With cryptocurrency attracting novice and experienced traders alike, the sector is improving consistently. From new exchanges to innovative automated bots, exciting ways to trade crypto are being introduced on a regular basis.

One such method is trailing bot trading. Combining the convenience of the bots with the effectiveness of new methods, trailing is gaining rapid traction among those who want to profit from buying and selling cryptocurrency without any interruptions.

So what is trailing bot and how does it work? The following guide will answer all your questions regarding this feature.

What is the Trailing Feature in Trading?

Whenever you are working with a trading bot that allows you to set basic features within it, you are able to set upper and lower limits to your mechanisms. This feature is most commonly available in bots that operate on the grid strategy.

When the price of the base currency that you are dealing with in fluctuates and goes beyond the upper limit threshold, the bot can stop trading until the price returns to its normal range. Similarly, if the price of your chosen currency goes below the lower limit, the bot stops in that case as well.

These mechanisms are used to help you hold your base currency and the cryptocurrency you want to trade in. The aim is to prevent losses while you trade through an automated bot. If it wasn’t for these mechanisms, those who keep their bots running on their own with minimal maintenance would be prone to lose money.

But this protective mechanism can act as both a blessing and a curse. Since automated bots are largely run by people who do not have time to manage them on a daily basis, this halt in trading can make them lose money by not capitalizing on market gains.

The worst part is that these users are often not even aware that their bots have stopped trading due to the upper or lower limit being crossed. That’s why, whenever they check their tools on a weekly or bi-weekly basis, it is a shock for them to find out that their bots were inactive for a significant period of time.

The trailing feature in trading helps resolve this issue quite effectively. By redefining the use of the upper and lower limit, trailing helps you run your bot smartly even when your defined limits are crossed.

How Does Trailing Work With Bots?

Simply put, whenever you activate trailing on your bot, it lets your bot readjust its function. When the upper limit is crossed, it doesn’t stop trading altogether. Instead, it follows the price on its own and adjusts the grid upwards. This way, your bot defines a new range of upper limit to work with.

This new range comes from very slight adjustments to the lower price, where the feature moves the lower grids to the top. This allows the trailing to word with new limits, but with the same grid distance that you originally defined.

The adjustments are shown in percentages, which describe how much a grid has been adjusted to extend the upper limit range. This percentage is dubbed as the profit per grid.

The trailing doesn’t mean that your trading bot can work with unlimited adjustments and essentially work as a bot with no limits. This feature simply strikes a balance between stopping automated trading altogether and continuing the intended operations with slight adjustments.

In other words, the trailing allows your bot to adapt to new market conditions without putting you at an increased risk.

When is the Perfect Moment to Enable Trailing?

The trailing is meant to keep the bot functioning even during your absence. This is why the perfect time to enable trailing is when you doubt your availability to check on your bots’ progress regularly.

It also works if you are expecting some upcoming market changes and want to make sure that your automated algorithm will not stop during it. This way, you don’t have to miss on even hours of opportunities between your regular checks on your trading bot.

Are there any risks with trailing feature?

The trailing does have a few factors that you need to watch out for.

For instance, when the base currency price increases, your bot is free to use all of the available balance on your account and not just your initial investment. This way, it can continue trading without any interruption. But it also means that you are trading with more on the line than you originally expected.

When the trailing is not properly set up or when you use less options for grid adjustments, the feature can also stop abruptly. This means that you need to be very careful during trailing setup to make sure that it is going to work as you intended.

With that being said, the trailing is safe to use if you know what you are doing. If you set the appropriate number of grid adjustments for the feature to play upon, the trailing stops exactly when you expect it to take a pause.

Popular trading platforms such as Bitsgap advise that you enable trailing with at least 40 grids, with a profit per grid of 0.4 percent or higher.

Can Trailing Bot Be More Profitable Than a Usual One?

Since trailing introduces you to more opportunities to trade, it can capitalize on market movements. This translates to a better performing bot that is able to generate more profits for you.

The key is to set up your trailing effectively. Take your time in learning about how different profit per grid techniques can affect your trading; how the feature works in a fluctuating market; and how you can strike a balance between both currencies in your trading pair. When you are confident in using these strategies in the real world, you can put them to use through your bot and see how they are working out for you.

As always, remember that with a new feature or mechanism, you should only trade with money that you can afford to lose. As a rule of thumb, using a separate account and set of funds until you have a good grasp over the trailing feature will go a long way in protecting your investment.