Crypto Trading Bots 101: Everything You Need to Know
It’s now safe to say that cryptocurrencies have changed personal finance as we know it. We can now be our own boss, generate income, and participate in global transactions—we’re living the dream. As we continue the grueling trading grind we’ve been on, we continuously ask ourselves: “can it get any better than this?” And the answer is yes—yes, it can.
Crypto trading bots are here to make our trading more convenient, and what is technology, if not tools to make our lives easier?
What are trading bots?
Yup, they’re exactly what you think they are. Crypto trading bots are automated computer programs that buy and sell cryptocurrency at the “correct” time—depending on the way you program it. The goal of the bots is to generate as much profit as they possibly can for you. To do this, they continually monitor the market and react accordingly using a predetermined set of rules, set by you according to your taste and preferences. This ruleset will determine how your bot analyzes market actions like volume, orders, price, and time.
Should you consider using a trading bot?
Unlike traditional markets, crypto markets never sleep. You can trade 24/7, and although that’s a fantastic thing, it presents a new problem for traders: no one can watch the market all the time. Since we can’t watch the market as much as we’d want to, an 8-hour lull period is created when we’re asleep—leaving the possibility of waking up to potential losses or gains. This is where a crypto or Bitcoin trading bot comes in. Here are some of the most significant advantages of using a bot:
Looking to save time? These trading bots allow you to step aside, rest, and not worry about your open positions. Even the most active traders out there need to sleep. With these bots, you have the opportunity to make money without the hassle of keeping your eyes glued to a screen.
Trading bots are always online, and since they can watch the market for you 24/7, you’ll have a chance to find new trading opportunities. We all know how volatile the crypto market can get. In a space like this, a relentless opportunity-hunting bot that can exploit market conditions in a snap would be extremely helpful. Of course, it depends on the parameters you set on the bot, but once the bot sees an opportunity, it will execute.
Lastly, using a bot would be able to take the emotion out of trading. As human beings, we’re susceptible to succumbing to the stress of day trading. Because of their volatility, crypto markets are even more stressful than traditional markets. This stress can cause emotions that may also affect our decision-making, leading to miscalculations that may be extremely painful in the high-stakes world of crypto trading. A pre-programmed bot could help protect all of us from our worst enemy: ourselves.
Types of trading bots
Before you dive into the world of crypto and Bitcoin trading bots, you’ll need a crash course on the different types. Each will cater to the usual trader personalities, so make sure to use the one that’ll fit yours.
- Arbitrage bots – If you aren’t familiar with cryptocurrency arbitrage, it’s a trading strategy where you buy an asset from one market and then sell immediately in another market at a higher price, taking advantage of the price difference to earn a profit. Arbitrage bots are hardcoded with this trading strategy.
- Trend-trading bots – These bots try to capture profits by analyzing the momentum or swing of an asset. Even if the asset’s track is discerning, bots can make use of take-profit or stop-loss provisions.
- Market-making bots – These bots will create several buy and sell orders to bring in quick profits. Let’s say that a cryptocurrency is worth 1 USD. A market-making bot could make a buy offer for 0.99 USD and a sell order for 1.01 USD—if both orders are filled, you’ll earn a profit of 0.02 USD.
- Coin-lending bots – If you’re into lending cryptocurrencies with interest rates, these bots can automate the process. By doing so, it can also mitigate volatile interest rates and loan repayments.
- Profile-automation bots – These bots can help you create, obtain, and maintain your desired portfolio, instead of actively trading. People use this kind of bot to eliminate tedious and repetitive tasks as much as possible.
These are the four main types of bots, but there are also other kinds of bots out there, like our very own Paxful Trade Bot for Telegram. This little chatbot is programmed to help you search for current offers and notify you when a new offer matching your criteria becomes available. You don’t need to go to the Paxful website or the mobile app to buy or sell crypto; you can trade crypto right there on Telegram. You can learn more about how Paxful Trade Bot works here.
Trading bots to get you started
Starting to warm up to the idea of using a Bitcoin day trading bot? Well, there are a ton of options out there for you to choose from aside from Paxbot. To get you started, we’ve compiled a list of both free and paid trading bots.
Pionex is both an exchange and a trading bot. Users have access to 12 free trading bots on this platform, allowing them to explore many different trading styles. For example, their Grid Trading Bot gives users the opportunity to buy low and sell high within a specific price range. Their Smart Trade terminal allows users to set up a stop-loss or take-profit in trades. Other bots include the Leveraged Grid Bot and the Spot-Futures Arbitrage Bot.
Access to the accounts and bots is entirely free. However, there’s a 0.05% fee for both users on every trade.
Mudrex offers users the opportunity to create automated strategies by setting their trading rules using a drag-and-drop interface that includes already-built indicators and patterns. These strategies can also be backtested and paper traded, allowing users to test and refine their approach as they go along. Additionally, users can also submit their successful strategies to the marketplace and specify a monthly fee for others to use them.
