Crypto trading bots are automated software programs designed to execute trades in the cryptocurrency market on behalf of the user. They utilize algorithms and pre-defined strategies to analyze market trends, identify trading opportunities, and perform transactions at high speeds, often faster than a human trader could manage. These bots operate 24/7, taking advantage of the market’s continuous nature. By leveraging various trading strategies such as arbitrage, market making, and trend following, crypto trading bots aim to maximize profits and minimize losses. They are popular among traders for their efficiency, precision, and ability to remove emotional decision-making from trading.
What Are Trading Bots?
A trading bot is just software, whether trading stocks, collectibles, or bitcoin. Once installed on a computer, you can instruct it to trade assets when you’re not around, even if you have many exchange accounts linked to it. For the trading bot to execute your strategy with better speed and accuracy, you, the trader, must provide some parameters.
In addition, a multi-bot setup allows automated crypto trading software to monitor and trade multiple assets at once. Plus, you won’t miss out on any market possibilities because you won’t have to simultaneously keep tabs on a gazillion screens. You can also experiment with artificial intelligence crypto trading bots now; they may provide a better-tailored experience.
How Does a Cryptocurrency Trading Bot Work?
Building trading bots is not limited to just one computer language. You can create a bot to trade cryptocurrencies using MATLAB, Python, or C/C++. The computational technique, frequency, and volume will significantly influence the system’s design.
If you don’t have a solid technical background, you’ll have to look into the program to determine if the trading bot suits day trading or long-term tactics. Typical components of trading bot software include a tool for backtesting, a manager for portfolios and risks, and an engine for actually trading.
You can practice your trading technique on a simulated set of past market data with the help of the backtesting tool. Doing so will allow you to assess the viability of your strategy in light of current market conditions and potential outcomes. The portfolio manager oversees a series of transactions and optimizes capital distribution among different strategies, considering variables like volatility, asset classes, sectors, etc.
Increased volatility, stronger correlations across asset classes, and “black swan” events are three sources of risk in trading. To that end, a trading bot’s risk management systems are responsible for attempting and anticipating how these events may impact the trading capital. The execution system’s final responsibility is communicating with a brokerage or other market access mechanism by receiving filtered trading signals from the risk management and portfolio management components.
Furthermore, it will not contact the broker via phone. A trading platform will be accessible to the trading bot via an API. The program will then automatically place trades based on data it retrieves from the exchange, which includes asset prices and volumes. Only when specific market conditions are met are the deals carried out. The strategy enters the picture at this point.
What Can and Can’t Trading Bots Do?
Trading is similar to a strategy game in specific ways. It would be best to devise a strategy to accomplish many objectives while responding to the game’s unpredictable happenings. The critical distinction is that when you gain experience and skill in a game, the level of uncertainty decreases.
A draughty year or invasion from a neighbouring country are examples of random events that are less stunning as the game approaches its endgame. When you have an unstoppable army and a surplus of food, no obstacle can stop you from achieving victory.
However, in the real world of trading assets, including cryptocurrencies, this fundamental problem of strategy games does not exist. Even if you devote your entire life to being an expert trader, some unanticipated catastrophe, such as the 2020 Pandemic, the 2022 Russo-Ukrainian War, or the 2022 bankruptcy of FTX, could still happen. Trading bots do have their strengths, though. And here are a few facts to back it up.
What Can Trading Bots Do?
Execute Trades 24/7
Absolutely! A trading bot can trade nonstop. But you have to keep an eye on the program and tweak the settings all the time. A trading bot can run well for one night but not for more than a week;
Act Based on Previously-Set Parameters
The cryptocurrency market is prone to sudden price declines and subsequent recoveries, so it’s understandable to feel the want to cash out when you witness a 10% decline in the value of your assets. This setting will be adhered to by a trading bot designed to purchase at -5% and sell at +2% regardless of the crypto fear and greed index. Even if the price drops to -19%, the bot will remain calm if you set a stop-loss order at -20%.For instance, you may teach a grid trading bot to sell high and purchase low by setting parameters for highs and lows.
Tests Strategies Based on Historical Data
This is how we find out if our trading approach is a good match for the market. Although the plan is tested on past occurrences, it is possible that it may perform well in backtesting but fail miserably in the live market. For one thing, market circumstances are always different, even while there are patterns and ebbs and flows.
Help You Save Time
By having the bot handle the order placement and parameter tracking, you can save a few minutes to a few hours of work. However, many Bitcoin bots that promise to make money but don’t are the stuff of fiction.
What Can’t Trading Bots Do?
They Don’t Create New Strategies
If a trading technique works well for some time, but then the market conditions change, it will likely no longer be profitable. Trading bots rely on you to provide new parameters before constructing new strategies.
Don’t Link Real-World Events to Market Conditions
When governments worldwide impose or remove travel restrictions, a trading bot will not buy or sell the stocks of airline companies. The same holds for cryptocurrency trading bots; they will do nothing in case of a network compromise. Unlike a human trader who swiftly notices a correlation and alters their approach, the trading bot will remain faithful to the original strategy.
It Doesn’t Foresee the Future
Despite the validity of probability and statistics as academic disciplines, no trading bot program can foretell the future of the cryptocurrency or stock markets. The indications and parts of risk management can only reveal the likelihood of a particular market evolution.
Are Trading Bots Legal?
“Are stock trading bots legal??” was the pertinent question before cryptocurrencies. Furthermore, Bitcoin trading bots entered the market as cryptocurrency trading gained prominence.
Trading bots are not explicitly prohibited on a worldwide scale in any scenario. Nevertheless, it’s wise to research any local legal mentions. However, in most cases, bots that trade cryptocurrencies or stocks are not breaking laws. You should also see whether there are any rules on trading bots on your site. Typically, legitimate automated trading software providers will specify which trading platforms they work with.
