Cryptocurrency trading has gotten insanely popular in the last few years, and that leaves many people anxious to try their hand at it. Unfortunately, this niche is a lot more complicated than it initially looks, that’s why crypto trading bots became so popular, and today we will help you to choose the best one!
There’s so much to learn if you do everything on your own, and for many people who already have day jobs and aren’t looking to become professional traders, the information overload can be daunting. Between researching different projects and learning various trading signals, it can become a full-time job quickly.
That has left many people turning to
Using automated trading to earn crypto is not a sure fire way to massive profits, and if you’re thinking about using one of these solutions then you should realize this before proceeding. You’ll need to learn everything you can about these methods before handing over your hard earned money.
If you’re keen to learn about automated strategies for earning cryptocurrencies, then we’ve compiled this guide with information and tips to help you. Let’s start by explaining exactly what these tools are.
What is a crypto trading bot?
Crypto trading bots are a form of automation that makes it easier for you to make trades based on certain conditions. These software packages plug into the exchanges that you’re using via API, and they can act out certain trading strategies for you to make money repeatedly.
Once programmed, this software can function with many different algorithms, and they can be set up to automatically take profits for you. Unfortunately, many people purchase a software tool without doing any research at all into how this product actually works, and that gets them into trouble quickly.
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How to choose the best cryptocurrency bot
When choosing the best crypto bot you should be extremely careful! It’s important to do your research on the software that you plan to use and not to just purchase the first one that comes along.
These tools could potentially be made by anyone, and in order for them to work, they will need to have access to your exchange accounts! It’s easy to see how this relationship could go south quickly, and that’s why reputation is key to choosing a good cryptocurrency trading bot.
You should start by checking out that software’s reputation with the community. How happy have they been with it, and has the developer been operating for a while? If this software is relatively new then you should be careful with how much money you trust it with.
It’s also important to gauge the involvement of the developer. Investing in software to trade with is not often cheap, and you should make sure that whoever made it will continue to offer upgrades and support to their customers.
You’ll also need to check what settings and features are available. A crypto trading bot is not a magic button that you press that makes money. It’s a tool that will require adjustments to remain profitable, and good software will have many customizable settings.
You should also realize that not every automated trade tool works with every exchange, and you’ll need to make sure that the one you’ve chosen will function using your preferred platform. The best cryptocurrency bot is one that works how you want and where you want it to.
How to use cryptocurrency trading bots
Many people are confused about how these bots actually work, and it’s important to remember that this is not a hands-off investment. While good automation can handle a lot of the heavy lifting involved with making your investments, your input is still required.
A lot of people are under the impression that they will be able to press a button and that the software will then just make money for them. This is not the case, and you’ll need to understand at least the basics of making cryptocurrency trades if you want to turn a profit here.
Connect Your Exchange
The first step is connecting your exchange accounts to your automation software. You can do this using an API key which almost every exchange will provide for you. This key gives the trading software access to your exchange accounts. That means that they can trade on your behalf, and in some cases even withdraw currency, so be careful!
Your exchange will likely provide you with different APIs keys. It’s important to make sure that you’re providing the software with a limited key that does not allow it to withdraw funds! Your automated tool doesn’t need this permission, and you should not use this API for this purpose.
Make a Deposit
Once you’ve set up the API, you’ll need to deposit cryptocurrency for the software to trade with at the exchange of your choosing. Keep in mind that it might not be a good idea to trust your new automation tool with too much of your hard earned money until you figure out how good it is at trading.
Instead, only deposit enough of whatever base currency you’ll be using for it to test out your strategy. You can always add more later after your software has proved itself to be capable and trustworthy.
Once that’s done, you’ll need to tinker with the initial settings. The exact process will depend on the exact software that you’re using, but these settings are there to help you set up a trading strategy which your bot will follow in order to make crypto for you.
Don’t get too discouraged if your first experiment is a failure. You may need to adjust these settings in order for your strategy to begin making profitable trades. Continue to monitor the results of your experiment and adjust the software’s settings as needed.
Once you’ve managed to create settings that are profitable for you, it will then be safe to begin scaling up your operation. You can deposit additional currency and potentially put more trust into your strategy and into the software as well.
