If you have dabbled in the stock market you know that it remains open during specific hours, outside of which trading comes to a halt. The cryptocurrency trading market, on the other hand, is open at all time. Keeping round-the-clock track on the crypto market manually is near impossible, which is why several traders turn to automated bots.
How Does Automated Crypto Trading Work?
Simply put, a trading bot functions as a broker that never rests. The bot works in executing crypto trades through one or more cryptocurrency exchanges. The first step involves a bot sending a trade to an application programming interface (API). Then, all the information related to the trade makes its way to a cryptocurrency exchange. It is actually the API that interacts with the exchange, and not the bot.
Going the automated trading way gives you the ability to increase your trade volume easily. In addition, you may also benefit by the quicker identification of opportunities. However, since there is no dearth of alternatives, various aspects require your attention.
Does it Offer an Integrated Trading Platform?
Good crypto trading bots come in the form of complete packages, giving you access to trading platforms that you use as terminals to implement your strategies. For example, you might choose to keep track of the market until it reaches to a favourable level by using a trailing stop loss order. Alternatively, you might employ take-profit and stop-loss strategies at the same time. When going through your alternatives, consider limiting your search to bots that allow easy integration with popular trading exchanges such as BINANCE, BitMEX, and BITTREX.
Will You Get Access to Trading Signals?
Access to several trading signals is important, especially for someone who is not accustomed to using bots. This is because you may then look forward to receiving trading suggestions surrounding aspects such as when to buy and at what price. Until not so long ago, manual generation of trading signals was rather common. Now, trading bots and algorithms not only create trading signals, they send them automatically too.
Does it Allow Backtesting?
It is important to choose an automated trading platform that allows backtesting. This way, you get to apply strategies based on historical price data. Once you start to get your feet wet, backtest every strategy you want to use before its actual implementation. However, you also need to remember that backtesting is only indicative of what might have taken place in the past, and you cannot use it as a definitive tool to predict the future.
Is it Secure?
This field comes with its share of nefarious elements, which is why you need to pay due attention to security and reliability. If a service provider asks for withdrawals rights, you have good reason to be wary. In such a scenario, simply look at what others have to offer. The platform you select should ideally let you trade directly through your exchange, while it executes trade orders for you. This ensures that your cryptocurrency does not leave the exchange.
Is it Cloud-Based?
Going the cloud-based way makes sense on multiple levels. For starters, server access is an aspect you don’t have to worry about. Updates tend to happen regularly, and they are easy to implement with cloud-based solutions. In addition, since all the information is online, you get to access it from just about anywhere.
Using crypto bots to trade might be worth your while, but it is important to exercise due caution. Start small, limit your risk, have realistic goals, do your homework, and watch out for scams. The bot you finally select should score well on parameters such as ease-of-use, dependability, and not to forget, profitability.
About the Author
Jon’s work as a researcher with iCompareFX requires that he delve into how the world’s top overseas money transfer companies operate. Outside of work, he likes exploring music from different genres.