Although trading bots is not illegal, it is essential to be cautious of scams. You should probably pass on any deal that seems too incredible to be actual. Using algorithmic trading software does not imply any magic or assurance of profit.
Top Crypto Trading Bots You Should Look Out for in 2024
Some of the top trading bots out there are as follows:
Bitsgap
Year Established: 2017
KYC/AML: Not
Supported Exchanges: Binance, KuCoin, Coinbase, Kraken, HitBTC, Bybit, OKX, HUTX, etc.
Bitsgap made it easier to trade by developing a single solution with a user-friendly interface. You can make little but regular profits from every market move with the Bitsgap trading bot, a unique feature.
With over 10,000 cryptocurrency trading pairings on the platform, Bitsgap boasts a secure and fast interface. You may also view your transaction history on your linked exchanges, monitor open positions, and manage your balance.
Thanks to RSA 2048 encryption, the platform is twice as safe as a typical bank. No one in the company is authorized to view confidential data. The three different Bitsgap plans are $25/month for the Basic Plan, $59/month for the Advanced Plan, and $129/month for the Pro Plan. Along with a multi-exchange trading platform, a free 30-day sample, unrestricted manual trading, and ten active bots in the demo are all part of the free plan.
HaasOnline
Year Established: 2013
Supported Exchanges: Binance, Bitstamp, CEX.io, Coinbase, HTX, Kraken, KuCoin, etc.
HasOnline is among the industry’s most illustrious and long-standing names regarding cryptocurrency trading bots. Because of its effectiveness and profitability, this bot is preferred by most experienced traders. Also, by entering their API keys, bot users can link up with cryptocurrency exchanges and leverage platforms.
Trading strategies like dollar-cost averaging and paper trading are just two examples of the fifteen bots available in this program. Another indicator that HaasOnline has maximized is profitability, using marketing data and other techniques. Currently, HaasOnline offers three different pricing plans: Lite+ ($9), Standard ($49), and Pro ($99).
3Commas
Year Established: 2017
KYC/AML: Yes
Supported Exchanges: Binance, Bybit, OKX, KuCoin, Bitfinex, Bitget, Bitstamp, Coinbase, Gate.io, Gemini, HTX, Kraken
3Commas provides customers with dollar-cost averaging tactics and an integrated trading perspective from third parties, and it works on tens of crypto exchanges. Those looking to make money with little to no work can take advantage of the trading bots offered by crypto platforms, including 3Commas. Its many appealing features are the ability to mimic your previous bot configurations. To facilitate paper trading, traders can keep their coin ratios in check, which helps to balance their portfolios.
Whether the market is going up, down, or sideways, 3Commas can help its users make money. One of the many benefits of this crypto trading bot is its user-friendly interface, which consolidates the buy and sell functions into a single window. Options trading on an exchange is another possibility. But it’s scary for beginners.
Every one of 3Commas’s three plans offers something unique. $49 per month gets you the Pro package, and $79 gets you the Expert plan. You should consult the 3Commas staff before committing to the custom plan, which has additional restrictions.
The 3Commas bot is particularly convenient because it is compatible with Android and iOS, allowing users to trade from anywhere. Thanks to its increasing popularity, 3Commas is quickly becoming one of the most well-known crypto trading bots.
Cryptohopper
Year Established: 2017
Supported Exchanges: KuCoin, Bitvavo, Binance, Crypto.com, Coinbase Advanced, Bybit, Kraken, BingX, BitMart, OKX, EXMO, Bitfinex, Polonium, HTX, HitBTC
A popular automated crypto trading bot, Cryptohopper consolidates all of a crypto enthusiast’s accounts into one convenient location. Cryptohopper is a cloud-based bot that assists users in making smart trading decisions using algorithmic programming.
Currently, Cryptohopper users can link up with a maximum of nine exchanges. Cryptohopper safeguards security procedures, ensures data privacy, and offers automatic technical analysis. Additionally, new users may quickly discover Cryptohopper thanks to its simple and intuitive user interface.
One great thing about this crypto bot trading is how easy it is to start up. New users don’t even need to provide their credit card information. Cryptohopper houses all of its cloud storage services to mitigate financial risk further, enabling traders to engage in paper trading. Regarding crypto platforms, these characteristics are among the best for trading bots.
Having a small technical support force is just one of the many drawbacks of this bot. There are several fees associated with using Cryptohopper’s features. Everyone can use the Pioneer plan for free, but the Explorer Starter plan costs $29 per month after a free trial of three days. There is a $69 monthly price for the Adventurer plan and a $129 monthly fee for the Heroplan. However, it is still one of the grand scheme’s top crypto bot trading options.
ZIGDAO
Year Established: 2018 (launched DAO in 2023)
KYC/AML: Yes
One of the most recent crypto trading bots to hit the market is ZIGDAO, previously known as Zignaly. The users of this bot can create their trading methods from the ground up. Among the finest crypto bots trading alternatives, ZIGDAO offers a lot for the money.
All of ZIGDAO’s features are at your disposal after you sign up, and they’re free to use until you start making money. Users might choose to totally or partially automate their trading processes. One major drawback is that there aren’t many possibilities; only eight exchanges to which users can link the bot.
One of ZIGDAO’s features is the trading view integration, which allows users to view their most recent deals. Users can also take advantage of copy trading, which lets them mimic the moves of more seasoned traders. In addition, traders can access ZIGDAO signals, which come in free and paid varieties. Last, ZIGDAO is the top trading bot crypto platform available if you want to hone your trading abilities with bots.
