Can a trader nowadays stay successful without using a crypto trading bot? Statistics suggest that algorithmic trading accounts for roughly 60% of all U.S. equity trading. How high is the number then for an online market that works 24/7?

Cryptocurrencies never sleep. The digital asset market continuously presents not only brand new opportunities but risks as well. In such an environment, it is hard to stay relaxed with an open position since a wave of sudden volatility can crush all hopes and dreams in the span of mere minutes.

Full-time traders may catch an entire trading session, or even two if they are dedicated. However, the human mind can stay awake for only so long, and it is a matter of time before productivity levels take a toll.

As such, there are only two choices left for the average trader: take a leap of faith and believe in your wager or protect yourself by setting up a crypto trading bot. Staying online is definitely a choice that is open for you, as long as you employ the right tools.

What is a crypto trading bot?

A crypto trading bot is essentially a bundle of code that automatically executes predetermined commands based on market conditions and your personal preferences. Traders utilize this form of automated trading software to either trade better or to turn on trading strategies once they are offline.

The program that you download, or use online, will control your entire trading experience. Its wide set of capabilities allows it to execute orders at blazing speeds and process all sorts of trading algorithms, even those used in technical analysis.

Listing all the actions that a trading bot can take would result in an endless list. To put it in the best words possible, a bot can do everything that you can (and more).

Computers became a part of the financial world long ago, but trading bots only became popular during the last decade. Seeing the clear advantage that one has with the help of algorithmic trading, it became obvious that traders have to either adapt or ‘die’ as a result of this evolutionary pressure.

The speculative environment is now completely different in the traditional stock market, and cryptocurrencies are in no better position. Moreso, some avid participants hold the view that the advent of cryptocurrencies has pushed trading bots to the forefront of most trading screens.

Is there a particular reason why this has happened? The idea of having your trades automated while bathing in the sun on a hot summer day certainly does indeed sound nice. But the question is, in what way is a crypto trading bot good, and is it better than a human?

How it works

Crypto trading bots work by using an API (Application Programming Interface) to communicate with exchanges and create or execute orders on the trader’s behalf. The bot is personally connected to the exchange on an account with a set of API keys.

Is using a trading bot safe? While giving a 3rd-party application control over your trading account does sound dangerous, there are certain caveats that protect you. For example, the bot is limited in multiple respects and you can even add or remove rules on your own. By default, most tools are unable to withdraw the assets on your account. Therefore, you are entirely safe.

Are you scared that the trading bot will nuke your account? Do not worry! You can also add certain limitations. For example, you can set how much risk can be taken and what kinds of losses you are willing to suffer.

Specifically, trust is all that matters in this niche. As long as the company that develops the software is reputable and there are no (public) exploits, there is nothing to worry about.

From the technical side, crypto trading bots work by processing market data to execute commands in certain conditions. For example, certain bots use technical analysis to examine the market and determine in which direction it could go.

Trading bots can apply complex traditional trading strategies or even custom indicators. A short list of popular strategies and indicators includes: Ichimoku clouds, Bollinger bands, moving averages, Fibonacci retracements, social sentiment, and order flow trading.

Most of the time, a platform will either offer preset settings or trading strategies shared by other users. However, it is also possible to create custom strategies and code the trading bot yourself.

Three reasons to use crypto trading bots

What are the main reasons that traders opt for crypto trading bots? Is it plain old futuristic automation, or is there something more behind them?

Data shows that the algorithmic trading market reached a valuation of $11.1 billion. By 2025, the figure should reach $18.8 billion per the estimations of experts. In the list below, you will find three reasons why the market heads in this direction.

#1 Trade without emotions

Fear is the mind-killer, a subconscious emotion that decimates all kinds of decisions and potential futures. With skin in the game, it is hard not to trade without constantly worrying about a bad outcome.

Emotions play a vital part in the life of a trader. In fact, they might as well be the most important part of the entire trading process. It is true that only a disciplined and calm mind can succeed in markets. However, what happens when an individual cannot always retain his cool personality?

FOMO and other impulsive thought patterns strike beginner and veteran traders alike. Not falling for these urges is essential to stay successful.

Rather than a battle, impulsive trading is a war that is steadily fought. For those who have a more challenging time winning, crypto trading bots come a long way. Colder than the universe, there is nothing that can influence the behavior of a machine. Whatever instructions you give to a trading bot, the automation will follow through with the commands without hesitating.

To summarize, crypto trading bots come in handy in situations where fear and other emotions influence your trading decisions. They will execute or close an order based solely on technical information. They will not think about whatever it is a good idea or not, nor will they linger on a decision until it is too late.

#2 Save time

Have you ever found that you spend too much time looking at your screen? Trading cryptocurrencies can be either a hobby or a job. Nevertheless, it would help if you controlled the time that you spend in either case. If you, or a family member, believes that you spend too much time monitoring prices or a specific position, it might be time to finally take a break.

Crypto trading bots can help you take a break by monitoring the market and automatically performing decisions if the need arises. In the meantime, you can sit back and relax.

While you are away, the trading bot will safely protect your position or open a new one. By employing automation software, you can effectively save time and have a virtual assistant that acts instead of you when you cannot trade.

Trading bots are especially useful and advantageous during nighttime. Depending on your timezone, the night might be the very moment that traders from Asia, North America, or Europe wake up.

Did you notice that volatility and trading activity spike during a specific trading session? Were you not there to make an important decision? If this is the case, then you have an obvious reason to use automated trading software.