Mudrex’s price is based on two categories: Mudrex Invest is free, but you’ll have to pay strategy creators their monthly fees, and Mudrex Build costs 16 USD per month, but it allows users to create, test, and deploy their own trading strategies.
Wunderbit Trading is another platform that allows you to trade cryptocurrency seamlessly. The platform has two distinguishable features: TradingView and its Spread-trading terminal. TradingView allows users to create their own fully automated trading bots in a matter of seconds, while the Spread-trading Terminal enables them to choose which assets they would like to pair simultaneously.
To get started on WunderBit, it’s completely free. A free account will start you off with manual trading, trading bots, and copy trading (a strategy that will help you emulate some of the best traders on the platform). However, if you want to take it up a notch, there are three plans: Basic (9.95 USD), Pro (24.95 USD), and Premium (44.95 USD).
Just like Wunderbit Trading, 3Commas is a cloud-based crypto asset trading platform. The platform includes a smart trading terminal, simple and composite trading bots, copy trading, and portfolio management. It’s accessible via desktop or mobile app and provides a dashboard that links you to a few crypto exchanges. The platform has a suite of customizable trading bots, so take your pick and make the trading bots your own with the configuration options available.
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You can test out 3Commas now at no cost with the free plan, but if you want more trading power, you might want to explore the paid options: Starter plan (14.50 USD/month), Advanced plan (24.50 USD plan), and the Pro plan (49.50 USD).
Being one of the oldest crypto trading bots, Gunbot is one of the most popular options out there. It comes with up to 14 powerful precoded trading strategies—perfect for those that are new to trading, looking to pick the pairs they want to trade, and simply letting the bot do the heavy lifting. For the more experienced trader, Gunbot’s customization is top-notch—you can modify precoded strategies or even create your own fully customized and personalized approach from scratch.
Gunbot also comes with a powerful arbitrage bot that can execute triangular arbitrage. Let’s say that you have 100 USDT. Their bot can search for triangular arbitrage opportunities and buy BTC. Then, the bot can use BTC to buy XRP and then finally use XRP to repurchase USDT for a profit.
Unlike the other trading bots on this list, Gunbot offers lifetime licenses with three packages: Standard (0.025 BTC), Pro (0.0375 BTC), and Ultimate (0.0625 BTC).
Trality‘s goal is to close the gap between professional and private trading. To do this, they give everyone access to the technology of automated trading bots and help them become more intelligent traders.
When it comes to features, there are two from Trality that stand out. The first is the Trality Rule Builder, a simple yet powerful graphic interface that lets users build trading bots by dragging and dropping indicators. Basically, it pretty much gives you the ability to develop your own trading algorithm without having to write a single line of code.
The second feature is the Python Code Editor. Suppose you want to get into the excruciating details of the algorithm. In that case, this feature is an in-browser code editor that allows you to create a trading algorithm from scratch using the Python programming language.
You can try Trality for free with the Pawn plan that comes with a live bot, virtual bot, and a monthly volume limit of 5.00 EUR. However, if you want more trading power, there are three other packages with more perks as you go up: the Knight plan (9.99 EUR), the Rook plan (39.99 EUR), and the Queen plan (59.99 EUR).
Bitsgap is a one-stop trading platform that connects some of the biggest exchanges and houses them all over one roof, allowing you to sit back and let the system do all the hard work.
The platform features different kinds of trading bots such as their Futures Trading Bots and their Automated trading bots. Combined with their top-notch tools found in their Trading Terminal, you’ll have everything you need to trade on multiple exchanges using a single interface.
You can get started on Bitsgap for free with their 14-day trial. With that plan, all the standard features are included as well as a 1,000 USD trading limit. If you’re looking to do more serious trading, there’s a Basic Plan (19 USD/month), Advanced Plan (44 USD/month), and a Pro Plan (110 USD/month)—all of which have more perks and higher trading limits as you go up.
Remember the risks
Just like any other investment, it’s important to remember that crypto trading bots come with risks.
Additionally, it’s important to remember that these bots are designed for traders, not investors. If you’re just a casual investor that likes to buy and hold assets, using a trading bot may not be the right choice. Even if the platforms make it easy to get started, people who have financial literacy, analytical skills, and trading knowledge will always have an advantage over those that don’t.
In this space, you’ll also have to beware of scams and hidden fees. Cryptocurrency is a new technology and that sometimes has the tendency to attract bad actors. With that in mind, you must do your due diligence. Ask yourself the following questions: how credible is the team behind the platform? Do they have a public profile and support team? Can they be contacted? What are the other customers saying about them? Are there any hidden costs? Remember, whenever it comes to the investing and trading space, the more you know, the better.
As appealing as these crypto trading bots may seem, it’s important to remember that they are simply tools and don’t guarantee a profit. While you can set and forget most of these bots, the best solution is often a combo of automated trading with a mix of human supervision. The market conditions change so fast that bots need a bit of readjustment in between trades—that’s where the human supervision part comes in. You have to continually adjust the bot’s strategy parameters so that it doesn’t muck up your money.
If you move forward using a trading bot, make sure that you remember the risks and do your due diligence. Good luck!