Crypto trading is energy intensive. Most of the trading strategies require you to understand the various market trends and keep updated. You also might have to enter and exit positions at short notice which makes it hard for humans. Moreover, crypto is a global market that runs 24/7 every day. As humans, you can’t trade full time.
To help with all the shortcomings, the crypto community is embracing trading bots. This guide looks into what they are and if you should use them.
What are crypto trading bots?
Crypto trading bots are computer software or programs meant to analyse the market so you can trade crypto at the right time. They run data on market trends and various developments before placing a trade for the most profits.
If you are looking to get the most out of any crypto trade, then you must nail the timing. You need to enter and exit the position while earning the most. However, humans are not accurate as they cannot analyse data fast enough compared to machines. The bots rely on market data analysis and market risk prediction to sell and buy assets.
By using the trading bots you can analyse the market and place a trade within the shortest time.
What are the advantages of crypto trading bots?
Crypto trading bots are becoming popular due to the various benefits they offer the traders. These include;
- Emotionless trading – unlike humans that are prone to FOMO, bots never enter a position based on influence from other sources. Instead, it relies on data and analysis.
- Risk diversification – as a single trader, you might not have the capacity to analyse multiple tokens and trade at the same time. However, the bots can be set to analyse a variety of tokens and check through various exchanges at the same time.
- Consistency – most traders tend to burn out after some time of losses or trading in general. However, you never have to worry about time outs. You might only experience downtimes that you can solve with troubleshooting.
- Faster trading – everything about crypto trading bots, from analysis to taking and exiting a position, is fast. This increases profitability and reduces losses.
What are the risks of using crypto trading bots?
Even though the trading bots come with multiple benefits, they have downsides. These include;
- Scams – As trading becomes popular so do scams. Some developers are producing low-quality bots then sell to unsuspecting clients. It means you must ensure proper research before settling on a trading bot.
- System crashes – crypto trading bots are vulnerable to malware attacks and will crash from time to time which impacts your trading.
Should you use crypto trading bots?
Whether to use crypto trading bots or not remains a concern for most crypto traders. The trading bots are an ideal option for repetitive tasks, need for precision, complex trading and full-time trading. Still, there is always the need for human touch due to the various trading bots risks.
In the end, you should only use the bot as help in some aspects of trading and not rely entirely on it. For example, you can use bots for data collection, smart order routing and portfolio management. The rest of the activities like taking a trading position you can handle by yourself.