Imagine this: You are sipping your morning coffee or chilling with your friends, and at the same time, your crypto trades are taking place just the way you like. Wouldn’t that be great?
But how can that be possible, you ask?
The answer is “Crypto Trading Bot”- the trading automation Ginnie that can do magic to your crypto game. Whether you want to become a pro trader or want a secret weapon to make your crypto trading easy and efficient, knowing about trading bots might be the only key piece of knowledge you need.
So, let's not waste another moment – it's time to dive in and swiftly acquire this essential knowledge.
What are Crypto Trading Bots?
A Crypto Trading bot is a digital tool or software that buys or sells cryptocurrencies according to some preset rules to make money for its owner.
It analyzes market parameters like price fluctuations, volume differences, and liquidity crunches to match its instructions and execute the preset trading strategy. While crypto trading bots manage cryptocurrency trades, similar ones exist for traditional investment markets. One clear benefit of a trading bot is the elimination of emotion-based trading decisions that usually cloud the judgments of traders. However, no trading bot guarantees profit every time.
But now the burning question emerges: Why would anyone risk their valuable investments to a trading bot instead of managing them manually?
It is because the crypto market is like a never-ending roller coaster ride, with prices and scenarios changing around the clock. Monitoring such a volatile market 24/7 is humanly impossible, making it challenging to make profitable decisions consistently. Being available to trade anytime becomes even more challenging if you are a busy professional juggling work, family, and other activities.
Furthermore, we all know that every second counts in the crypto market. At one moment, it's a market crash; at the next, it's a euphoric surge. In such cases, if you want to perform multiple cryptocurrency trades strategically, you might not get enough time to do that before the market sentiments change again. It is where crypto trading bots can step in to help.
Trading bots can work like your digital assistants, who will do exactly what you trained them to do. You can use them to spontaneously execute trades or short-sell when the price of cryptocurrencies reaches a certain level. Some bots can also track the historical price movement of digital assets and form the best trading strategy accordingly. However, most traders use them to execute sophisticated tasks like arbitrage.
Yes, you heard that right.
Trading bots can do arbitrage, too. They are better than you think. For those who do not know arbitrage, it is when you buy something for a low price in one place and sell it for a higher price somewhere else, making a profit from the price difference. Many crypto traders do it with cryptocurrencies. They buy crypto from one exchange and sell it to another Exchange, where that crypto is trading at a higher price. Kimchi Premium is the best example of it.
Coming back to Crypto trading bots, some of these trading bots can quickly react to the difference in prices of a cryptocurrency at two different platforms and execute arbitrage trades to generate profit.
Let’s take an example to understand it.
Assume that one day, the price of Ethereum varies on two Crypto exchanges. In that case, an arbitrage bot can spot that price difference and act quickly to execute a trade by buying ETH at a lower price from one exchange and selling it at a higher price on another exchange. While humans can also do that, they may or may not be able to do it before the exchanges correct their ETH prices. However, a bot can work faster and make it happen.
Now that you know what trading bots are and how they can benefit you, let’s solve the next mystery: How do these crypto trading bots work?
How do Crypto Trading Bots Work?
Crypto trading bots work by observing different technical market indicators or parameters and then analyzing them over time. Once they analyze the information, they process it with historical data and create strategies according to their pre-programmed objectives.
This whole process usually occurs in three functions, which are as follows
Signal Generator for the Trade
Under this step, the crypto bot analyzes historical data and the present market movement of a specific cryptocurrency to make predictions. Based on those predictions, it generates either a buy or a sell signal.
Risk Allocation of the Trade
This function considers the possibilities generated by the signal generator and decides how much investment should go into it. The bot performs a comprehensive risk analysis on the possible outcomes of the trade to execute. It also takes help from a specific set of parameters and rules programmed into it.
Execution of the Trade
As its name suggests, the Execution function executes the actual trade of the involved crypto asset (s). It follows all the steps in crypto exchanges to execute a trade.
