Understanding the Cryptocurrency Trading Bot Strategies

By default, most trading bots in the cryptocurrency market use a handful of trading strategies; however, these strategies are not as difficult as most people think. Rather, they are simple algorithms that leverage the high volatility inherent in the cryptocurrency market.

The crypto bot strategies in use today require instant placement of orders, which is something that human beings cannot always accomplish. They also require an instant calculation of numbers, which is why they are useful when it comes to trading in the cryptocurrency market.

Artificial Intelligence — Machine Learning

Machine learning is relatively new in the crypto trading arena. It uses AI systems to examine historical data and convert it into a practical trading strategy. Essentially, the machine-learning algorithm learns from the data fed into it and becomes smarter at predicting the price of a particular cryptocurrency asset.

However, this trading strategy is not as simple as it may sound. Artificial intelligence learning is very complicated, and you need tons of data to make it work. In addition, the machine-learning algorithm cannot consider such things as important news, market sentiment, and other relevant factors.

Grind Trading

This crypto trading strategy uses stop buy orders and stop sell orders to place a significant amount of small trades. It also sets stop loss and takes profit in advance. However, one of its most important benefits is to help traders predict whether the cryptocurrency market will move down or up. The disadvantage of this strategy is that it can lead to an increase in human error. This is because traders need to manage multiple trades at the same time. This is where cryptocurrency trading bot strategies come to the rescue. They can manage a huge amount of trades simultaneously.

Signal Trading

This trading strategy uses several technical indicators to check for a good entry point. These indicators include EMAs, MACD, RSI, and others. RSI is perhaps the most popular indicator in use. Basically, it analyzes the market’s momentum. When it shows a value of more than 70, it typically shows that a particular digital currency is overbought, which is an indication that a pullback is imminent. On the other hand, when the value is below 30, it is an indication that the cryptocurrency is oversold, which means that a bounce is likely approaching.

Exponential moving averages (EMAs) are different from RSI. To generate the moving average convergence divergence, crypto traders usually need to use at least two EMAs. In addition, they can use several technical indicators in conjunction and only enter trades when favorable conditions appear. This can be a complex strategy to use since some technical indicators can oppose each other.

Ping-Pong

This is one of the easiest cryptocurrency trading bot strategies. As the name seems to suggest, this is a buy low, sell high trading strategy. To implement this strategy, traders need to set a buy order followed by a sell order immediately, with a higher percentage to make a profit. When the sell order fills, traders need to set a buy order immediately at a lower percentage.

They can continue this ping-pong process for as long as they want. This is the ideal strategy for trading bots. They can calculate any percentage traders want to place and instantly set all orders. In addition, traders can leave the trading bots running for as long as they want.

Bollinger Bands

Traders can use Bollinger bands by themselves; however, they are part of technical indicators. They measure volatility and are narrow when the market is trading sideways and wide when it is volatile. This trading strategy works wonderfully in the cryptocurrency market. To determine whether a big move is forthcoming, the market will be trading sideways. In typical stocks, this is not usually the case. This is because stocks can trade sideways for several years.

Breakout Strategy

This trading strategy uses a clear level that many traders also use to get a higher chance of a big continuation and a good entry. It takes advantage of a coin’s momentum and is fairly simple to understand. First, traders need to identify support and resistance levels and then place their sell or buy orders accordingly.

It is important to place the buy order slightly above the resistance level and the sell order slightly below the level of support. Fakeouts are possible, and stop losses are the only defense. Therefore, traders using this strategy should keep this in mind and understand how the crypto bot strategies in use today can help them.