users. But don’t worry, what this bot lacks in simplicity, it makes up for in the absurd number of options it gives you. The platform has no hidden costs and accommodates its members with an offer of a demo account where you can learn how to trade and predict the crypto trends.
Bitcoin Cycle automates the entire crypto trading process from start to end. You deposit the money to your account and then wait for the bot to make favorable trading, it’s that simple. You don’t even have to look at any cryptocurrency, since the bot handles everything so cleanly. Even if the system doesn’t have its own mobile app, it’s still accessible by its mobile and desktop website versions.
All this crucial data about cryptocurrency, why and how trading bots work, the different trading methods, and some of the best trading bots on the market set on your journey into the wonderful and crazy world of cryptocurrency. Get your courage and start trading heaps of crypto assets to achieve the desired financial independence!