Keep in mind though that even the best trading bot should not be run without supervision! Continue to monitor your software assistant and make sure that it is performing adequately, bringing you profit in crypto.
Tips for securely using automation with your APIs
As you’ve probably guessed, it’s very important to protect your APIs. These are the keys to the castle, and you should not just hand them over to any software that comes along. Only connect your API keys to crypto bots which are trustworthy and have a stellar reputation with the community.
Reputation is the Key
Avoid any fly-by-night operations or vendors that promise you instant profits. Nobody who is offering a legitimate tool will promise you profits, because they can’t. Anyone who does should be considered dangerous.
No Permission to Withdraw
You should also carefully guard the permissions of your API. A good automated trading tool should only request that you give it trading permissions. Don’t use an API that will allow the software to withdraw money from your cryptocurrency exchange account!
This should only be done by you manually, and you should make sure that you are using 2FA protection for your account logins to prevent phishing attempts from unscrupulous software providers.
Protect Your Account
All it takes in most cases is for them to steal your email address and password. This will give scammers all that they need to take over all of your exchange accounts and steal your money! Use 2FA on your email addresses and all of your exchanges as well.
Use New Account
It might also be a good idea to register an entirely new exchange account for the cryptocurrency bot to use. This prevents scammers from gaining access to your real accounts via the API if there is some kind of security breach or shady business going on.
However, it’s always a good idea to only give the bot whatever amount of money you are actively trading. Make sure to regularly remove profits to a more secure wallet for your protection. A hardware wallet is best, but even a hot wallet is better than leaving a large amount of crypto on an exchange.
Is automated trading profitable?
It can be very profitable, but no bots will promise profits to you. This is because bots are only a tool, and if you don’t understand how they work then you won’t make any money.
This is not a magic software package that prints money. Trading bots do need good strategies to be successful, and those are provided by you.
Are crypto trading bots legal?
Yes, trading bots are legal. You should be able to run them on your exchanges without any issues, and without getting your account suspended or closed.
What strategies do cryptocurrency robots use?
They often utilize a strategy called scalping. This is a trading style that specializes in making profits on tiny price movements. It’s a popular trading style, even for human traders, but it can be rather tedious since so many small deals must be made to secure a profit.
That’s where trading bots come in! By automating the process, the bot can constantly trade for you when the correct conditions arise without you being around. This allows you to make profits without needing to stay glued to your computer.
Tips for setting up your automated trading bot
When setting up your trading bot it’s better to use settings that take smaller profits. You should avoid high-risk settings and focus on what bots are good at: tedious tasks.
While for human traders, performing hundreds or thousands of small trades would be infuriating, automated software excels at this activity. This allows you to take advantage of their tireless efforts and earn more cryptocurrency.
Pros and cons of crypto software
There are many reasons to use automated trading strategies in crypto, but there are also some very good reasons not to. Whether or not you decide to use a trading bot for all or even only some of your trading will depend on your goals and your risk tolerance.
Pros of automation
- Bot automatically trades for you to free up your time
- Eliminates the ability for your emotions to cause you to make bad trades
- Increases discipline, because the software is trading and not you
- Allows for consistency in your strategies
- Orders are executed faster thanks to software
- You can diversify your strategies by trading on multiple exchanges at once
Cons of automation
- You have to trust a third party with your account APIs
- They can’t account for dramatic price spikes or drops outside of their programming
- You still need to monitor everything, they don’t provide hands-off investing
- Some of them are difficult to set -up and could require a large initial time investment
In closing, it’s important to remember that crypto trading bots are just a tool, and even the best ones are not bulletproof. They are not a magical way to make money without any work. However, if you’re willing to put in the initial time investment to learn how they work and set them up properly then they can be very profitable.
All cryptocurrency investors should make sure that they are practicing good safety habits with their money, but for those using automation software, it’s even more important. Not every software is created by someone who is looking to do good.
Many of these software tools could be extremely dangerous for you to use, and you should make sure that the one you pick has a solid reputation and that you take steps to protect yourself. This includes limiting the software’s access to your funds and watching it carefully when using cryptotrading bots.