Four years ago, the idea of trading crypto in general and Bitcoin in particular was seen as something for the specialists. It was a new, hi-tech world that few people understood, and its most famous characteristics were risk and volatility. There are a number of factors that have led to the phenomenon entering the mainstream. The sight of those early Bitcoin investors making their billions caused plenty of people to pay attention, and the thousands of websites, blogs and other news outlets that popped up led to a better understanding of how crypto works from both a technological and economic perspective.
Yet the biggest influencing factor of them all has been the introduction of trading platforms that anyone can use. Of course, just because you can do something doesn’t necessarily mean you should. But with the latest platforms like Cryptosengine, automated trading means you can leave the decisions about buying and selling in the hands of an AI algorithm that knows what it is doing. Let’s find out more.
About trading bots
A trading bot is simply a piece of software that interacts with the financial exchanges to do your buying and selling for you. It makes its decisions on the basis of the same market data that you would pore over, such as volumes, price movements and so on. Each bot is preprogrammed according to a host of rules and parameters. You then have the ability to modify these to suit your personal circumstances in terms of preferences, risk appetite and so on.
Trading bots are actually nothing new, and software like this has existed in various financial markets, particularly on the Forex scene, for years. However, they have typically been prohibitively expensive – a Bloomberg terminal, for example, could easily set you back a five figure sum. The difference today is that advances in AI have improved both the effectiveness and the accessibility. Now, any amateur crypto trader can have a trading bot right there on his or her smartphone for nothing.
Benefits of a bot
Blockchain is all about transparency, and this works in the trader’s favor. There is open access that simply isn’t available to private individuals on the more traditional financial markets.
Using a bot means anyone can take advantage of this without having to dedicate hundreds of hours towards first understanding and then constantly analyzing this market data. Keep in mind too that the crypto market never sleeps. With a trading bot, you can keep on top of the game in a way that would simply not be possible without one.
There are two main strategies that you need to consider when trading crypto using a bot:
This means buying low on one market and quickly selling higher on another. This used to be a rich source of income across the different crypto exchanges. These days, there is not such a significant spread between them, but a bot is the perfect tool to jump on those differentials when they do appear.
2. Market making
This involves making many rapid transactions and leveraging the spread between the buy and sell price. Again, it is practically impossible to make significant profits this way manually, but a bot can give you the edge.
Ultimately, edge is what it is all about. Using a trading bot doesn’t guarantee success – nothing does. But a good bot is a powerful tool that will help you make the right decision more often.