A cryptocurrency trading bot is an automated trading system that opens and closes transactions according to its algorithm. Trading robots facilitate routine trading processes, save the trader’s time and respond faster to changes in the market situation. What are the advantages and disadvantages of trading with the help of robots? How and for what purpose are bots used for trading on the cryptocurrency exchange?
There are two types of trading bots. Ordinary robots work according to a specific pattern. They enter the market if the conditions laid down by the creator are met. Arbitrage bots are designed to operate on multiple exchanges. They buy cryptocurrency on the site where it is cheaper and sell it where the price is higher. The difference in price minus commissions is the trader’s profit. Those who want to earn a passive income are recommended to use Stoic software – the bot that conducts research and analyzes data for maximum profitable trading. Using such bots as Stoic, you can forget about security problems and hidden fees.
A trading algorithm capable of flawlessly performing the work of a trader on a fully automatic basis has not yet been created. As a result, bots have both advantages and disadvantages. Knowing about both makes it possible to predict and guide the operation of an automated trading system in the cryptocurrency market.
Let’s Start with the Pros
Unlike a trader who has emotions, the trading algorithm trades strictly according to the rules. It will not open a trade if there is no signal. It will not enter the market by intuition and will not close the order ahead of time for fear of losing what is already there.
A cryptocurrency trading bot responds faster to a volatile market. Trading robots are not wrong. If the trading strategy involves specific calculations, the algorithm will cope with the task faster and more accurately. A trader can make a mistake, and robots are never wrong.
Now About the Cons
There is no universal bot for automated trading, which only does that on autopilot earns profit for its owner. Any algorithm is imperfect. Therefore it needs control and testing. Do not expect that after installing the bot, money will flow to you on its own.
Most bots cannot analyze the market and trade according to a mathematical algorithm. This feature can be a disadvantage. For example, the cryptocurrency market reacts to news, rumors, expert opinions. Yet, a trading robot does not take these factors into account. Automatic trading is tailored to the standard. However, the market is too volatile. It cannot always be judged by templates.
A cryptocurrency trading bot is a third-party program, so you need to be aware of the dangers that can wait for a trader when using it.
There are many cases described on the Web when bots transfer profits from owners’ accounts to accounts on third-party accounts. This can be either a one-time situation or a transfer of a small part of the profit regularly. There are also trading robots that collect personal information about users and pass it on to third parties. The reliability of the bot can be judged by the reviews, but only the creator can guarantee it.