What Are Crypto Trading Bots and How Do They Work? – MUO – MakeUseOf





Automated cryptocurrency trading sounds awesome, but how does a crypto trading bot work?
Trading cryptocurrencies is challenging as there are many variables involved. Even the most experienced traders struggle to make consistently profitable trades because of their human shortcomings.
As a result, automated crypto trading was invented, which involves using trading bots to automate trades. This turned out to be helpful as human shortcomings such as emotions are eliminated in trades, making them more likely to succeed.
So, what are crypto trading bots, how do they work, and who can use them in trades to increase their chances of winning?
Crypto trading bots are bots used to automate trades. They are basically programs that are executed to yield specific results in trades.
Although you can just go to a crypto bot trading platform and start using trading bots with pre-defined rules, you can also program them to suit your trading needs. For example, you can change the settings on a bot to make it buy a certain cryptocurrency at a certain time or price, depending on your crypto trading strategy.
Crypto bot trading platforms also provide backtesting services that allow you to test such a strategy before deploying it in your trade. This significantly reduces your risk as you go into such a trade.
Another important role crypto trading bots play is eliminating human emotions in trade decisions. No matter how experienced you are, you can be overtaken by emotions and make mistakes that may cost you a lot of money in trades. Again, it has to do with trading psychology and how it affects crypto trading.
The bots execute instructions and cannot change because they don't have emotions, which can save you from losses. They also don't require any high-level technical skill to operate, making them a go-to solution for trading these days.
Crypto trading bots are hosted by platforms such as Coinrule, Cryptohopper, etc. These platforms create crypto trading bots with specific rules that apply to trades, but you can modify them to suit your specific aim.
Perhaps the most impressive thing about them is that they trade 24/7, which is something no human can do. You can program them to execute trades at certain times, day or night, based on how the market moves.
Some bots have special features that set them apart, such as the HODL feature on 3Commas. This doesn't just trade, but it also helps you to buy and hold cryptocurrencies automatically by buying at low prices. It is up to you to decide the cryptos you want and choose a bot to help you achieve it.
You should know, though, that although trading bots are good for automating trades, they can be of a disadvantage if the trade doesn't go according to plan. This is because they cannot change the instructions already given.
As mentioned earlier, crypto trading bots do not require special programming or other skills to use. Therefore, even a complete trading newbie can use them for trading.
Of course, advanced traders are also at risk of letting their emotions or other issues get in the way of accomplishing trades. To help, they deploy trading bots sometimes, e.g., when they need to execute a trade at night.
They cannot trade all day and all night, so trading bots can come in handy at such times or when they are busy with other engagements.
In summary, everyone uses crypto trading bots, if not because they are new and with little experience, then because they cannot carry out the trade themselves at the best time.
Crypto trading bots can help you in your trades, especially if you are a beginner. Take the time to read about how each crypto trading bot works on the platform you choose, and remember, a crypto trading bot isn't a guarantee that you'll turn a profit.
Ponvang holds a BSC in Zoology and an MSC in Conservation Biology, but is a technology enthusiast with particular interest in blockchain and crypto. He has been a writer in the space for over 4 years now, creating content for several clients as a freelancer. He recently dabbled into finance too, and likes travelling and birdwatching.
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