This whole process is a well-choreographed dance with many moving parts. Let’s simplify it by introducing an example.
Assume that a trading bot is programmed to read the Bitcoin chart patterns and automatically deduce the buy or sell signal accordingly.
Let’s also assume that the trading bot has been configured with the two rules below
Buy Rule: If the bitcoin price movement makes a chart pattern that is considered bullish, the bot will place a buy order.
Sell Rule: If the bitcoin price movement makes a chart pattern that is considered bearish, the bot will place a sell order.
Then, whenever that trading bot detects a bullish chart pattern like an ascending triangle (a chart pattern that is usually considered bullish and rarely results in bearish movement), it will automatically initiate a buy signal. In other words, the trading bot will execute a Bitcoin buy order on your behalf.
On the other hand, if the bitcoin price movement makes a bearish chart pattern like the double top (a chart pattern that is usually considered strongly bearish), it will automatically place a sell order.
Notably, it is a simple example to explain the workings of crypto trading bots. Real trading bots can perform more complex and sophisticated functions by considering many other factors.
While many crypto trading bots are free to use, some come with hefty charges. Moreover, each bot needs a unique combination of tools and hardware to function properly. To choose the right one, you must know and understand their types.
Types of Crypto Trading Bots
Crypto Trading Bots are mainly of three types
Trend Following Bots
As the name suggests, these trading bots aim at market trends and execute their actions accordingly. They consider the market momentum for a particular asset and give signals in a way that benefits their owners from that momentum. If the trend signifies a price increase, these trading bots execute a buy order. On the contrary, if the trend signifies a price decrease, these trading bots sell their holding of a particular asset. In other words, they buy when prices are increasing and sell when the prices are falling.
Arbitrage Bots
Arbitrage bots benefit from an asset’s price difference between different crypto exchanges. They usually buy a cryptocurrency from an exchange where the price is lower and sell it on another exchange where the price is higher, making a profit from the price difference.
Market-Making Bots
Market-making bots are those bots that place bids for buying and selling orders on a platform to provide liquidity to users. Many cryptocurrency exchanges use them to create limit orders for their users so that they can trade anytime with minimal human intervention. If a trader places an order at a price different from the market price of an asset, these bots search markets outside the platform to place an order there on behalf of the trader.
Now that we've explored the ins and outs of trading bots, it's time to find the crème de la crème – the best ones in the game.
Which are the Best Crypto Trading Bots?
Here are the top 5 best Crypto Trading Bots
Pionex
Pionex is one of the most renowned names in the Crypto trading bot world. It is also a full-fledged crypto exchange with dozens of trading bots to offer. It has 12 free and many other highly affordable trading bots. Some of these bots include- the DCA (dollar cost averaging) bot, Grid Trading Bot, Rebalancing Bot, Infinity Grid, Arbitrage bot, and many more. While the grid trading bot of Pionex allows its users to trade crypto within a specific price range, the DCA bot lets them buy dips to lower the average price of their holdings. On the other hand, the rebalancing bots let their owners hold multiple coins for a long time and make a balance in their holdings.
Not only does it offer pre-programmed bots, but Pionex also allows retail investors to develop new trading bots with little coding experience. The best thing about the trading bots of Pionex is that you do not need to integrate them into a third platform. It is because Pionex has its native crypto exchange where you can use trading bots.
3Commas
The next best Crypto trading bot is 3Commas. Once connected, its trading bots can execute transactions on behalf of the user round-the-clock. 3Commas currently serves over 1,00,000 users worldwide and is compatible with 23 crypto exchanges. 3Commas is best known for its DCA and Grid bots that work with the aim of risk management and the best interest of their owners.
A unique thing about 3Commas is that it lets you choose different strategies for the bots according to the market conditions. It involves strategies for a bullish market as well as a sideways market. You can also create your bot for its available presets that involve trading pair options, bot types, strategy types, and many other useful ones.
