It is no secret that cryptocurrency bot trading is becoming a viable option for supplementary income. But it also means that it is being used by people who already hold day jobs as their primary source of revenue.
Due to the way they are built, these automated solutions help people trade crypto assets while also being able to pay attention to their primary jobs. As a result, people who want to trade cryptocurrency with minimal investment of time hail automated trading as a viable option.
But trading bots are not the panacea to the woes of the busy trader, and they are not a magical solution to get rich overnight. Just like any other financial tool, they are prone to make mistakes during their working mechanisms. That is why, if you set up new bots without identifying the risks, it can lead you towards losing your money as opposed to earning profits.
To help you avoid that route, here are the top 5 reasons why you lose money with trading bots. Knowing this information will help you setup your bots in a way that they don’t only work with minimal investment of time, but also function with minimal losses.
You Choose Shitcoins to Trade
Shitcoins are simply altcoins that have no real purpose, no popularity, and no growth working for them.
Despite the red flags, many traders choose to setup their bots with these shitcoins anyway. It’s because these options carry a bigger hope for them hitting large profits with low investment.
The approach does work in limited cases. This is especially true when the market is going through a transformative phase in regard to the value of Bitcoin. But this happens only rarely, and shitcoins with their zero sense of purpose actually end up costing you more money than you could ever imagine.
Putting two and two together, you can easily see that this is not really the fault of the bot tools. It has more to do with the choice of cryptocurrency you are trading with. That is why it is highly important that you select your trading pairs very carefully.
Choosing automated solutions that help you set up your trading pairs is essential in controlling this factor. Keeping this in mind, make sure that you are always setting up bots that give you complete control over what crypto to trade.
You Are Not Managing Your Bots
One of the most important things to remember while using any trading bots is that you have to manage them to a large extent, especially during the setup phase.
As smart as these bots are, they are not capable of doing everything on their own. If you leave things completely on the automated system, then you have higher chances of losing money than you originally thought possible.
That is why, even though you don’t have to micromanage your algorithms every second of the day, it is prudent to go through their statistics and activities at least a couple of times during the hours that you have set up for them.
This helps you determine what exactly your bots are doing with your funds. As a result, you can make any necessary changes in time and prevent large losses of money.
This doesn’t go against the “automated” functionality of these bots. They still perform their functions as they are supposed to. But your guidance right before you put them on auto-pilot helps you generate profits and minimize losses optimally.
You Pick an Irrelevant Time to Launch the Bot
A big mistake that new cryptocurrency traders often make is to launch their bots at inopportune times. Much like any other financial decisions, automated scripts can only work well if they are executed at the right time.
If you launch your bot at a time when the market is unstable, then it will not be able to perform to its fullest extent. On the other hand, waiting for the right opportunity and executing your bot when the market is stable helps you get maximum benefits.
Analyzing the market and related conditions may seem like a daunting thought, but it is not that difficult when you know what you are doing.
You can read assessment articles and news pieces to gather information. You can study market trends such as pump and dump schemes. And you can learn about the emotional response around Bitcoin and other cryptocurrencies during specific times.
All of these factors help you determine the larger movement of the market. As a result, you can launch your trading bot at a time of market stability for maximum gains.
You Have Small Bankroll
Working with a cryptocurrency bot with minimal investment would not help you reap the benefits that automated trading has to offer.
This is especially true when you are using paid bot services. It’s because you don’t only have to generate enough profits to pay the subscription fee, but you also need to meet your goal of extra income in mind. If you pay for a bot upfront with a lifetime license fee, then it is also important that you generate enough profits overtime to meet that investment.
These objectives can only be achieved when you are working with a large bankroll. This helps you make the most out of market manipulation opportunities.
Whenever your bot sees a chance of profit, you can set it up to use a certain amount of money that brings you optimal revenues without jeopardizing your whole investment. This cannot be achieved via a small bankroll, since it puts your complete investment at risk while also returning only minimal profits.
A large bankroll also helps you generate more profits in comparison to a smaller investment. Keeping this in mind, make sure to start with a substantial investment amount whenever you start a trading bot.
You Have Chosen the Wrong Algorithm or Bot Service
Last but not least, another reason why you may lose money with a trading bot is due to choosing the wrong algorithm or service provider.
With a plethora of cryptocurrency trading options out there, this is a very easy mistake to make. But it is just as easy to avoid with proper planning and due diligence.
Make sure that you read extensively about any algorithm or service before you choose to go with it. Researching reviews, studying the pros and cons, and comparing different services against each other might take some time at first. But it goes a long way in helping you steer clear from services that end up costing you money for no good reason.
As a beneficial practice, make sure to read the reviews on this site before you try any service and use the backtesting feature to know more about the capability of the bot in question. This gives you an idea of the bot’s capabilities and helps you get the most out of them.
Remember, whenever dealing with a new trading solution, only invest money that you can afford to lose. Never put your savings on the line, and keep a clear head while making any investing decisions. All of this goes a long way in helping you make money from crypto trading as opposed to losing it.