Looking to learn more on how to trade cryptocurrency? If so, we have two words for you: trading bots.
See, it’s a known fact that the cryptocurrency market never sleeps. If you want to remain in control of your trading at all times, you’ll need some help. Also, specified bots execute trades faster than you can do manually.
In this cryptocurrency boom, the number of available trading bots has increased. That said, they don’t all work as intended. Plus, even the reliable bots may not suit your style of trading.
Here are the main things you need to know about cryptocurrency trading bots.
What Are Trading Bots?
At its core, a trading bot is a software program.
By interpreting the market data, trading bots can place buy or sell orders on your behalf. This involves monitoring a market’s price movement and responding according to a set of pre-programmed rules.
Now, cryptocurrency exchanges are transparent by nature. This allows users to analyze any exchange’s electronic order book. By using trading bots, you’re able to take advantage of this information without dedicating too much time to it.
How to Trade Cryptocurrency
These days, there are many different trading bot strategies. Two of the most popular are arbitrage and market making.
The arbitrage strategy revolves around buying in one market and selling in another for a higher price. This strategy is effective in decentralized Bitcoin exchanges, where exchange prices vary.
Arbitrage can also help you use futures contracts in your trading strategies. If there’s a difference between a futures contract and its underlying asset, you could benefit from it.
Market making is all about providing liquidity for other traders. It involves buying and selling limit orders near a single marketplace. As prices fluctuate, your crypto trading bot will place orders to profit from the spread.
Which Bots Are Worth Your Time?
When it comes to cryptocurrency trading software, you have many options at your disposal. Here are the three most popular publicly-available bots out there.
3Commas
This Bitcoin trading bot operates as a web-based service. It’s known for its social trading aspect, allowing you to copy the actions of the best traders. It also allows you to set take-profit and stop-loss targets.
Cryptohopper
This bot requires no installation and runs entirely on the cloud. It’s the only bot that allows subscribing to external signals from professional analysts. It also comes with an intuitive and detailed dashboard area.
Gekko
Unlike most other bots, Gekko is completely free. This open-source platform supports 18 Bitcoin exchanges. Though it’s not a high-frequency trading bot, it’s a good choice for new traders.
Curious About Cryptocurrency?
Are trading bots the right choice for you? That depends on your trading style.
If you want to ensure that you’re always interacting with the market, trading bots are worth a shot. They can also remove some of the stress associated with trading cryptocurrency. If you’re a casual investor, there are better options out there.
Want to know more about how to trade cryptocurrency? Take a look at our list of the 5 essential trading rules you need to know about!
