A crypto trading bot is a software program that automatically sells and buys cryptocurrencies, with the goal of turning a profit. It monitors the markets 24/7, and makes moves according to a set of rules and limitations defined by the user. These bots can be customized by the users to make specific decisions based on market variations.
The crypto market is extremely volatile, and extreme changes in value happen 24/7. As such, many crypto traders prefer to use automated trading bots over traditional passive trading. Cryptocurrency trading bots can conduct market analyses much faster than a human ever could. However, it isn’t as easy as it sounds.
There are different kinds of bots for different kinds of markets. For example, technical trading bots. They use past history and signals of crypto to make decisions off of it and are the most common kind of cryptocurrency trading bot out there. Then there are portfolio automation bots. Their goal is to maintain a specific portfolio, rather than attaining a profit and are used to automate the tedious and repetitive parts of trading.
Market making bots are programmed to turn short profits as fast as possible, I.e, rapid buying and selling rapidly at small profits. There is a kind of bot for every type of trader. However, that does not mean that they can entirely replace human traders. Human intervention is required, and to turn profits, some level of knowledge in trading is necessary. One cannot just set up a bot and expect big profits. Think of crypto trading bots as assistants, that help with the repetitive and time-consuming parts of crypto-trading.
Every trading bot has its own trading strategy which it employs, and some prove to more profitable than others. One case where a trading bot may be useful is trading where timing is important. A bot will always beat a human in terms of timing inaccuracy, and this helps when you want to make a move at a specific point, for example, buy 0.5 bitcoin when it drops to $35,500. Manually, you would have to look at price charts and wait.
With a bot, you can program it to do that, and it’ll automatically execute the trade within milliseconds. Some traders prefer to create their own crypto trading bots. This is the best, and hardest option as it requires a lot of programming language and time but results in a bot tailored to your needs.
To sum it up, crypto trading bots, while a useful tool, require extensive background knowledge in trading to employ successfully. If used correctly, they can be massively profitable.