Human vs Crypto Bot: What is Better to Get Profit
In our article, we decided to figure out why crypto bots are gaining popularity among traders. So do they well allow you to automate the trading process and make it more efficient? Or it is still better to rely on the human mind and the ability to analyze the growth and development of the market?
It can be very difficult for a beginner to make a choice, understand what is better and learn how to choose high-quality trading software. We have prepared information about crypto bots that will help you navigate the complexities and trading strategies.
What are Crypto Bots?
Most inexperienced traders who want to make money on cryptocurrencies prefer to use bots in their trading. A crypto bot is a computer program whose purpose is to automate the trading process. This is a fully automated algorithm that reacts to changes in the market situation by opening or closing positions in digital assets.
Bots work on the principle of defining pre-established complex patterns. This allows you to trade cryptocurrencies using an automated trading system. As soon as the bot detects a favorable moment for making a deal, it does its job on your behalf.
Most cryptocurrency bots use fairly simple algorithms to work. Simple boilerplate strategies are not always effective. Do not believe in trading programs that guarantee a profit of 300% or even 1000%.
Types of Crypto Trading Bots
There are many classifications of bots for trading. The most common classification is as follows:
- Trend trading bots. Works on a specific trading platform. Earnings are made on different timeframes, from short to long. This bot takes into account the momentum of a particular asset, analyzes it and decides to buy or sell.
- Arbitrage bots. Under the influence of various factors, the price of bitcoin on different sites can differ by several tens of dollars. The bot operates on two or more trading platforms. The primary income is on the difference in rates between them.
- Coin lending bots. This is the method when you lend coins to margin traders. Later they will return you the loan with percentage.
Coin lending bots help you automate the process. Thanks to them, you can spend less time looking for the right interest rate.
This bot allows the user to configure a strategy, withhold lending current interest rate you need, choose a currency, and date of coins back.
- Market making bots. This bot utilizes orderbook spread to bring you profits. The more actively an asset is traded, the wider the spread will be, the more profits you will get. The key principle is to sell at a higher value than a selling price and do it regularly.
Advantages and Disadvantages of Cryptocurrency Bots
Benefits of Cryptocurrency Bots
- Saving time. A well-designed cryptocurrency bot frees up a lot of time for the trader. He needs to regularly check the trading statistics, but there is no need to monitor the cryptocurrency market all day long.
- No emotions. Most of the traders’ losses are caused by being influenced by emotions. Having once made an erroneous decision, it can be difficult for a cryptocurrency trader to quickly get out of a position. This leads to losses. The bot is devoid of emotions and trades according to a clear algorithm. It is not afraid of any psychological influences.
- Discipline. Another popular mistake traders make is the loss of discipline. Crypto-asset traders sometimes ignore violations of their own rules. Because of this, they are losing money. Cryptocurrency is a volatile market. Therefore, such an aspect as a discipline can play a cruel joke with a trader. A bot, unlike a human, is not susceptible to this. It clearly uses the algorithm and the bot executes certain commands, at a certain time, according to certain rules.
- The efficiency of calculations. It is difficult even for a talented and experienced trader to quickly calculate the effectiveness of a particular deal. The bot does everything automatically, which improves trading efficiency.
Cons of Cryptocurrency Bots
Among the disadvantages of trading bots, because of which they yield to humans, the following can be distinguished:
- They require constant revision and upgrade. The situation in the cryptocurrency market is constantly changing. There is no one-size-fits-all strategy that works anytime, anywhere. Continuous improvement takes a lot of developers’ time. And a bot’s algorithm that is not updated on time can lead to a loss of the trader’s profit. Bot users will have to regularly reconfigure their strategies in response to changes in the market situation.
- Require control by the trader. There are still no bots that don’t need to be controlled at all. Working with a trading robot is better and faster than working on your own. But in no case you should leave the situation uncontrolled. The bot can lose your money. To prevent this from happening, you need to set limits on the maximum daily losses on the account.
- Big competition. Algorithmic strategies are used not only by individual traders but also by large financial companies. In hedge funds, dozens of experienced traders and mathematicians can work on cryptocurrency bots at once. It is extremely difficult to withstand such competition.
How the Robot Trader Works
For automatic cryptocurrency trading on different platforms, bots use special algorithms and trading strategies. Developers create these strategies and algorithms based on a technical analysis of patterns and cryptotab. To carry out such an analysis, they consider historical data on rate changes, graphs of the growth and fall of the cryptocurrency rate over the last year.
Having determined the patterns, the strategy is tested on the same historical data, the number of potential losses and profits is calculated. If the results are positive and suit the developer, then rules of the robot’s trading strategy for the cryptocurrency exchange are created on their basis.
Some bots additionally use indicators with which you can analyze the current market situation. There are crypto bots that perform any actions related to the purchase and sale of tokens only when certain market conditions occur. The main trading strategy with exchange and arbitrage bots is that when the price of cryptocurrency decreases, you need to buy it. If the price of a cryptocurrency rises, then it needs to be sold.
High-quality bots analyze more than a hundred parameters to decide about buying and selling cryptocurrency. Some cryptocurrency bots have a stable, unchanging program of algorithms, and there are bots with which you can connect or configure additional parameters. Such trading bots are used by professionally experienced traders. They have their preferences in the style of trading and a standard bot is suitable for them, which can assess the market situation, monitor the rate for a given period, make a forecast and buy/sell cryptocurrency on time.
How to Choose a Bot for Trading Digital Assets
Finding a cryptocurrency robot is easy. There are special trading sites that offer traders bots to buy. It is difficult to choose a working bot that will generate profit regularly. When choosing a trading bot, pay attention to following advice:
- Give preference to working through API keys. Many scammers are working on the network who every day come up with new working ways to get hold of your cryptocurrency. Therefore, it is better to give money not to the management of the algorithm, but to take software by subscription. Such a program will be individually customized to your needs and trade from your account via the API. At the same time, the bot cannot withdraw money from the exchange on its own. The trader will do this.
- There is no guarantee of profit above 300%. The less profit they promise you, the more chances to get it. The opportunity to get over 300% profit is a gimmick and another marketing ploy of developers who want to get high profits for their bots. If anyone has such a super bot for trading cryptocurrency, then they clearly will not share the get-rich-quick resource with other traders.
- Check the results. Require developers to provide tools for back-testing the bot. It is also important to view the report from the exchange on completed operations and trading results. This will show how efficient the bot is at work. If the developer is unable or refuses to provide such information, then there is no guarantee that such a bot will bring you profit.
- Read professional reviews. On the Internet you can find dozens of professional reviews of the work of crypto bots. The authors collect information about the advantages and disadvantages of each bot in their reviews. You will also find many comments from traders about the experience of using cryptocurrency trading bots and you will understand what you should pay attention to when choosing.
Popular Bots for Cryptocurrency Trading
Cryptohopper is a newcomer to automated trading, but its popularity is growing rapidly for several reasons. It is the only cloud-based cryptocurrency bot on the market. Even if the trader’s computer is down, the bot continues to trade cryptocurrency on Folgory or any other exchange.
Pionex is one of the first exchanges in the world with built-in trading bots. Pionex provides 12 free trading bots with which users can automate their trading 24/7 without checking the markets regularly.
You realize that your trading lacks an attentive assistant. You want to delegate some of the routine work. Pay attention to trading bots. If you properly configured them, they will do an excellent job.