Answered: Compare cryptocurrency trading bots

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Answered: Compare cryptocurrency trading bots

When comparing [url="http://"http://forex.pm/index.php?topic=32356.0"]Crypto Trading Bot[/url], make sure you consider the following 7 factors at least:



Trading strategy. What strategy or strategies can the bot implement? What sort of market data and technical indicators can it analyze and what parameters can you program in? Ease of use. Some bots have preprogrammed strategies set up and ready to go while others allow you to program them however you want so you can implement your own strategy. The right platform for you may depend on your level of trading and coding knowledge, so make sure any program you choose is easy to understand and use. How to make changes. How easy is it to adjust your trading strategy and parameters? Is the bot designed to automatically rebalance your portfolio on a regular basis, or is it up to you to make adjustments as you see fit? Cost. Some bots don't charge trading fees but many do. Compare the cost of different options and make sure you know exactly what you're paying for. Longevity. How long has the bot been around? Is it a new program or does it have a long history of successful use? Reputation. Does the bot have a good reputation among the wider crypto community? Check online forums for reviews from other users to see if the bot is legit and if they'd recommend using it. Exchanges. While most reputable bots will work with most reputable exchanges, make sure any program you choose will allow you to trade on the exchange(s) you want to use.



Benefits of cryptocurrency trading bots.



Crypto bots can offer a number of advantages over manual trading.



24/7 trading. Unlike stock exchanges with their regular trading hours, global crypto markets are open 24/7. Humans have to sleep eventually, but a bot can keep trading 24/7. With cloud-based trading bots your computer won't even need to be on for the bot to keep working. Fast execution. Cryptocurrency markets can shift extremely quickly, and some opportunities last only seconds. Bots can automatically process and act on information that humans can't. Reduced human error. Manually entering trade details yourself always introduces the risk of human error. By automating trade execution via a bot, this risk is reduced. Just make sure you don't make any mistakes while setting up the bot. Take the emotion out of trading. Effective trading is about having a plan and sticking to it, rather than running with gut feelings. [url="http://"http://forex.pm/index.php?topic=32356.0"]Crypto Trading Bot[/url] take emotion out of the equation and react to pure data only. Ability to diversify. Using a bot can allow you to trade across numerous accounts or try out various trading strategies. This can help you spread risk across a variety of crypto assets. Backtesting. Want to test a trading idea? Use a bot to backtest, which is where you test your strategy using historical market data to see how it would have worked. You can also paper trade, which is when you use a bot to trade pretend money against the markets of today.



Risks of using [url="http://"http://forex.pm/index.php?topic=32356.0"]Crypto Trading Bot[/url].



Bots are not free money machines, and they're not without some risks and downsides.



Scams. Scams are an ongoing problem in the crypto trading bot space. It's essential that you thoroughly research any bot before use to help safeguard your funds against scammers. For example, if you come across a bot that promises guaranteed substantial gains, this should sound alarm bells. Setting and forgetting. There's a common misconception that once set up, a bot can simply be left to do all the hard work for you and make money while you sleep. This isn't the case. Rather than being passive income generators, [url="http://"http://forex.pm/index.php?topic=32356.0"]Crypto Trading Bot[/url] need ongoing monitoring and adjusting as market conditions change. Poor quality software. The quality of software varies from one bot to the next and using a poorly coded bot could cause you to lose money. That's why you need to look for a reputable bot with a proven track record of success. Bad strategies. The crypto market is constantly evolving and trading strategies need to keep adapting to achieve success. If you choose a bot with an outdated or simply inadequate strategy, or match the wrong bot and signals, program it incorrectly or otherwise make mistakes, expect to lose money. Failing to set stop-loss limits. In the event of a flash crash, where the price of a cryptocurrency plummets rapidly, traders that have not set stop-loss limits could potentially suffer heavy losses. Crypto market complexity. There's only so much that exchange data can tell you about what is happening in the crypto market. From tech developments to the online rumor mill, there are many other factors that can drive price movements.



Popular crypto trading bot strategies.



[url="http://"http://forex.pm/index.php?topic=32356.0"]Crypto Trading Bot[/url] can be used to implement a wide range of trading strategies. Some of the most commonly used strategies include:



Arbitrage.



