The use of trading bots or automated trading features is rapidly becoming popular in cryptocurrency trading and for obvious reasons. If you trade Bitcoin, you have to watch the markets to identify trading opportunities in the market and also to determine whether those opportunities match your trading criteria before executing a trade. This analysis requires patience and dedication. But what if you could use a Bitcoin trading bot to do the work for you or to perhaps even execute trades on your behalf?
The above explains the usefulness of a Bitcoin trading bot or a trading bot that can be applied to multiple cryptocurrencies if you decide to diversify into other cryptocurrencies. It simplifies the trading process since the trader does not have to do the market analysis when there is a system that can be programmed to do the same thing faster and more efficiently. These characteristics provide the trader with more advantage in terms of more profit-making potential while at the same time reducing the margin of error.
How does it work?
A bot is simply a set of instructions that are designed to carry out specific activities. In this case, the bot will be designed to execute trades on a cryptocurrency exchange or crypto trading platform such as TrailingCrypto.
There has to be communication or interaction between the bot and the broker or trading platform. In other words, the bot has to send instructions to the trading platform’s application programming interface, similar to how an individual would click on various functions on the platform to execute a trade.
The set of instructions programmed into the bot tell it how to react to the fulfillment of various conditions, assuming that the trader already has a solid strategy that the bot can follow. The instructions would thus be based on the strategy. For example, a bot can be triggered to react to the price reaching a certain price point but it may also be programmed to also be triggered when various indicators reach specific levels.
A Bitcoin trading bot that is automated to handle market analysis and trade execution would therefore require the trader to input his/her preferences. It would then execute trades and close trades based on those preferences. For example, the Bitcoin Trading bot can execute a trade if the price reaches a predetermined level and close the trade based on preset take profit or stop-loss levels.
What should I look for in a good Bitcoin trading bot?
There are quite a number of considerations that you should pay attention to when selecting or developing a Bitcoin trading bot.
- Integration- A good Bitcoin trading bot will allow integration with multiple platforms. For example, if you use TrailingCrypto, you can switch between different exchanges such as BITTREX, BitMex, and Binance among others. It would be convenient to have a bot that integrates easily without needing much work, thus giving the trader a smooth experience.
- Backtesting- A good Bitcoin trading bot should facilitate backtesting. This will allow you to tweak it to match your trading strategy. You cannot simply use a bot without knowing whether it will trade the way you would trade using your strategy.
- Trading signals- If you choose a bot that will do market analysis on your behalf, then you want it to notify you when the market conditions are right so that you can decide whether to execute or not. The Bitcoin trading bot should therefore have the ability to give trading signals for it to be an effective tool.
- Security and reliability- The concept of safety can be interpreted differently when it comes to bots. For example, a Bitcoin trading bot that is buggy and does not work sometimes might risk your investment. Imagine if a bot failed to execute a stop loss when it was supposed to. This also ties into the reliability aspect.