Home Crypto for Beginners What is a trading bot

What is a trading bot

Cryptocurrency trading bots are automated trading systems that trade on the investor's behalf. They enable you to make transactions automatically when certain conditions are met. These bots consider information such as current prices and volatility levels. In a nutshell, they make investing and cryptocurrency trading easy. Bots are more efficient than people and make fewer mistakes, with less opportunity for emotion or compassion. This is especially useful given the cryptocurrency market's often volatile price changes. According to estimates, algorithmic trading bots account for 70-80% of total cryptocurrency trading volume.

Most crypto trading bots include these services:

Data analysis: Bots sift through raw market data from many sources, analyse it, and decide whether to purchase or sell. Many bots allow users to customize the sorts of data they receive in order to deliver more detailed responses.

Buying and selling of crypto: API keys (Application Program Interface) are used by bitcoin trading bots to purchase and sell cryptocurrency assets systematically. The API key serves as a password for your trading bot in order for it to manage your account and place bitcoin orders. This is beneficial when you don't want to buy tokens in quantity.

Risk prediction: This is an essential component of a cryptocurrency trading bot. Bots use market data to predict an asset's potential risk. This data assists the bot in determining how much to invest or trade.

There are also many different types of trading bots:

-        Trend trading bots, which are waiting for the momentum before opening a position. As the name itself says, this kind of bot is following the trend. If the trend gives signal of possible increase, bot will open a long position. And vice versa, if the trend signals of possible fall, bot will open short position.

-        Arbitrage bots, which is also one of the most popular trading bots and compares the prices across different exchanges. It then makes trades to benefit from the price differences. These bots automatically set the buy and sell order because the crypto market is volatile. Profit from these bots can also be taken as marginal.

-        Coin lending bots let you to lend coins for margin trading, however trader needs to return it with interest. It will help you to find better rates.

It is crucial to note, however, that crypto trading bots are merely instruments for automating trade. However, they may not be appropriate for everyone. It is critical to conduct thorough study before selecting bots, otherwise you may wind up losing money.

Bots provide additional dangers. Programming flaws can also reduce the efficiency of these robots. Keep in mind that bots operate based on the criteria and actions you specify. As a result, for a crypto trading bot to work in your favour, you must first comprehend cryptocurrencies and have a solid investing plan.

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