Photo Credit To Cryptohopper Via Medium
Making a profit on the 24/7 crypto market can be difficult. This is why using a trading bot can be useful. However, it is worth noting that trading bots do not mean you will automatically make money. Ensure that you conduct a lot of research and carefully set up your trading bot to avoid huge losses.
What are Crypto Trading Bots?
Bots are software that automatically manages your trading on the crypto market. The trading bots use trading software that is connected to an exchange(s) via software called an API. It makes it possible to manage your trades by setting customized strategies that can be repeated over time. With a bot, you can manage some or all your trades using a program. Using bots to trade is legal and most exchanges allow the use of bots.
Some Of The Majors Players In This Space?
Crypto trading bots have been around for some time now, and many investors find a lot of value in the techniques. One of the larger players in this space would be Cryptohopper. The company has a solid platform and states they have “helped 140,000+ traders to get results.” Cryptohopper auto trading / portfolio management infrastructure gives you exposure to Bitcoin, Ethereum, Litecoin and 100+ other cryptocurrencies. When crypto trading bots first rolled out, many focused on just a few cryptocurrencies. Cryptohopper has built out their offering model, and gives users the ability to diversify among many cryptocurrencies. One of the other cool features on Cryptohopper is the ability for users to “mirror other trading pros effortlessly.” This can be an effective tool for beginners who are just entering the trading space.
How to Use Bots the Right Way
After you pick a bot, you will still need to make the right choices in order to make a profit on the volatile trading market. Here are some tips on how to do it the right way:
- Set up API Keys with Your Exchange
Each exchange has specific instructions on how to set up your bot. Ensure that you keep your key and passwords a secret. If your keys fail, go through the instructions again or contact customer support at the exchange.
- Avoid Giving Your Bot Withdrawal Permission
This is unnecessary and a bit dangerous. You should only do this if you doing arbitrage between different exchanges. If a bot cannot withdraw funds, the worst thing a person can do with your bot is make messed up trades on your behalf. If this happens, you can change passwords, delete keys, and report to the exchange.
- Make Use of Two-Factor Authentication
To ensure you are safe, two-factor-authentication is important. The harder it is to access platforms you use, the safer you will be. It is also recommended that you set up a different email for each platform.
- Make Use of Live Testing and Back Testing
Backtesting allows you to test your strategies based on past movements in the market. Live testing lets you simulate trades based on the live market. Most bots come with these features. However, live testing is not as common as backtesting. Before you settle on a strategy, backtest it as many times as you can using different sets of data.
- Not All Coins are the Same
While the crypto market is volatile, some are more volatile than others are. Thus, do not apply the same strategy to each cryptocoin. Ensure you understand this when setting up your trades.
- Make Full Use of Stop Loss
All bots come with a stop loss. Sometimes, the crypto market can nosedive in a matter of minutes, less time than you can react. As a result, you need to set up stop loss. This ensures that you minimize the amount you lose during a trade.
With these few tips, you should be able to take advantage of trading bots. If you are new to bot trading, consider starting with small amounts.
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