Cryptocurrency arbitrage is a strategy that allows you to take advantage of price differences between crypto exchanges. For example, buying bitcoin on an exchange where the price is low and immediately selling it on an exchange where the price is at a higher level.



Specialist crypto arbitrage bots are designed to track price movements and differences across exchanges and then execute the necessary trades.



Market making.



The market making strategy involves continuously buying and selling cryptocurrencies and digital currency derivatives contracts in order to profit from the spread between the buy and sell prices. Market makers earn a profit by providing liquidity to other traders by placing limit orders on both sides of the order book and making their income from price fluctuations.



For example, if Ethereum is trading at $500, you could create a buy order for $499 and a sell order for $501. When both orders are filled, you earn $2 profit.



Trend trading.



This strategy involves programming a bot to identify the price trends of specific cryptocurrencies and then execute trades based on those trends. By analyzing which way the price of an asset is moving, this strategy is designed to assess when trends are forming and then profit from the resulting price change. In other words, buy when prices are trending upwards and sell when they're heading down.



Mean reversion.



The key underlying principle of the mean reversion strategy is that there is a stable trend in the price of a particular cryptocurrency. So while the price may fluctuate in either direction, it will eventually return to its mean.



Based on this assumption, you can program a bot to execute trades depending on where the price of the currency sits in relation to its historical average.



Want to learn more about trading cryptocurrency?



Check out our comprehensive cryptocurrency trading guides:



Bot trading safety tips.



There are some basic rules whenever you use a bot for the first time:



Don't give your bot withdrawal access. In most cases, there's no need to give a bot permission to withdraw funds from your account, so preventing withdrawal access can be a simple way to protect yourself. Of course, if you're performing arbitrage trades between exchanges, you will need to grant withdrawal access. Don't share your API secret. In order to put your bot to work, you'll need to create an API key and secret on your chosen crypto exchange. API secrets are like crypto wallet private keys. If someone has your API key and secret they can place trades from your account, so never share with anyone. Use two-factor authentication. Enabling two-factor authentication on all exchanges, accounts, wallets and crypto programs can provide an extra layer of protection for your funds. As always, make sure you also set strong passwords. Backtest your strategies. Backtesting allows you to trial your trading strategies using historical data. While there's no guarantee that a strategy which would have worked in the past will be profitable in the future, it's worth running some simulations to determine whether it might be worth putting your strategy into use in the real world. Limit your losses. Use tools like stop-loss orders to ensure that losses are minimized when the market moves against you. Develop an understanding of technical analysis. The more advanced trading bots can assess a variety of technical indicators when executing trades, so developing an understanding of cryptocurrency technical analysis could help you get more out of your bot. Don't over-commit. Bot trading can be quite complicated and may take a while to wrap your head around, so start with small amounts as you build your knowledge and confidence. Track your trades. Finally, don't forget that your trades will have tax implications, so keeping records of your crypto transactions is essential.



Bottom line.



Cryptocurrency trading bots can be an extremely handy tool for traders, but only when used properly. They offer a handful of key advantages, such as being able to constantly interact with the market and taking the emotion out of trading, but they're certainly not a silver bullet that can guarantee you'll make a profit.



The many risks associated with [url="http://"http://forex.pm/index.php?topic=32356.0"]Crypto Trading Bot[/url] mean the best approach is to proceed with caution. If you know what you're doing and you're prepared to constantly monitor performance, trading bots can form an important part of your overall trading strategy. However, going all in and using bots as the be-all and end-all of your crypto trading strategy is not recommended.



Finally, make sure you thoroughly research any bot to be sure of its legitimacy and whether or not it could be a useful trading tool for you.



Are cryptocurrency trading bots legal?



Are [url="http://"http://forex.pm/index.php?topic=32356.0"]Crypto Trading Bot[/url] profitable?



This depends on a number of factors, including the strength of the software, the trading strategy used, how the market moves and how you adjust your bot in line with changing market conditions.



Cryptocurrency trading bots at a glance.



Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks - they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Source: Answered: Compare cryptocurrency trading bots

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