In traditional markets, large financial institutions have long had access to sophisticated program trading software, helping them implement complex trading strategies at a lightning-fast speed. In the crypto world, automated crypto trading is available through something called crypto trading bots, and it is available to both large and small investors.
Crypto trading bots are computer programs that can access your accounts at cryptocurrency exchanges and make trades on your behalf without any interaction on your part. Using advanced cryptocurrency trading algorithms, these bots can trade quickly and during any time of the day at a variety of exchanges around the world. They are the perfect tool for enacting a wide range of trading strategies, including arbitrage.
In this comprehensive guide, we will describe everything you need to know about how to day trade crypto automatically. This includes describing what crypto trading bots exactly are and how they work, what you can use them for, what to look for in them and examples of some of the better crypto trading bots available.
Crypto Trading Bots: What Exactly Are They?
Normally, when you trade cryptocurrencies, you log on to your account at your exchange and manually enter a trade. But software such as bitcoin trading bots does all this for you while following a trading strategy you have specified.
These strategies can take advantage of prevailing market trends, and they can also find arbitrage opportunities for you. You can further use crypto trading bots to repeatedly rebalance your portfolio if you are looking to maintain a particular indexing strategy.
The software used to create trading bots can vary considerably, from simple and free crypto trading bot scripts to professional and complex standalone programs that can cost thousands a dollars per year.
Crypto Trading Bots: How Do They Work?
Most major cryptocurrency exchanges allow other applications access to their platforms through something called application programming interfaces (APIs). These APIs are what lets crypto trading bots trade on your behalf while also allowing it to view your balances and relevant market data.
In order to trade using a bot, you first need to go to your exchange and generate a pair of API keys: your public and private key, which is also known as a secret key. How you do this will vary by the exchange you use.
After selecting a bot compatible with your exchange, you provide these keys to the bot. This, in essence, gives them permission to trade on your behalf. You can also remove this access at any time.
Most crypto exchanges allow you to specify a set of permissions, which are tied to the keys. A bot trading crypto typically will require two permissions: a balance permission, which will allow the bot to view your available balances, and a trade permission, which will allow the bot to trade for you. Be very cautious about giving a bot more permissions than this. You also want to avoid giving it withdrawal permissions, as this could allow it to steal from your account.
Crypto Trading Bots: Why You Should Use Them?
There are many good reasons for using a crypto trading bot instead of making manual trades. Here are the most important ones:
Eliminating Repetitious Tasks
Some forms of trading require repetition, such as continually rebalancing your portfolio based on an indexing strategy. Instead of constantly having to do this yourself, the bot can do it for you automatically, even when you are away from your computer.
Making Precise and Complex Trades
Often trading strategies will require you to make trades at very specific times, such as when a cryptocurrency reaches a certain price. Instead of you having to monitor markets yourself for these events, the bot can monitor them for you. It can also help you execute complex strategies that would be difficult (if not impossible) for you to do yourself.
Just as importantly, bots can initiate trades, often much faster than you could do yourself. This is important because a fraction of a second could be the difference between a successful and unsuccessful trade.
Freeing Your Time
Some people actually enjoy staring at a trading screen all day. But most of us would rather spend our time doing something more enjoyable. After all, enjoying life is usually the whole point of creating wealth in the first place. With a crypto trading bot, the computer does the hard work for you. You just need to tell it your strategy and let it do its business.
Allowing You To Trade Continuously
Unlike many traditional markets, cryptocurrency markets never close. There are people trading on them at all times. What’s more, there are exchanges operating in just about every time zone. Crypto trading bots allow you to trade even when you are asleep. They are constantly on the lookout for opportunities for trading cryptocurrency for profit. You can even specify one strategy for when you are awake and a different (and safer) strategy for when you are asleep.
Crypto Trading Bots: What To Look For?
With so many crypto trading bots available, it can be very difficult deciding which one to use. Here are the most important factors when it comes to deciding on a trading bot:
Not all crypto trading bots have the same set of features. Some only implement certain types of strategies, with little or no ability to customize them. Before selecting a bot, make sure that it can implement the strategies you want (and may want in the future) and that it is easy enough for you to use.
Backtesting is one of the most important concepts in program trading, regardless of the type of trading. Before you implement any trading strategy, you should first test it against historical data to make certain that it has validity. So, make sure that any bot you choose has the ability to backtest.
Before selecting a crypto trading bot, make sure that it has a good reputation. Check online reviews and relevant threads in online forums. Also, do not be afraid to ask questions about these bots in these forums. Often you can get answers from people who have practical experience using them.
Depending on your level of expertise in both trading and trading software, customer support can be a big issue. The free crypto trading bots usually will only have very limited customer support options, such as user forums, while professional software can often provide you with personal and immediate support.
There is a great variance in prices of crypto trading bots. The good news is that there are quality bots for every budget. In general, the more you pay, the more features and support you get, and the easier the software is to use. But this is not ironclad, and you do not have to pay a fortune to get a quality bot, or any money at all.
2019 Best Crypto Trading Bots
In this section, we will provide a list of the best crypto trading bots. But do note that there are other good crypto trading bots outside the list as well. It is simply a set of examples of the types of trading bots available.
Gekko is an example of a free crypto trading bot. It is a standalone program that is not necessarily the easiest to use for inexperienced traders, but it is very powerful. It has the following important features:
- Real-time market data and historical data import
- Profit and risk calculations
The software currently supports these crypto exchanges:
- Coinbase Pro
- The Rock Trading
3commas is a good example of a modestly priced crypto trading bot, with costs starting at a little more than $20 per month. This bot not only has a lot of quality features and great support, but it also has a developer API, which allows you to make detailed customization to your strategies if you have some programming skills.
Its features include:
- Trading terminal
- Signal customization
- Composite bots featuring multiple pairs of currencies
- Take profit (and take loss) trailing options
Currently, the bot supports these exchanges:
- Coinbase Pro
HaasBot is an example of a high-end crypto trading bot. It comes with a wealth of features and support for a wide range of exchanges, but it is also relatively expensive. It can cost as much as $3,000 per year.
The bot’s features include:
- Exacting control over the bot
- Custom scripts
- Customizable commands
- Detailed reporting
- Manual execution of strategies
It supports these exchanges:
- Coinbase Pro
You Can Also Build Your Own Crypto Trading Bot!
If you have programming abilities, you can also build your own crypto trading bot. This is not as difficult as it may seem, as there exists something called the Universal Crypto Exchange APIs, which will allow you to connect to all the major crypto exchanges and make trades. It also provides lots of other useful features.