What’s the Role of Bots in Crypto Trading?

Anyone with any experience of trading cryptocurrencies understands how volatile they are. Prices fluctuate significantly within a mere matter of minutes, creating a consistent state of uncertainty, even if only at a minor level.

Investors all over the world can participate in crypto trades at any time of the day or night, without restrictions (unlike in other markets, which may operate from Monday to Friday only). But there’s a downside: changes can occur while traders sleep, causing them to miss out on valuable opportunities.

The high volatility and round-the-clock accessibility combine to limit the effectiveness of human input on cryptocurrency trading.

Primarily, investors in most cases simply cannot react to price fluctuations fast enough to make the most high-value trades that the market presents from time to time. Any lagging in transaction times or exchanges’ performance exacerbate this issue, and can cause immense frustration.

Furthermore, investors are unable to put as much time into analyzing and trading on the cryptocurrency market as they would like, preventing them from achieving optimal results. They would need to be monitoring crypto exchanges 24 hours a day, every single day — which is a recipe for disaster.

But fortunately, there are solutions.

The most obvious, and practical, is investing in a bot. These are automated programs designed to undertake trades and complete transactions on traders’ behalf. While crypto trading bots may be considered a controversial option, there are several reasons to leverage their capabilities.

In this post, we answer two key questions: what is a crypto trading bot and what role do they really play?

What is a Crypto Trading Bot and which are available?

Multiple types of cryptocurrency trading bots are available, and one of the most widely-used is the bot built for arbitrage. These are designed to conduct close examination of prices at various exchanges and execute trades when advantageous discrepancies appear.

As cryptocurrency prices typically differ from one exchange to another, arbitrage bots with the speed to move quickly enough may beat those exchanges which take longer to update prices.

Other trading bots leverage historical data to perform comprehensive testing of specific trading strategies, potentially providing investors with an advantage. Some bots are built to conduct trades in response to preset signals, such as volume or pricing.

What is a crypto trading bot role? Understanding their functions and operations

Free crypto trading bots are available for those investors with no interest (or available funds) in paying. This is an appealing alternative to those bots which impose a fee on users, many of which are expensive.

Generally, though, traders search for bots offering the most practical value to streamline their cryptocurrency trading overall. Download codes are usually available from the bots’ developers, and each comes with unique hardware & software requirements.

Investors looking to maximize the value of their crypto trading bots need to know how to take full advantage of them. This includes setting up accounts at multiple online currency exchanges and keeping them funded with cryptocurrencies. Traders still need to make important decisions regarding buying or selling — yes, bots can execute them for you, but effective strategies are still essential.

But let’s be clear: a crypto trading bot role is not to bring traders overnight wealth: time and effort are still crucial for reaping the rewards. The majority of bots offer only marginal returns, even when they’re used properly. And some bots simply aren’t designed well, and there’s a lack of regulation in place to address this.

Crucially, leveraging a crypto trading bot successfully demands that investors possess an in-depth knowledge of currency market activities and a clear plan for investment. Some traders may find crypto trading bots prove to be a significant help, but others might realize that they no longer need to use them after putting in so much prep time.