Can you automate the trading process? (And more importantly, Should you?)
Trading of cryptocurrencies can be automated. We can have bots that will do the trading for us i.e. trading bots. They are software programs that can buy/sell your cryptocurrency on your behalf.
Which means you can trade even when you are asleep (Cool, eh?). Basically, they watch market’s price movements and make the decision to buy/sell accordingly.
Where to get them, you ask? You can either you can write your own bots or you can use some of the already available ones. Some of them like Zenbot, Gekko is open source. And then there are some paid options like Haasbot, cryptotrader, Btcrobot etc. Haasbot is the most popular one.
Some examples of Trading Bots
Gunbot, another popular trading bot, works with popular exchanges like Poloniex, Bittrex etc. It costs about 0.1 BTC for each bit and if you are a newbie, the only things for you to configure is the API key and API secret key.
There are four trading strategies available with these Trading Bots – BB(Bollinger bands), 1000trades, ping pong and step gain strategy. BB strategy is set to default and if you are a newcomer to trading, This is recommended.
On the other hand, LeonArdo has two trading strategies. Ping pong strategy and the margin maker strategy. Margin maker is the more advanced strategy.
According to steemit, “In the ping pong strategy, you have to set a buy and a sell price and leave the rest on the bot while in the Margin Maker Strategy the bot buys and sells based on price action adjusting with the course direction of the market.”
LeonArdo can be used with markets like Bittrex, Poloniex etc.
Why do traders use it?
Cryptocurrency trading is a source of passive income for many. Very few traders actually have the time to stare at the price charts the whole day. This is where trading bots become really useful. They’re basically tools that can do these redundant, but important activities like price monitoring and stop loss etc.
This way, trading can be done even when you are sleeping. Besides, it is no secret that bots are faster and more effective than humans when it comes to functional things.
There is something called a pre ordering strategy, where we program the sequence of orders that must take place.
According to Stephan de Haas, the creator of Haasbot, an example of pre ordering strategy is:
“Let’s say I bought 10 Bitcoins, and I want to sell them if the price reaches $1200. This can be done at exchanges already, of course. But using the bot, I can set it up to sell at $1200, buy back at $1000 and sell it all again at $1100. So I am building up a sequence of ordering events that must take place, and I define the exact target prices on it.”
How do these bots work?
A trading bot is a software program that has some certain conditions programmed into it. When all the parameters align, a trade will be executed. However, do remember that a bot doesn’t always make perfect decisions; you do stand the risk of losing money on this too.
Can I expect to have my own rags-to-riches story?
Bots are highly optimized for specific time periods. A bot that was optimized for a particular time interval may not work well for some other time interval. So, you could make a lot of money or you could end up losing some too. Bots are tools to help you execute your own strategy, they are not solutions to trading. Nobody shares money making machines with the public.
You have to pay attention to the current market trends and make necessary changes accordingly. Besides even if you earn some profit, it is marginal. But given that the value of cryptocurrencies is rising and rising, that marginal profit can turn into a bigger one.
So, should you use a bot?
Using bots to trade will be a better method than using the buy and hold method, especially for day trading. Even if you are know you are going to lose money according to current market conditions, using bots can help minimize the loss. As a trader you won’t have to stare at the charts all day as the prices of cryptocurrencies change every hour and even every minute. If you feel that you are losing money by using a bot and could have made more money manually, then you can always pause it.
However, you have to make necessary changes to the bot from time to time. If you don’t monitor, it can keep doing bad trades indefinitely resulting in money loss.
Bots can save you time but don’t be completely blind and expect the bot to keep on making money for you. Keep your eyes open and do some manual work like checking whether the bot is making right decisions or not.
A mixture of manual and automated decisions will be the best idea. Remember, a correct decision can make you some profit while you may end up losing some if made an incorrect one.
Feature image credit – http://sebfor.com/
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