How do bots work for cryptotrading?
Bots exist in the form of software, which, in most cases, works directly with crypto-exchanges through the program interface (API). The goal of bots is to automatically perform transactions with assets: for this, the bots conduct a detailed analysis of market information and, based on the data obtained, make decisions on concluding transactions. Depending on the chosen strategy, set parameters and set goals, a trader can choose one of four types of bots:
Trading bots analyze the information received from crypto-exchange, and make decisions about buying and selling of cryptocurrency based on the parameters chosen by the trader. This type of bots can be customized to work with several parameters at once, or you can use predefined strategies that were developed by analysts.
Arbitrage bots monitor changes in quotations of Cryptocurrency on various exchanges and automatically make transactions to obtain profit from the price difference.
Custom bots, or order bots, are used to make transactions with predefined parameters that are entered manually or are selected in automatic mode.
Script bots exist in the form of basic software, on the basis of which the trader can independently configure the work of the bot. Used by experienced traders who know the intricacies of trading on Crypto Market.
Risks in Trading Bots on Crypto Market
Defective software: not all currently available bots were launched by a team of professional developers and experienced crypto traders. Moreover, the bot, in whose code the mistake was made, may not just be inefficient, but also cause significant financial losses, especially in combination with a poorly chosen strategy. Therefore, for trading it is worth choosing only proven bots with a reliable reputation and a wide range of tools.
Instantaneous collapse of the cryptocurrency: cryptocurrencies are an extremely volatile asset, not insured against collapses. So, in June 2017, at the GDAX exchange, as a result of a major deal, the price of the air dropped from $ 319 to 10 cents. As a result, traders who did not set stop-loss limits, in a matter of seconds, suffered huge losses. In this regard, some traders are confident that bots are able to work only in typical situations and an experienced trader will more accurately predict the situation on the market.
Fraud: in the unregulated market, cryptocurrency cases of fraud occur quite often, and working with bots is no exception. In December 2017, the Hexabo scam bot actively operated on the market, blocking the user’s funds, suspending the output of the crypto currency, and then stopped working, presumably by sending all the funds to the developers of the platform. Also, according to one trader, you should avoid popular free bots, because together with them you can download malicious software, the purpose of which is to gain access to private wallets keys or use the trader’s node for mining.
Popular Bots for Cryptotrading
3Commas is a popular paid bot for automated cryptotrading, which works with such exchanges as Bittrex, Bitfinex, Binance, Bitstamp, KuCoin, Poloniex, GDAX, Cryptopia, Huobi and YOBIT. It offers a large selection of diversified portfolios that users can choose to invest or to use as an analytical tool to track market conditions. It provides for simultaneous use of stop-loss orders and take-profit. It has four subscription levels – “Initial” for $ 30, “Trading” for $ 50, “Professional” for $ 100, and also “Individual” for agreement.
Cryptohopper is a cloud-based paid bot that will work even if the trader’s computer is offline or off. Experienced traders can independently customize the work of the bot, while beginners can use the available “autopilot”. The bot can also analyze and verify the effectiveness of trading system signals made in the past (backtest), has a Stop Loss order control algorithm, and can trade directly on several exchanges. It has three types of monthly subscription – for $ 19, $ 49 and $ 99. A more detailed analysis of the platform can be found here.
Cryptotrader is one of the most popular cloud cryptobots for trading. Supports a large number of crypto-currencies and exchanges. Must be fully customized by the user. Offers backtesting and strategic market functions, which allows users to trade strategies. It has five levels of monthly subscription: for 0.0018 BTC, 0.0025 BTC, 0.0045 BTC, 0.0086 BTC and 0.0214 BTC.
Haasbot is a platform for automated trading, intended, first of all, for experienced bitcoin-traders. Uses strategies derived from technical analysis data. This bot is paid and has three levels of annual subscription: the license “Beginner” for 0.073 BTC, “Simple” for 0.127 BTC and the “Extended” license, which costs 0.208 BTC. Depending on the license purchased, users can configure several interconnected bots that will be able to perform a number of different functions.
Gekko is a free open source bot that can be downloaded to GitHub. It is simple enough to use, has detailed step-by-step instructions that will be useful for inexperienced traders. Has a convenient interface, can backtest strategies and visualize the results of trading. Moreover, the bot software runs on most operating systems.
Zenbot is another open source bot for bitcoin traders. The bot users can download the code and make modifications to its work, and its algorithm is available for the main operating systems. And, unlike Gekko, Zenbot can perform high-frequency transactions and apply arbitrage opportunities. However, in the crypto community it is noted that the bot has not been updated for a long time, and therefore has no opportunity to work with the new popular exchanges.