Crypto currency; one of the most ground-breaking developments of the modern age has become a popular topic of debate among web-enthusiasts as well as progressive minds who predict the future of the world and plan to run some part of it. Crypto currency is a means of exchange, independent of all authorities, transferable through the World Wide Web in a secure and verifiable way which will play a decisive role in the future of the tech world. As the world moves towards adopting this form of virtual exchange, more and more companies acquire the use of crypto currency.
- What are Crypto Trading bots?
A trading bot is a software program that interacts directly with financial exchanges and places buy or sell orders on your behalf depending on the interpretation of the market data.
There are currently dozens of crypto currency trading bots on offer. They range from free software that anyone can use to expensive subscription-based bots for professional crypto day traders. However, even the most popular crypto currency trading bots vary in quality, usability, and profitability. In this article, we go through some of the most popular types of Crypto-bots.
3Commas is a popular crypto currency trading bot that enables traders to execute automated trades on Bittrex, BitFinex, Binance, Bitstamp, KuCoin, Poloniex, GDAX, Cryptopia, Huobi, and YoBiT. The price for the trading bot ranges from $30 to $100 depending on the number of features a user requires.
3Commas provides an easy-to-navigate web-based SmartTrade dashboard that allows traders to view all their trades on the supported exchanges and includes features such as trailing stop losses, automated mean-reversion trades, and copy trading. 3Commas also enables traders to set up, analyze and back-test model portfolios to aid with portfolio composition.
Auton.io is a relatively new cryptocurrency trading bot that describes itself as “the first decentralized AI trading application for cryptocurrencies.”
Autonio provides an easy-to-use trading software for both amateur and professional traders that combines a set of technical indicators to create trade signals that traders can use to automatically execute trades. Autonio users pay a $50 monthly subscription fee.
Cryptohopper is a cloud-based (24-hour) crypto currency bot – which means the bot can continue trading even if the user’s computer is turned off. Experienced traders can take a manual approach and configure trading based on multiple technical indicators. Cryptohopper also features embedded external signalers, which permit inexperienced traders to let their bot trade on autopilot. The bot also offers backtesting, trailing stop loss, and the ability to trade using multiple exchanges. The first month’s trading is free, with tiered subscription packages from $19 to $99 per month after that.
CryptoTrader is a cloud-based platform that allows users to develop their own cryptocurrency trading bots which are hosted on the platform. The software supports multiple currencies and exchanges, and allows for thorough backtesting of trading strategies. Additionally, CryptoTrader provides a marketplace where users can sell trading strategies they have developed as well as buy other user’s strategies.The prices for subscriptions to CryptoTrader ranges from 0.0026 BTC to 0.0316 BTC per month and can be paid for in both bitcoin and litecoin.
Gekko is a free open-source bitcoin trading bot that can be found on Github. It allows users to execute basic cryptocurrency trading strategies. The bot aggregates live price data, calculates indicators, executes live orders, and can simulate live markets using historical price data for the backtesting of trading strategies. Gekko is a good trading bot for those new to the cryptocurrency markets who want to test out different automated trading strategies.
Haasbot is probably the most popular crypto trading bot available today. The bot provides candlestick chart pattern recognition and allows users to combine that with several other trading signals to develop more advanced crypto trading strategies. Furthermore, Haasbot is supported by a long list of major bitcoin exchanges and is fully customizable in terms of when it should execute trades.
- Trading Bot Strategies:
The digital nature of the Crypto market has meant that despite the fact that it has had significantly less time to integrate algorithmic trading, the technology has not been slow in catching up on its rivals in terms of providing a trading bot service, allowing for investors to access a range of trading strategies, some of which are introduced below:
In the early days of cryptocurrency, this was the most popular strategy used. It is basically buying assets in one market and then selling them in another for a higher price and so earning profit on the difference. Since cryptocurrency exchanges were decentralized, there were often large differentials between prices offered on various exchanges, meaning that profits could be made through arbitrage.
Although the spread between exchanges are much smaller now, they do still appear from time to time and trading bots can assist users in making the most of these differentials. In addition, arbitrage can also be utilized in traders looking to involve futures contracts in their trading strategies by benefiting from any difference that exists between a futures contract and its underlying asset, by considering futures contracts that are traded on various different exchanges.
This strategy involves making both buy and sell limit orders near the existing market place. As prices fluctuate, the trading bot will automatically and continuously place limit orders in order to profit from the spread.
Although this may be profitable at certain periods, the intense competition around this strategy can result in it being unprofitable, especially in low liquidity environments.
- Do Trading Bots actually Work?
Trading bots work by reacting to the market. They obtain the needed data in order to execute a trade based on analysis of the trading platform. However, with cryptocurrency, the trading platform cannot give an accurate account of the real picture, for example outside factors such as social media and online controversies which often play a big role in market values cannot be programmed into the bot for analysis.
In addition, as noted above, the spread between the exchanges has flattened somewhat, meaning that the opportunities for inter-exchange arbitrage are much lower than in previous years.
Many trading bots use what is known as an exponential moving average (EMA) as a starting point for analyzing the market. EMA’s track market prices over a set time period, and bots can be programmed to react to what that price does – such as moving beyond certain thresholds. By programming the bots, traders can set their thresholds to correspond with their risk appetites. However, one of the downsides of EMA is that it is based on past history, which, as all traders will know, is not indicative of future performance, especially in the volatile world of cryptocurrency. Therefore the question of whether trading bots work is a multi-faceted one in which the answer is that they work, but not necessarily for everybody.
Trading bots offer a variety of advantages, including having constant interaction with the market, as well as the not-insubstantial factor of removing the emotion from trading. However, on the other hand, by using the wrong trading strategy or relying on the trading strategy of others, a trading bot could simply end up automating a set of poor market trading decisions.