Understand How Trading Bots Work » Small Business Bonfire

With the daily advancement of technology and financial markets, crypto trading is the new currency in town. Due to their volatility, digital assets are listed on crypto exchanges just like stocks of public companies and state-owned enterprises on Wall Street.

The crypto market runs around the clock, with prices constantly fluctuating depending on market forces around the world. With a large number of active cryptocurrencies in the world, and taking other considerations into account, no human can efficiently track the price changes.

This brings automated bots into context. These bots are algorithms designed to simplify the trading process by providing accurate and efficient data on the cryptocurrencies a user is trading.

They are tools designed to collect and analyze market data and execute trades on behalf of traders, which essentially means profiting from tiny price fluctuations.

Due to their ability to transmit accurate and timely changes in crypto market prices, they are desirable for investors diving into trading. There are several types of automated bots for crypto trading available in the market.

What Are Trading Bots?

In the virtual world, a bot is a program configured to perform repetitive actions. They perform mechanical and monotonous work for a trader. 

All bots for cryptocurrency trading are generally no different from others: They are used to trade automatically on exchanges according to the specified parameters.

The simplest bots buy a cryptocurrency when the exchange rate falls and sell when it rises. Since many people trade bitcoins passively and do not want to spend enough time analyzing the market, crypto bots like the OKX trading bot, allow users to trade more efficiently without always knowing what is happening in the market at the moment.

December 2020 and January 2021 will be remembered for strong exchange rate fluctuations in the cryptocurrency market. The Bitcoin price – the most popular virtual money – rose extremely at the end of 2020 and maintained a good rhythm throughout last year.

Types of Bots

  • Arbitrage Bots: Taking advantage of existing market inefficiencies, arbitrage trading generates profits by simultaneously buying and selling the same asset in different markets at different but narrow price ranges. Arbitrage relies heavily on execution speed, as it is critical to buy an asset on one exchange and sell it simultaneously on another, but at a higher price.

Among all the providers of automated trading solutions that have integrated this feature into their platforms, the one offered by Bitsgap clearly stands out. All thanks to a variety of tools that allow analyzing data from 25 crypto exchanges around the world to find the best opportunity for a deal.

  • Grid Bots: Grid bots place multiple buy and sell orders within a given price corridor. The orders form a grid above and below the current price – the higher the number of levels, the more intense the trading will be. The increasing number of grids leads to decreasing price differences between them, which decrease with each trade.

Users should be careful to reduce the grids, as some bots do not take into account the exchanges’ fees when calculating profits. Bitsgap is among the few platforms that include all commissions in the profit calculation and simply do not allow bots to execute a trade if it does not bring profit to the user.

  • Futures Bots: The main advantage of futures trading is leverage, which allows traders to open positions that exceed their initial investments, multiplying profits. However, this advantage is the main danger of futures trading, as it can dramatically affect the size of the portfolio and lead to partial or even total loss of investments.

Controlling emotions is especially difficult when trading futures, and this is where the bot fully automates the process by combining grid and DCA technology and uses trend reversal to maximize profits when the trend turns in your favor.

Advantages of Trading Bots

Just as there are disadvantages to using bots in blockchain trading, so are the advantages. What outperforms them by miles. This has been leveraged by the introduction of the Ethereum London Hard Fork. It contains:

By analyzing cryptocurrency market prices by chart patterns and trend lines, the interpretation of data is simplified. Investors can therefore easily read and understand graphical representations and then make informed execution decisions, just like trend trading bots.

Nonstop trading. Bots operate around the clock as they scale the fluctuations and variations in cryptocurrency prices. This allows investors to free up time and focus on analytics and highly profitable smart trading.

Time-saving. Automated bots constantly analyze prices and trading volumes of over ten thousand trading pairs and are capable of executing thousands of trades per minute on dozens of exchanges. No human can achieve this kind of precision, while bots execute them with ease.

Making Profits with Bots

Making and maximizing profits is the main concern of investors. It goes without saying that the greater the risk, the higher the profits. The smaller the investment, the lower the return margins.

Crypto is maturing year by year. It has become a major asset class, attracting investors with promises of high returns and relatively low barriers to entry. Since 2017, Bitsgap has matured with the industry and has become one of the leading companies offering a one-stop automated solution for crypto trading.

Compared to other platforms, Bitsgap offers an unmatched set of tools on 25 crypto exchanges to build a solid trading strategy that can generate stable returns regardless of the market trend.

The company’s blog provides users with articles and pre-built automated trading solutions that allow newbies to avoid the most common mistakes and start profiting from crypto immediately.

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