Cryptocurrency markets operate 24 hours a day, seven days a week. And that makes trading harder than you might expect if you’re more familiar with markets running for a limited number of hours each week.
Another key facet of the cryptocurrency market is its volatility: seasoned cryptocurrency investors know the emotional strain of checking your portfolio to find significant gains or losses have occurred overnight. This round-the-clock structure of the cryptocurrency market is driving more and more investors to embrace crypto trading bots.
In this post, we’ll explore what cryptocurrency trading bots are, crypto trading bots pros, and crypto trading bots cons.
Understanding Cryptocurrency Trading Bots
Crypto trading bots are designed to conduct in-depth analysis of data on cryptocurrency trading, following a list of pre-set rules according to the user’s specifications. This software will place orders to buy or sell automatically, leaving users free to focus on other tasks and duties.
As cryptocurrency trading bots work to established rules, their ability to make decisions revolves around market price fluctuations. Bots usually evaluate certain actions occurring within the market, such as orders, price, and more. Users can configure trading bots based on their unique goals and personal preferences.
The value of cryptocurrency trading bots
Traders find crypto trading bots such a useful tool because they help to reduce much of the emotional impact involved (specifically fear), as trades are executed according to a tailored strategy of their own making.
Bots allow users to operate their trading round the clock, which is ideal for investors who can’t keep checking market activity throughout the day and night. This 24/7 automation makes cryptocurrency trading far less time-consuming and more streamlined.
Key considerations when choosing a trading bot
Consider the following factors before you choose a crypto trading bot:
Security is key
Effective security is paramount for any form of online software — especially crypto trading bots.
If you utilize a bot developed by an unreliable team with little or no online presence, you could put yourself (and your money) at risk, as they have access to your personal currency. Determining how secure crypto trading bots are can be tricky, but look to online communities and reviews to help yourself make the smartest, safest choice.
Reliability brings peace of mind
Good crypto trading bots operate 24/7 and execute critical functions when you need them most. That means they have to be reliable. If you choose a bot that loses its connectivity, even for just a few minutes, you could miss out on a valuable opportunity to secure a gain.
Look to reviews from other users, dating as far back as they go. Try a variety of review or community sites, to gather a variety of insights from genuine customers. The more satisfied people you can find, the more reliable a bot is likely to be.
Transparency reduces risk
Transparency is one of the core advantages of cryptocurrency trading: as networks are transparent, the risk of unethical activity and behavior is reduced significantly. The most secure, reliable, and acclaimed crypto trading bots follow a similar model.
Keep transparency in mind when browsing cryptocurrency trading bots, and favor reputable developers. An honest, open team will be more likely to offer ongoing support and advice.
As a cryptocurrency trading bot is designed to keep the process simple, aim for a bot with a user-friendly interface. An intuitive design and streamlined layout reduce your risk of becoming confused. This is critical if you’re a beginner.
Do a little research on the profitability of any cryptocurrency trading bots you’re considering. It’s not worth using one if it’s unlikely to bring you a satisfactory return on your investments. Again, check out what other users say.
Crypto trading bots pros
A lack of emotions brings clarity
As cryptocurrencies have a high volatility, it’s easy for traders to panic or become too confident. Emotionally-charged decisions can lead to lapses in judgement and poor choices over time. But one of the main crypto trading bots pros is that they have no emotions or attachment to the funds involved.
Crypto trading bots are experts in multitasking: they run analysis of multiple currencies and conduct trades at the same time. They’re not hindered by the same narrowed focus as humans, and won’t miss potentially beneficial trades because they were concentrating on another task.
Faster responses and processing
Taking too much time to execute a trade can be a big problem when the crypto market is highly volatile — you could miss out if you take too long.
But as crypto trading bots make instant orders, the risk of losing out through indecision is greatly reduced.
You’re only human. You have to sleep at some point. But cryptocurrency trading bots operate 24 hours a day, seven days a week, making potentially profitable decisions for you while you sleep. They’ll never miss a valuable opportunity.
Crypto trading bots cons
Some supervision still required
While cryptocurrency trading bots automate a lot of repetitive tasks, you’ll still need to check in regularly. You can’t leave the bot to work independently forever without monitoring it.
You need a solid grasp of crypto trading to set effective rules and ensure the bot is running properly.
Potential security weaknesses
Crypto trading bots conduct trades via APIs, allowing them to work automatically, with no manual input required.
Cyber-criminals tend to stay clear of blockchains, which are generally secured well, but they may target bots or cryptocurrency exchanges. You can reduce your risks by deactivating automatic withdrawals and being secretive with your API keys.
Traders can enjoy great results with cryptocurrency trading bots, particularly when you know how to configure them to suit your preferences. But it’s crucial that you check reviews, look into the developers, and verify that you’ve chosen a secure option to maximize your investment’s value.