When it comes to cryptocurrency trading, it can be an arduous task to stay on top of the market at all times. Unlike stock markets which have a fixed opening and closing time, the global cryptocurrency market never stops, operating 24/7. As large parts of cryptocurrency gains can be attributed to timely trading decisions, many traders turn to cryptocurrency bots for a continuous trading experience. Cryptocurrency bots, in particular, Bitcoin trading bots have been a revelation since the idea was conceived, with many such Bitcoin bots available in the market to make the trader’s life considerably easier.
Bitcoin Trading Bots: Explained
Bitcoin trading bots are a part of a family of trading bots made for several specific cryptocurrencies. In layman’s terms, a Bitcoin trading bot refers to a tool or application to make trades automatically on the trader’s behalf, based on some predetermined protocols set by the trader. The degree of successful trades and profit margins depend on the input of the trader and the trading algorithm in question. Even though there are several types of cryptocurrency trading bots available, Bitcoin trading bots are the most popular, due to the fact that Bitcoin is arguably the most actively traded cryptocurrency in the world. BTC Robot is an example of a popular Bitcoin trading bot.
All cryptocurrency bots including Bitcoin trading bots have certain factors in common. For instance, all trading bots start the process by first interacting directly with various cryptocurrency exchanges around the world, utilizing APIs to gather the required information. Factors include market volume, prices, time and orders. The bot interprets this information and takes the appropriate actions according to a set of predetermined rules and protocols. These inputs are usually done by the trader himself.
For example, a user can program his/her Bitcoin trading bot in such a way that it executes Bitcoin trades once it reaches $10,000 USD within the next 48 hours. The bot will automatically monitor the price amongst various exchanges and execute the trades accordingly once the required protocols have been met. Traders, as a result, can now stay on top of the market at all times, even when he/she is physically unavailable.
Since the cryptocurrency market and blockchain technology, in general, focuses heavily on transparency, average users using trading bots can successfully gain access to updated market information in real time, allowing them to generate even greater profits than conventional trading means. This was not previously possible before the advent of automated trading applications.
Bitcoin Trading Bot Strategies:
The Bitcoin trading bots are still a relatively new concept in the crypto world, employing a wide range of trading strategies depending on the user’s choice. However, two of the most common strategies used by Bitcoin trading bots are arbitrage & market making
- Arbitrage: Arbitrage is one of the first strategies employed by the first wave of crypto-trading bots and is still employed by a large part of the crypto community. It involves the Bitcoin trading bot being configured to buy Bitcoin in one market and sell them in another different market with a profit margin. The process was more effective in the early days of cryptocurrency trading when large amounts of disparities in price were found between different crypto-exchanges. However, with time, as price differences started to correct them and become smaller, the potential profit level has dramatically decreased. This strategy, however, is still employed in Bitcoin futures contracts with proven results.
- Market Making: The other popular trading bot strategy is called market making, which involves employing trading bots to provide liquidity in a particular market. As a result a profit is generated by the different between the buying and selling prices. This strategy aims at making several buy and sell orders at price ranges which are close to the market price at the time. As fluctuations occur, the trading bots search and automatically place trades to capitalize on the spread. As a result, this strategy enjoys the best results in high liquidity markets.
Some Notable Bitcoin Trading Bots:
- Gekko: Gekko is one of the easily usable Bitcoin trading bots available on Github, allowing users to execute basic crypto-trading strategies with ease. Gekko provides users with aggregated live price data along with indicator calculations. It also allows executing live orders along with backtesting of the trading strategies selected. Gekko may be behind in certain aspects as compared to its competitors, the functionality suits novice traders in testing out different automated strategies.
- CryptoTrader: CryptoTrader is a popular cloud-based platform, allowing users to develop their own cryptocurrency trading bots to host on its platform. Cryptotrader also provides users with a virtual marketplace where users can sell their own trading strategies as well as acquire new trading strategies developed by other users on the platform. Although limited in its cryptocurrency offerings, the platform allows greater backtesting of trading strategies. The subscription prices are also reasonable, within the 0.0013 BTC and 0.016 BTC range.
- Haasbot: Haasbot is a relatively new buy popular cryptocurrency trading bot application with some advanced functionality included. For instance, the bot provides integrated candlestick charts and pattern recognition, allowing users to combine the data with several other trading signals to develop trading strategies. Additionally, the bot is supported by a large list of cryptocurrency exchanges worldwide. Haasbot allows users to engage in arbitrage across several exchanges, as well as providing stop-loss limit functionality. A three-month license is valued at approximately 0.0084 BTC, recommended for advanced traders.
- Cryptohopper: Cryptohopper is another cloud based Bitcoin trading bot with a far superior methodology. The application can continue trading even when the trader’s computer is turned off. It allows a number of customizable functionalities, with many experienced traders preferring to take a manual approach for configuring the trading protocols. It features embedded external signals, which allow the more novice traders to trade on autopilot, with favorable trades being recommended by trusted and ranked 3rd
- Gunbot: Gunbot is another user-friendly Bitcoin trading bot, with only the major exchanges being covered. Among the major exchanges covered include Bittrex, Binance, Cryptopia , CEX.io, Cryptopia, Bitfinex, Kraken, Poloniex and GDax among others. The trading bot has a very good reputation inside global cryptocommunities with a large user base. Subscription prices range from 0.026 BTC to 0.16 BTC depending on the particular feature site selected.
Why Use Bitcoin Trading Bots:
One of the most obvious reasons why traders employ Bitcoin trading bots is to attain a higher level of profit which wouldn’t have otherwise been possible. That being said, there are advantages of using such bots, as mentioned below.
- Emotions Are Minimized: Any automated crypto-trading application including Bitcoin trading bots do a great job of eliminating emotionally driven trading decisions. There have been cases in the past where traders have lost a fortune as a result of making emotionally driven trades with negative implications. Emotions should never play a part in trading, especially in such a volatile market as the cryptocurrency market. By keeping a trader’s emotions in check, traders can effectively stick to their selected trading strategy without deviating, adding stability to the decision making process.
- Trading Consistency: The surest way towards trading success is to not deviate from a proven trading strategy. This involves adding consistency to any trading habits employed. A lot of times, users who conduct manual trading may miss certain trading opportunities which may turn out to be profitable. This is however, eliminated by trading bots, as trades are conducted automatically without any external involvement.
- Order Entry Speed is Improved: Another very important trading benefits of these bots is that they improve the order entry speed by a large degree. This is due to the computerized nature of the system, where the bot responds immediately to changing market conditions and actions are taken instantaneously. This is radically faster than what would have been possible through manual conventional trading processes.
- Trading Diversity: Some Bitcoin trading bots allow users to trade using multiple trading accounts along with various trading strategies being applied simultaneously. Tasks which are thus almost impossible for a human to accomplish is executed with ease by using Bitcoin trading bots, with increased accuracy. Thus trading bots help traders to effectively scan for the best trading opportunities across several markets, mitigating any risk that would occur with a smaller portfolio.
Automated trading bots such as the various Bitcoin trading bots available are effective tools for achieving profit stability for many traders. However, the fact that trading bots are fool-proof is highly misleading, as malfunctions can result in disastrous results. The popularity of cryptocurrency trading in general has also seen the influx of fraudulent activities, such as fraudulent scams, flash crashes or intentional software glitches. Thus, automated trading should never be considered as an alternative to manually executed trading. That being said many Bitcoin trading bots are proven to be effective, especially the server-based platforms which focus more on security.