If you’re investing in cryptocurrencies, you’re probably wondering about automated crypto trading strategies. Here are the facts about bots and how they work.
You want to be able to take advantage of what’s happening on the cryptocurrency market 24 hours a day, seven days a week. You know that working with a cryptocurrency trading bot allows you to do just that.
However, there are countless factors that you’ll need to consider if you want to profit from automated crypto trading strategies.
You’ll need to find the right crypto exchange, make sure that you understand the basics of how crypto trading with or without a bot works, and stay up-to-date with current market conditions.
In short: it’s not something you can fall into, and you’ll need to be willing to put in the work in order to get it right.
But when you do, you’ll love the levels of profitability you can achieve.
Ready to get started on mastering the basics of automated cryptocurrency trading?
If so, then we invite you to keep on reading this post.
What Is Crypto Trading?
Before we get into more complicated crypto trading strategies, let’s first make sure that you understand what crypto trading actually is.
In the simplest terms, it’s the process of trading one type of cryptocurrency for another option. Given that there are currently over 1,600 different kinds of cryptocurrencies out there, you’ll certainly have no shortage of options.
In addition to trading across different exchanges, the process also involves buying and then selling different coins.
Usually, if you want to buy a different type of coin, you’ll need to use one of the most well-known cryptocurrencies like Bitcoin, to make it happen.
People interested in the cryptocurrency market enjoy the trading process because it allows them to avoid having to mine coins themselves.
In order to enter the market for the first time, you’ll need to buy crypto on the crypto exchange. In addition to trading one cryptocurrency for another, you can also use fiat currency (AKA, government-backed currency types like the American dollar) to get the job done.
You can choose to trade on a centralized exchange, the most common way to trade, or a decentralized exchange. The latter is similar to automated peer to peer trading, which means that it carries a bit more risk than trading on the centralized exchange.
Now that you know the basic ground rules, let’s take a closer look at automated cryptocurrency trading.
Understanding Bot Trading
So, what exactly is a cryptocurrency robot, and how can you use one to help you to make the right kinds of trading decisions?
It’s a kind of cryptocurrency trading software that uses an API (an Application Programming Interface) to connect with an exchange. Through the exchange, the bot is then able to place your buying and selling orders.
This is common in numerous types of trading and is completely legal. However, it’s most often practiced in the crypto market.
You should think of a crypto trading bot as a sort of “digital robot broker” that can execute trades on a specific online crypto exchange. These trades are sent to the API via your trading bot, and the API then sends the data regarding the trades to your specific app/exchange.
So, the flow is:
Your trading bot —> the API —> Your app/crypto exchange
Remember that it’s the API, not actually the “bot” itself, is what really interacts with the crypto exchange.
What’s the benefit to you?
You’ll be able to execute more trades on an automatic basis. This allows you to increase your overall trading volume, and identify opportunities much faster than you would manually on your own.
Let’s take a closer look at the advantages of using automated crypto trading strategies below.
What Makes Bot Trading Profitable?
We know that you’ve likely entered the binance trade because you’re looking to seriously cash in on the cryptocurrency trend.
So, how exactly do you make money using automated cryptocurrency trading with a bot?
First of all, remember that the software behind these bots is incredibly accurate, which helps to lower the risk of human error when placing trades.
In addition to providing you with greater accuracy, these bots are also getting much easier and more intuitive to use and understand. Often, you’ll get access to built-in trading strategies, graphical interfaces, and even customization options.
You’ll also be able to execute trades quickly, without having to take the time to fully analyze every decision you make (which can lead to missed opportunities).
Instead, you simply line up your investing and trading strategies with the bot and let it work to help you to achieve your goals. Remember that the bot is also working 24/7, so you’ll always be able to hop onto the latest deals.
You don’t have to worry about broker fees, poor advice, and commissions with a bot. They’re working for your objectives alone–there’s no problem of self-interest here.
The Downside of Automated Crypto Trading Strategies
Of course, as with any sort of trading, there are certain things you’ll need to be on the lookout for when it comes to using bots to trade cryptocurrency.
First of all, remember that you’re at the mercy of the overall accuracy of the software. Like any other software or bot, glitches can happen on the bot-based crypto market.
So, as with “standard” Wall Street-based trades, when you work with crypto, you’ll never be able to fully eliminate risk.
Additionally, remember that, although the bot will do what you tell it to, you’re still the one who is responsible for coming up with a solid foundational trading strategy. In short, the bot may be following advice but if you don’t do your homework, it could be following bad advice.
This is why it’s so important to stay on top of the latest news, strategies, and even scandals taking place in the crypto world.
As with the standard market, you’ll also be subject to overall market factors. Like on Wall Street, the crypto market can crash, people can decide to pull out their money, and opportunities can vanish before you’ve had a chance to take advantage of them.
You’ll also need a certain element of luck, especially when it comes to updating your trading strategy to be in line with current market conditions.
Sometimes, no matter how much “homework” you’ve done?
You just don’t end up making the right move.
So, to succeed, make sure you study up, maintain a bit of liquidity, and always have a plan in case the worst happens when it comes to overall market conditions.
Ideas to Get Started
If you’re just getting started with trading bots, we know that it can feel seriously overwhelming.
You want to learn the ropes but you also don’t want to risk losing half of the cryptocurrency you’ve worked so hard to get your hands on.
We strongly suggest that you find a trading bot demo that you can “learn on” for best results. You even have the option to lease out a trading bot, or even use a free open source trading platform.
Remember that you’ll be allowed to run backtesting and even live testing before you commit to a particular bot. Taking the time to do this can save you tons of headaches.
Finally, you’ll also need to make certain that you’ve made an API key on the exchange of your choice. This functions as a kind of password to your entire crypto account–so never tell it to anyone else.
Remember that, if someone manages to steal your API key, you could get hacked into–and trades could be executed against your will. In most cases, you won’t be able to get the cryptocurrency that you’ve lost back.
So, take security as seriously as possible here.
Ready to Learn More Crypto Trading Strategies?
We hope that this post has helped you to better understand the ins and outs of automated crypto trading strategies.
Remember that, while it might take a while to truly get the hang of it, your hard work will likely pay off in the end.
Of course, you’ll need to ensure that you research new trading strategies, set realistic crypto investing and trading goals, and understand which currencies are hot or cold.
That’s where we come in.
From helping you to understand what influences Bitcoin pricing to walking you through popular methods of digital payment, we have all the advice you need.
When you’re ready to start making bank off of crypto–and learn from others who have done the same, bookmark our blog for more invaluable advice.