CryptoHopper
CryptoHopper describes itself as the most customizable crypto trading bot. Founded in 2017, this crypto trading bot platform offers an all-in-one solution for traders to automate their trading practices on different exchanges. It's an AI-driven bot platform that makes crypto trading easy and fun for everyone. Apart from offering customizable trading bots, CryptoHopper also offers other exciting services like social trading, portfolio management, trading terminals, paper trading, and many more. You can connect it with your crypto exchange with just a few simple clicks.
Unlike other Crypto bots we discussed so far, CryptoHopper also has copy bots that efficiently copy an expert trader one-on-one. If you want AI to handle all your trading activities, it is also possible through it. DCA automation and strategy designers are other beneficial features of this AI crypto trading bot. It has both free and paid versions available. You can choose whichever suits your trading needs and capabilities.
HaasOnline
The fourth best Crypto trading bot in our list is HaasOnline. It works promptly to help traders eliminate emotions from their trades by automating them with math and probability. HaasOnline lets you create trading bots for DCA, grid trading, arbitrage trading, and reselling without coding. Its best features are automated trading, market research, and portfolio management.
All of these features together make Haasonline a complete automated trading toolset. It is important to note that Haasonline is not free to use. It has a subscription-based model starting from $7.5/ month.
Altrady
Altrady is a crypto trading platform that offers DCA bots, GRID bots, and signal bots to make trading seamless and beneficial for everyone. It also provides a risk calculator for traders to manage their crypto trading risks and make informed trading decisions. With a full package of both exchange and automation tools, Altrady claims to streamline the trading process and eliminate human errors.
You can manage multiple exchange portfolios from this dynamic platform. Over 70,000 traders are using Altrady to level up their crypto game. Altrady has both free and paid versions to cater to the needs of beginner and experienced traders.
Each of the aforementioned crypto trading bots has its unique strengths and strategies. But the key to choosing the right one from them lies in aligning their capabilities with your specific goals and risk tolerance. Before making the decision, do your research and comparisons. Remember, the best bot is the one that empowers you to achieve your financial objectives seamlessly. So, as you navigate the thrilling crypto markets, keep your goals in sight and choose your trading bot wisely.
Departing Note
In the cryptocurrency world, every second counts. To make the best of every second, crypto traders have started using trading bots as their assistants to perform beneficial trades. These bots are trainable and programmable to meet the needs of different traders. Each of the top 5 crypto trading bots we've explored possesses unique strengths and strategies. However, the magic happens when you choose the right one according to your needs and goals.
FAQs
Are crypto trading bots legal in India?
Yes, Crypto trading bots are legal in India. Many registered crypto entities actively use them to streamline the trading processes for their users. However, the legality also depends on the specific use of the trading bot and its source. Thus, it is essential to use crypto bots responsibly.
Is crypto bot trading profitable?
Whether crypto bots are profitable or not depends on how you use them. If you choose and integrate them wisely, they can boost the efficiency and frequency of your trades, resulting in profit. However, they do not guarantee any profit.
Are crypto bots risky?
Yes, Crypto bots can be risky. They automate trading but are not loss-proof. Market volatility and unexpected events can lead to losses. Misconfigured bots or relying solely on automation without monitoring can amplify risks. It's crucial to use them cautiously and understand the potential pitfalls.
Are there any free crypto trading bots?
Yes, there are many free crypto trading bots available in the market. Some of the best free crypto trading bots are Pionex, Cryptohopper, Traility, Altrady, Arbitrage Scanner, and many more. However, remember that most free crypto trading bots come with limited functionalities. Thus, if anyone requires advanced features in your crypto bot, opting for a paid one with reasonable pricing is better.
What are the best FREE crypto trading bots?
Some of the best-known free crypto trading bots are - Cryptohopper, Arbitrage Scanner, Pionex, Traility, and Altrady. They are highly trusted and preferred by crypto traders to automate some of their trading activities. You can choose whichever you like according to your specific needs and goals.
