What Is Automated Crypto Trading?

Cryptocurrency trading is quite interesting and confusing at the same time. Why? Let’s find out!

First of all, there is no shortage of cryptocurrencies. So, it takes time and effort just to read about thousands of cryptocurrencies. Moreover, it is quite hard to understand technical aspects.

We have good news for you! The situation isn’t as complicated as it might appear at first glance. Fortunately, technology has made it possible to automate a number of trading processes, including market analysis, etc. As a result, traders have the opportunity to focus on other details. 

Do you know what to answer if someone asks, “What is automated crypto trading?” 

Automated crypto trading is the practice of utilizing computer programs (crypto trading bots) in order to buy and sell cryptocurrencies on one’s behalf. 

Crypto trading bots are intended to react to market changes to trade at the optimum moment. Thanks to such bots, it is possible to reduce risk factors. 

As we all know, human beings are emotional. However, it is vital to control your emotions when it comes to financial markets. 

It is recommended to use crypto trading bots in order to worry about emotions. Hopefully, there are many crypto trading bots. All you need to do is to type “crypto trading bot” in Google Search.

Some newer crypto trading bots use smart contracts and operate directly on the blockchain. However, the vast majority of platforms are still APIs. 

As a reminder, API stands for an application programming interface. Notably, it allows your account to communicate with a cryptocurrency exchange so the cryptocurrency exchange mentioned earlier can open and close positions on the user’s behalf according to certain predefined conditions.

Automated crypto trading vs. manual trading

Now, you know what to answer if someone asks, “What is automated crypto trading?” 

Interestingly, automated crypto trading has numerous advantages compared to manual trading. For example, a crypto trading bot doesn’t get tired. Moreover, bots don’t get angry. They aren’t emotional. 

So, crypto trading bots will always adhere to their game plan. Moreover, they will follow any new market trend or event immediately after it happens.

As of 2023, there are several types of crypto trading bots. The most popular crypto trading bots tend to be grid trading or arbitrage bots. 

Crypto trading bots and novice traders

One of the most popular questions after “What is automated crypto trading?” is about crypto trading’s bot profitability. Unsurprisingly, novice traders often ask, “Is crypto bot trading profitable?”

Manual trading isn’t as popular as automated crypto trading. We need to note that algorithmic trading bots play a very important role in the modern world. They now drive the vast majority of the activity on Wall Street. 

Apart from cryptocurrencies, equities, bonds, as well as forex are traded by bots. Why?

To make a long story short, bots work much faster compared to humans. As stated above, they don’t get tired, and they aren’t susceptible to various other factors. Bots can follow their trading strategy in various situations. 

However, it would be best if you remembered that crypto trading bots aren’t perfect. Unfortunately, crypto trading bots can’t remove all risk factors. 

Nevertheless, a crypto trading bot has the capability to automate trading procedures in order to help inexperienced and experienced traders. 

In order to properly configure a crypto bot, it is vital to have a basic understanding of the market. Don’t forget about regulations as well. 

Crypto trading bots and legal aspects 

As you already have an answer to the question “What is automated crypto trading?” we can discuss other important topics. 

There are many questions about crypto trading bots. However, one of the most popular questions many traders ask is, “Is crypto automation legal?” 

Don’t worry; you can freely use a trading bot. To cut a long story short, there is nothing illegal about using a crypto trading bot in any country where cryptocurrency trading is allowed. 

Bots are everywhere. It is hard to imagine the modern world without them.

Nevertheless, you need to pay attention to various details. Unfortunately, you can’t trust all crypto trading bots. Some of them are outright frauds. Moreover, they are trading bots that use various shady tactics that could be considered unethical or illegal. 

In spite of various problems, crypto trading bots have the potential to make life easier for hundreds of thousands of traders. 

If someone asks, “Do automated trading bots work? Feel free to say yes. However, you need to remember that not all trading bots are equal. 

Pros of crypto trading bots 

Source: blueocean.caCrypto trading bots have their advantages and disadvantages. 

We can start with advantages. 

First of all, they help to control emotions. Crypto trading bots help to control emotions by automatically carrying out trades once the predetermined parameters have been met.

Moreover, they can be backtested utilizing historical data in order to generate simulated results. This process allows for the refinement and improvement of a trading strategy before the above-mentioned trading strategy is put into live use. 

As stated earlier, human beings are emotional. Unsurprisingly, it is tempting to get swept up in a market rally and make hasty decisions. 

Crypto traders have the opportunity to take a methodical approach to their trading by following the trading rules determined by their strategy. By adhering to these rules, they can avoid costly mistakes. 

As a reminder, crypto trading bots have the capability to monitor the market and execute trades faster compared to humans. Also, it is important to keep in mind that cryptocurrencies are extremely volatile. So, it is vital to monitor the market. Importantly, bots can also react to changes in the market much more quickly than a person. 

Inexperienced and experienced traders know that it is vital to create a well-diversified portfolio. Thanks to crypto trading bots, it is easier to create a diversified portfolio, as they allow users to trade numerous accounts or different strategies simultaneously. 

Cons of crypto trading bots 

They also have their share of disadvantages. 

For example, it is quite difficult to create an automated trading system, to say the least. Moreover, initial expenses might counteract any gains the above-mentioned system makes. 

Furthermore, such systems must be monitored regularly for problems such as network outages and unanticipated market events that could affect trade execution. 

We shouldn’t forget about other problems as well. One of them is the lack of flexibility. It is noteworthy that crypto trading bots are built in order to follow a set of regulations. They can’t adapt to changing market conditions. 

As in the case of any other system, a crypto trading bot can suffer from technical problems such as network outages, etc. 

The topic of safety is also very important when it comes to crypto trading bots. The safety of automated crypto trading depends on two factors. The first one is the system design and whether trades are monitored on a regular basis. You need to remember that you need to keep an eye on trades. 

To sum up, a crypto trading bot may, nevertheless, be a trustworthy tool that can facilitate cryptocurrency trading journeys. However, it is desirable to check the information about the crypto trading bot. Don’t hesitate to ask many questions.