Cryptocurrency is an internet-based medium of exchange which used strong cryptography to secure financial transactions. These can be sent and received directly between two parties via the use of private and public keys, at minimal processing fees. Cryptocurrency market shifts are quite fast-paced and opportunities last for only seconds. However, with the development of software programs called trading bots, traders can place orders quickly, before any fluctuation occurs.
Let us take a complete guide on Cryptocurrency trading bots:
How it works?
- They are connected to exchanges and work on behalf of the users, without them being actively involved.
- Every bot works on indicators and signals, for instance, moving averages and indices.
- When the indicators line up, the program gives an indication to the exchange that a buy or sell order is ready to be executed.
- In case of sell orders, bots utilize stop losses when value of cryptocurrency is on a diminishing side, thus, allowing traders not to suffer losses.
- Bots are normally adjusted basis particular market conditions and periods.
Merits of trading bots:
- 24*7 trading – Cryptocurrency runs around the clock, which means a profitable opportunity may emerge at anytime.
- Human error negligence – Since, no manual entries are done, accuracy increases manifold.
- Increases speed – A bot can process large volumes of information and calculations at a faster pace digitally.
- No human emotions involved – Rational decision making is possible because bots work on set commands. Once the fed rules are met, they execute the order without any questions.
- Diversified portfolio – Trading bolts are so developed, to easily manage variety of assets, trading strategies and accounts in different markets.
Demerits of trading bots:
- Not suitable for beginners – A decent understanding of the trading process is required to avoid suffering from losses.
- 100% manualness cannot be done away with – An eye of the trader is required continuously as a machine has its own pitfalls.
- Concerns of security – They do lack decent security protection as a bot requires access to API keys.
- Continuous updations required – Trading bot settings have to be updated regularly to avoid inadequacy and losses.
- Market complexity – Market being quite dynamic and volatile, cryptocurrency trading bots can have a hard time exploring the multilayered and fast paced market.
Tips for safe trading:
- Never share your API secret.
- Disable option of access to withdrawals.
- Enable two factor authentication options.
- Thorough research to be done.
- Technical analysis principles to be learnt.
Even if using cryptocurrency trading bots, one should thoroughly understand the market shifts and strategies to maximize profits. So, take your time, examine the pros and cons and start earning.