Yes! Utilizing a bitcoin trading bot is profitable; but only if you know how to use one properly. If your plan is to buy a trading bot, connect the bot to the exchange, press a button and earn money, you will be disappointed.
That is not how a bitcoin trading bot works. Yes, there are trading bots that come with predetermined algorithms that can be used to place automatic buy and sell orders for you. But, really good ones allow you to program your own buying and selling rules.
Trading bots aren’t built for the casual or hobbyist trader, but; if you are willing to invest your time into learning how to use one, this can be a profitable venture. You can make far more money than the regular day trader. Before I expand further on this topic, we must explore what a trading bot really is.
What is a Trading Bot?
A trading bot is a computer program that uses various indicators to identify trends in the market (often using exchange’s API), interpret it, and execute orders on your behalf. A bot executes orders based on pre-programmed rules. Trading bots are popular in the currency market. With the explosion of cryptocurrency, they are quickly making their way into the crypto market.
Types of Trading Bots
There are thousands of trading bots available today in a variety of markets. But our focus is on Bitcoin and cryptocurrency trading bots. The two main types of bitcoin trading bots are 1) software that runs on your computer and 2) cloud-based trading bots. The price of these bots varies from free to costing you thousands of dollars. If you are a professional trader and have the time to learn how to use these bots, you may decide to invest in an expensive trading bot.
Pros of Using a Bitcoin Trading Bot
It is no doubt that if you are a professional trader that utilizes a bitcoin trading bot, you can make far more money than day trading. The reasons why this is true can be broken down into 3 main points.
Every day trader knows trading is repetitive. Regular price checks, pressing buying and selling buttons, and technical analysis is repetitive. Programming your bitcoin trading bot to do these tasks for you can save a lot of time. You can sit back, relax and see your bot in action.
Cryptocurrency markets are open 24/7. If you are a day trader, you know you can’t trade all day. The average day trader works for 2 – 5 hours a day. This is where a trading bot has a real advantage. Trading 24/7 in multiple cryptocurrency exchanges at the same time can make you a lot of money. Please be aware that trading 24/7 means there is also the potential to lose a lot of money if you do not perfect your strategy.
No Emotional Trades
Traders aren’t immune to emotional highs and lows. Greed and fear can influence your trading activity. For example, if you see a coin gaining in value, you may jump into a trade too soon or close a trade too quickly. FOMO (Fear Of Missing Out) is an enemy for traders. A bitcoin trading bot is immune to emotional trading.
Best Trading Bots
Now you know the pros of using a bitcoin trading bot, your next question may be, “Which bitcoin trading bot is the best”. There is a variety of bitcoin trading bots available today. These are the top 3 bitcoin trading bots based on popularity, price, features, and ease of use:
HassBot is very popular among cryptocurrency traders. It has a range of services that can be utilized by less experienced traders as well as professional traders. HassBot is a software that needs to be installed on your PC or laptop.
HaasBot has a range of backtesting tools that can be used to test your strategy against historical or real-time data, a variety of technical indicators, and a range of insurance and safety types that can trigger buy and sell orders.
As of now, HaasBot supports 21 cryptocurrency exchanges and 16 prebuilt bot types that can be utilized by less experienced and professional traders. Flash crash bot, intelli bot Alice, inter-exchange arbitrage bot, mad hatter bot are some of the bots available in HaasBot.
3commas is a cloud-based service that provides users with an intuitive interface that can be utilized to automate trading activity. The main features of 3commas bot include long bots, short bots, bots with QFL method, composite bots, and SmartTrade which can be used to plan stop-loss and take-profit simultaneously.
Additionally, 3commas provides a range of tools to backtest and analyze your trading strategy, monitor best performing portfolios created by other users and follow other successful traders.
As of now, 3commas supports 13 cryptocurrency exchanges and trading dashboard can be accessed on your laptop, PC, iOS, or Android.
Additionally, Cryptohopper provides users with backtesting tools, trailing tools and bear market tools. Cryptohopper features 30+ indicators and 90+ candle patterns.
As of now, Cryptohopper connects to 9 global cryptocurrency exchanges, including popular exchanges like Binance, Bittrex, Poloniex, and Kraken.
You can check out the complete list of cryptocurrency trading bots here.
Limitations of Bitcoin Trading Bots
Bitcoin trading bots can earn you a lot of money, but they are not without flaws. These are some of the limitations of a trading bot:
Limitations in Strategy
The majority of the strategies implemented by these bots are fairly simplistic. Yes! There are sophisticated bots that support artificial intelligence, but the majority of bots are simple pre-programmed instructions that cant factor in social trends, breaking news, and other factors.
It is no doubt that there is a variety of bitcoin trading bots available today. Choosing the right one takes time and effort. And not to mention the scams associated with these bots. Some of these bitcoin trading bots are available to the public for free. Free ones lack sophistication while sophisticated bots are expensive. It can cost you thousands of dollars.
Monitoring Your Trading Bot
Having a bitcoin trading bot means you have to monitor and change instructions of your bot. The cryptocurrency market changes all the time. Factoring in sudden price movements, breaking news, and insider knowledge results in different trading strategies.