Bots For Trading On Cryptocurrency Exchanges. How To Choose And Use?
Types of cryptocurrency bots A robot (bot) is a program that has a specific algorithm. She buys or sells assets based on the market situation. The first trading robots appeared in 2012, and since then they have become more and more perfect. According to some estimates, on Forex and in binary options, more than 90% of short-term transactions are made either by bots or with their participation.
There are 4 types of cryptocurrency trading bots:
- Exchange – Acts on a specific trading floor. Earnings are made on different timeframes from short to long.
- Arbitration – Operates on two or more trading platforms, the main income is on the difference in rates between them.
- In the Telegram channel – Searches for buyers or sellers in the Telegram.
- Bots for collecting cryptocurrency through faucets. Faucets are online services that distribute satoshi or other cryptocurrency pennies for free. They are quite well protected from bots and require captcha. Until written, there are only promising, but not ideally working, developments of good robots that can earn decent money on cranes.
How the robot trader works
Bots for automatic cryptocurrency trading operate according to special algorithms, trading strategies, which, in turn, are created on the basis of technical analysis of patterns. To conduct an independent analysis, you will need historical data on course changes (charts for at least the last year), sometimes it is possible to find a relationship with the news. In addition, after determining the patterns, the strategy is tested on the same historical data, the number of potential losses and profits is calculated. And if the results are satisfactory, the rules of the robot’s trading strategy for the cryptocurrency exchange are created on their basis. Some bots additionally use indicators that allow you to analyze the current market situation, while others are executed only when certain market conditions occur.
Trading strategy for exchange and arbitrage bots can be very simple, for example:
- When the price of cryptocurrency decreases, you need to buy it.
- When the price rises, it must be sold.
Or much more complicated. The algorithm can take into account recent historical data, indicators, and be guided by signals. High-quality bots analyze more than a hundred parameters when placing orders. In some programs, the algorithm does not change, but there are bots for which you can connect or configure additional parameters. This option is well suited for experienced traders with a preference for their trading style. A standard bot can do the following:
- Assess the market situation, monitor the rate for a given period of time, make a forecast.
- When trading manually, it can show signals to the trader.
- Create orders to sell or buy.
- Provide reports on the received profit or loss.