Why should you have to pay good money for a cryptocurrency trading bot when you can create trading bots yourself? Here’s what to consider for DIY bot-making.
Cryptocurrency trading bots have been making waves in the investment world for some time now and it’s not hard to see why. Trading in any currency offers great opportunities for profits to pile up, but losses can escalate just as quickly if you don’t move fast, and nothing acts or reacts as quickly to dynamically shifting markets as a dedicated software solution. Automation makes trading cryptos less of a struggle because bots will work around the clock, execute trades in line with preset parameters, and place orders faster than any human can manage. They don’t make mistakes due to lack of coffee or personal problems and just deliver faithful performance with clockwork regularity. No wonder some people decide to create trading bots for themselves.
Cryptos are often volatile, so traders want to build trading bots in order to squeeze the maximum value out of their investment capital and reducing their personal participation in the trading process. So, let’s look at the nuts and bolts of how to create trading bots.
Javascript or Python?
JavaScript(JS) and Python are currently the most widely-used programming languages that let you build trading bots. Both of these languages are bolstered by supportive developing communities and they’ve been shown to work well in the crypto environment. Python is economical, in the sense that you can render an idea with less code, and its libraries are great for prototyping and research. JS developers like the fact that it is dynamic, prototype-based, and multi-paradigm. The majority tend to use it for simulations, data modeling, and low latency executions.
Here are some of the differences between these two popular programming languages include:
- Beginners find Python easy to learn and JS more of a challenge as it’s quite complicated.
- Python has existing libraries for data analytics, machine learning, or scientific computing, while JS lends itself to building native applications and websites.
- JS is as happy running on a browser as a server frontend, while Python sits better with server-side/backend programming.
- JS can be used for mobile development but Python is slow running in comparison to JS so doesn’t really suit it.
- Python is a more modern language with better design that’s not so tricky to maintain, in contrast to JS which is difficult.
Building Your Own Crypto Trading Bot
The first benefit of using your own custom trading bot is you’ll keep control of your private keys. The second is that it will be set up to do exactly what you need it to. Once it’s up and running it will be able to perform trades day and night, placing orders to your requirements with greater speed than you could ever hope to.
The number of trading bots available is growing at the same rate as the popularity of the cryptocurrency market itself. Naturally, plenty of vendors would like to sell you (or have you subscribe to) pricey crypto-trading bots, but the truth is that you don’t actually need to break the bank before you can start making money. You might be able to build trading bots yourself.
Setting up the API for each exchange
The crypto trading ecosystem of today relies on efficient and effective APIs. In case you didn’t know, API stands for Application Programming Interface. It’s the interface between the bot and the exchange. Most crypto-exchanges let you use their API interface for the bot, but such systems rely on a small number of permission-levels protected with unique keys and a secret. That means you’ll need to set an API key for the exchange you want to use. Once this is done you’ll put the key and the secret into the trading bot so you can make use of the API.
When you create trading bots, remember that API keys effectively guard the treasure, so you shouldn’t let anyone else know what they are, and while you’re at it, and be careful which exchanges you entrust them to as well. Stolen or hacked key lets anyone get into your trading bot, so they can trade or withdraw money at their leisure. That’s why it’s a good idea to make sure the API is set to not allow withdrawals. If you do this then you will obviously have to make future withdrawals manually, but this little bit of inconvenience is worth it if it saves you from a much bigger one.
API links for leading currency exchanges:
Checklist to create trading bots.
You can build trading bots for yourself and avoid the expense of subscribing or buying them. Here’s what to do to make sure that it goes as smoothly as possible.
- Choose your programming language, and consider using a well-established one like Python or JavaScript. The bigger the user base for a language, the more clever people there will be to help you solve problems.
- Get hold of all the APIs for the crypto exchanges that you want your trading bot to be able to talk to. For example, if you want to build a Binance trading bot, then get the Binance API.
- Set up accounts with the exchanges that you’ll be using. If you want to build trading bots that link to Kraken, you’ll need access to the Kraken API.
- Settle on a trading bot strategy. It could be arbitrage, market following, or the market making strategy. You will obviously need to allow more development time for more complicated trading strategies.
- Architecture. Make sure you set out with absolute clarity what kind of data you want your trading bot to interpret.
- Make your bot and follow a procedural approach when you do. This is the part of the journey that will take you the most time. There’s no other way around it.
- Test. This is your opportunity to test drive all the trading bot’s functions and fine-tune any performance issues.
- Deployment. Once you know it works well you can release it into the wild and get to work.
Conclusion
If you want to build trading bots it can be a very attractive option if you’re someone that wants to avoid the expense of purchasing or renting an off-the-shelf solution. It is possible, but it is time-consuming and may be beyond the abilities of beginners. If you’re dedicated and willing to commit to an extremely exacting and potentially costly process, then this could be the right choice for you.