#3 Become more efficient

It would take inhuman qualities and abilities to constantly track the market and stay aware of all the different possibilities available throughout multiple timeframes. With such a level of power, one could have in mind all the potential entries, exits, profits, and losses that are possible to make.

Since the brain is not that intelligent, there is not much room for multitasking. But what if we leverage a machine that continuously processes market data?

We can severely expand our capabilities with the help of crypto trading bots. They can spot price imbalances that the average eye cannot see. They can search through tons of information just to find that one trick that will make your chances increase, even if for only a few percentages.

Certain platforms also focus on social trading, in which traders share their strategies and algorithms. Have you found someone that has done a great job? You can copy the user’s trading bot and use its settings on your own bot!

Pros and Cons

Crypto trading bots come with many advantages. Likewise, they also have a few disadvantages that might deter you from using one. To better understand the profitability of trading bots and their potential risks, read the following list of pros and cons.

Pros:

Saves time. You do not have to track your portfolio and positions all day.
Disciplined trading. Robots are not trigger happy, FOMO cannot affect them and result in impulsive moves.
Beginner-friendly. Developers create user-friendly trading interfaces that make it easy to learn how a trading bot works and how to use it.
Works 24/7. No one says that you can drink coffee and trade without even sleeping. But how long will you last? Let us be honest; nothing can beat a robot working 24/7.
Faster trade execution. The responsiveness and reaction time of a crypto trading bot is incredibly fast compared to the average trader. When time is limited and decisions must be made in a split second, bots will prove themselves useful.

Cons:

Bad security leads to exploits. If the software company producing your trading bot is bad at programming, they might leave an exploit or two. These potential security weaknesses can result in a loss of funds.
Bot trading is not 100% automated. If everyone were to use algorithmic trading and be successful, the money that you are earning would not be worth anything at all. You still have to monitor trading bots, interact with them, and frequently change settings or improve strategies to stay profitable.
Expensive. Even if a crypto trading bot is worth the price, can you afford it? Monthly and annual packages can be rather expensive for the average user. Unless you are willing to invest in your future, you should think twice before paying for an expensive subscription.

Choosing the right trading bot

There are a number of features that must be considered before purchasing a crypto trading bot subscription. While everyone has personal preferences, there are four fundamental characteristics that must be explored when reviewing an algorithmic trading platform.

User Experience

Why bother messing with a trading bot when it is too complicated to use? The primary purpose of this tool is to make your life easier, not harder. When it comes to automating trades, there is simply no feature more important than user experience.

Most services should have an easy to use interface with a minimalistic design. It should also offer a lot of configurations and settings that adjust the trading bot. However, it should not enforce these advanced options. Instead, beginners should also be able to use the bot with minimal technical expertise.

Technical support

Participating in the market with a trading bot is extremely sensitive. Bugs will definitely arise at some point, and even if the platform is perfect, you should still have the option to contact a team member and find out how the bot works.

With that in mind, always focus on those platforms with outstanding technical support. If they are responsive and answer all of your questions in a timely manner, you will find their trading bots are likely high quality. The best-case scenario is that the team has a dedicated support team, but it wouldn’t hurt to have social channels like Telegram as well.

Strategies

Previously, we have mentioned some of the trading strategies that are rather popular. Understand that a trading bot is just like any other market participant and that it as well has the ability to utilize various tools and skill sets.

If you already have a strategy in mind to improve your portfolio, it would be wise to specifically search for platforms that support the strategy in question. We also recommend that you find out to what degree the process is automated and how much involvement the bot requires from you.

Cost

Almost all services and products in the blockchain industry retain a high price, and trading bots are not different. While there do exist companies that offer economical and well-budgeted price packages, there still remain options that cost as high as thousands of dollars.

When choosing a platform, keep your budget in mind. Consider crypto trading bots tools that can help you and not tools that can turn your life upside down. If you have freshly joined the crypto market, it would be wiser to spend your money on improving your portfolio rather than buying expensive trading services.

Setting reasonable expectations

After reviewing the purpose, design, and use cases of a crypto trading bot, it is time to delve deeper into our expectations. The entire crypto market is filled with empty promises, and it is always up to the community to set the record straight.

So, will trading bots forever change your life and turn you into a rich man overnight? You probably already know the answer. Will it permit you to spend all of your time at the beach while an AI money machine does all the hard work on its own? That is also questionable.

Trading bots are no superweapons. If they were, most of us would use such a tool for a month and disappear into obscurity, never to return.

The harsh reality is that these tools only improve our trading journey, not replace it. It is still up to the trader to always work on developing the best strategy and make his bot more efficient. It takes a lot of work, time, and experience to successfully trade with bots. Therefore, expect a virtual assistant and not a money printer.

Final Word

Technological progress affects all spheres of life, including financial markets. More and more traders are switching to automated trading, and statistics suggest that the entire global algorithmic trading market will reach a valuation of $18.8 billion by 2025. By that date, how many users from our own industry will be using a crypto trading bot?

The future is decentralized, digital, and perhaps even automated. If the data is correct, a large portion of traders will turn trading bots mainstream. While they are helpful, bots do not represent a golden goose that can make all our worries go away.

In this article, we have explored what a crypto trading bot is and how it can help us. While the central premise lies in saving time, their most important feature might be the act of creating time. Your daily energy level is limited, and there is no other tool that can act instead of you while being asleep.

Shrimpy is an account aggregating platform for cryptocurrency. It is designed for both professional and novice traders to come and learn about the growing crypto industry. Trade with ease, track your performance, and analyze the market. Shrimpy is the trusted platform for trading over $13B in digital assets.

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