Table of Contents:
What is a crypto trading bot
Most people imagine crypto trading bot as those super-advanced NASA supercomputers that control the crypto markets and leaves no chance to the retail investors. I often see people complain about the bots on social media. Not realizing that behind that bot, there is a trader.
The trader takes his trading strategy and writes it into a program. This way, the bot looks at the market 24/7 for him, and based on what the trader told it to do, will buy and sell Bitcoin or any other crypto that the trader wants.
A crypto trading bot can be coded in less than 20 lines of code and you can profit from it personally. There is nothing magical about them, they are only lines of code created by a trader.
Here’s an example of a trading bot in action, this is our free Breakout script for crypto:
Why you should use a trading bot
Trading is tough enough to start with, you need to keep looking at the chart and make sure that your positions are doing good. Now, you will also need to control your emotion to make sure that you are taking clear and smart trading decisions.
Lets check it out a bit…
Better trade execution
A good trading strategy involve stop-loss, take-profit and position size.
If you are trading on a chart with a timeframe lower than 1 day, you probably know that setting up a trade quickly can get difficult when the markets are volatile. Well, the trading bot doesn’t care if you trade on a 1-week candle chart or a 1-minute candle chart. It is just sitting there waiting for your condition to be fulfilled.
Once your condition are reached, the trading bot simply execute what you told it to do, calculating your stop-loss, take-profit, and position size. Then it place your order on the exchange and waits for the next condition to be meant. All that while you could be sleeping or in the pool.
Emotionless trading
The worse enemy of a crypto trader is not the whales, it’s not the banks or the Chinese new year (lol). IT IS HIMSELF!
Humans are full of emotion and those emotions are good for many reasons in our daily life. But they are devastating in the trading world.
The emotions a trader go through are greed, fear, euphoria and other emotion that will alter your vision of what is really happening. Fear can actually paralyze your decision process and by the time you get out of your paralysis, your account might be down 50%.
Trading emotionless will increase your trading results dramatically, by allowing you to see clearly, and execute your strategy without any fear or greed
If you ever traded the crypto market, you know what I’m talking about.
So what is the best way to remove emotion of your trading? Well, I guess you already know the answer to that. Use a bot!
Backtesting increase your confidence
The last reason I want to push on why you should be using a trading bot is that it gives you the ability to backtest your strategy.
When you create a trading bot, you can see how it would have performed in the past. You will know right away if the strategy you are using is worth trading or not. If it is, you will have the backtest to prove it. The proof that the strategy works will increase your confidence in the strategy. With more confidence, you will increase your trading even more. You will also sleep better at night knowing that your bot will do exactly what it is supposed to do and that in the end, profit will come..
Here’s an example of a trading bot backtest, again, using our free breakout strategy:
Can trading bots make money
Yes, it can, by now you already know that a bot is simply a trading strategy that has been automated. So your bot can only be as good as the strategy it is executing.
You need to know though, that the trust you have in the bot can affect the results of the bot. Every trading strategy will suffer at one point or another of what we call drawdowns (% loss from your equity all-time highs). If you do not trust the trading bot, you will probably stop using it as soon as it starts losing a bit of money.
Then you will jump from bot to bot, always exiting with a loss, and you will start to believe that trading bot doesn’t work.
But that is not the case, you just didn’t trust it long enough for it to work.
So, before you buy a bot or join an automated trading program (copy-trading), you need to make sure that you understand how the bot is working, why it is working, and the downside of the bot that might occur from time to time.
Once you trust the bot, you can go forward and start trading with it.
If you are just buying a bot because the creator promises you that you will make X% every year, you will lose money.
Below are the results for 90 days of trading for our Trend Following V2 bot and our Account building bot:
How much does a trading bot cost
Building your own crypto bot
If you build it yourself, it will be free! But then you would need to know how to code. If you don’t know how to code, you can always hire someone that knows how. A platform like freelancer.com hosts 1000s of developers that can help you build your own trading bot. All you have to do is post a new job, and they will come and bid on your project.
A trading bot could range between 100$ to around 5000$ USD depending on how complex and how many variables you need for your strategy to work.
If you are a quick learner, Pinescript (tradingview coding language) is an easy language to learn with a lot of free bot examples that you can use to create your own custom one.
There is also a lot of resources that you can find on google and YouTube that will help you create your first bot.
Using someone else bot
Using someone else bot is a very easy and effective way to start trading automatically.
Also, called copy-trading platform, there are more and more websites that allow you to use other trader’s crypto bots.
Those platforms are great as you can usually start trading within a few minutes, see the results of each bot, and have a full description of how it works.
The most popular copy-trading platforms are Zignaly , 3Commas, and Cryptohopper, On these platforms, you will find 100s of bots using a wide variety of trading strategies.
What is the best crypto trading bot
There is no single best crypto bot out there. There are many bots that would fit with different types of people.
What you need to find, is the best crypto bot for you. The crypto bot that you believe in, trust, and know that it will make you money. Making money in trading is not a sprint, it’s a marathon. What matters most is not the returns, it’s how you get to those returns.
A trading bot with 100% in a week surely is attractive, but don’t forget, the bot is probably using over-leverage and big position sizes, which can result in a huge drawdown.
If you are good with a huge drawdown (-60%), this bot could be perfect for you. But if you are risk-averse, maybe a bot that has lower results but a stronger risk management policy would be a better choice for you.
You have to make the best crypto bot in your head first, think about what you are looking for in that bot, once you know what you want, believe me, you will find it.
Platforms like 3Commas or Zignaly are the host of 100s of automated trading bots. Make sure that you read their bot description, understand it, and find exactly what will become the best crypto trading bot for you!
Here’s a few example of the variety of trading bot out there:
That’s only 6 of them, but there are 100s like those and you will have to choose the best for you.
For example, those 45 degree equity chart might appeal to most new crypto investors. But to me, all I see is the current -19% and-12%, those were way lower than that yesterday. Which tells me that the bot is not closing losing trades and could drag my equity down by a lot.
Some might not care about it, but it wouldn’t be a bot that I would use.
I have seen many bot go from +300-400% to -50-100%, liquidating all there investors.
This is why it is important for you to do your research, and only invest what you are willing to lose.
Conclusion
Trading bots are there to make your life easier and your trading better. But it is not a plug-n-play solution that requires no effort from your side.
The best way to be successful with a trading bot would be to create your own, but if you can’t, make sure to do in-depth research about the bot, ask question to it’s creator and always make sure that you are 100% comfortable trading with it.
You should start by using a small amount of your trading equity and increase it as time pass and as your confidence grows with the bot.
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