Trading Bots 2021: How They Work With Crypto

First things first, what is a trading bot? It is simply an automated program that operates on the Internet and performs repetitive tasks more efficiently than humans. They’re software programs that execute functions using artificial intelligence based on pre-established parameters. No more missed trades or missed opportunities – by running a set of algorithms, you can automatically buy, sell or hold assets in a timely, efficient, and automated manner day or night from anywhere in the world.

The bots communicate directly with crypto exchanges and placing orders automatically based on your preset conditions, trading bots offer exceptional speed and efficiency, fewer errors, and emotionless trading. To trade on an exchange, you must authorize a trading bot to access your account via API keys (Application Program Interface), and access can be granted or withdrawn at any time.

image results for trading bot

Trading bots work in three essential stages which are the signal generator, risk allocation, and execution. The signal generator essentially does the work of the trader, making predictions and identifying possible trades based on market data and technical analysis indicators. As the phrase implies, risk allocation is where the bot distributes risk according to a specific set of parameters and rules set by the trader, which typically includes how and to what extent capital is allocated when trading. Execution is the stage in which cryptocurrencies are bought and sold based on the signals generated by the pre-configured trading system. In this stage, the signals will be converted into API key requests that the crypto exchange can understand and process.

Many research works by experts suggest that around 80% of trading on the stock market is done via algorithmic-based automated programs. Comparatively few private traders, however, make use of algorithmic trading, partially due to the perceived complexity and costs. Not everyone is an experienced Python coder or financial expert, but trading bot platforms such as Trality are doing a really good job at leveling the playing field and giving retail traders, both beginners and advanced, a leg up across crypto markets.

From proper research, you will find that more than 80% of private traders lose money due to a variety of factors. Trading volatile cryptocurrencies are emotional work and with emotions come errors in judgment. As much as 39% of manual trades are influenced by our emotional states, which can cause us to make irrational decisions. It’s simple human psychology, you just have to choose instead to be among the 20% of smart traders who make money by harnessing the power of trading bots to ensure a non-emotional, systematic approach to trading.

In conclusion, one superpower of the trading bot is its speed. Bots are simply much faster than humans with millions of computations and thousands of transactions across various time zones and markets almost instantaneously. Trades happen in a fraction of a second which is far faster than anything an individual trader can accomplish. In the time it takes you to read this sentence, a trading bot could have made multiple profitable trades for you. That’s truly amazing.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

A short course in technical analysis

[Revised and Updated for July 2021]
Download this free eBook to learn how to use technical analysis to make profits from trading.
Written by David W. Edwards