The peak market cap of Bitcoin was $1,156 trillion, achieved in October of 2021. While it was a monumental achievement, many quickly realized that it was a temporary spike that was destined to be undone by harsh realities that haunt the global economy suffering from a variety of factors outside of human control.
Despite some issues, the crypto industry remains a very lucrative domain for millions of traders. It is why we have to talk about a very important tool in the arsenal of a contemporary investor — a bitcoin robot that can earn money without your intervention.
How do crypto trading bots work?
There are several reasons why robots and even animals very often outperform humans. One study discovered that literal monkeys could often be more efficient at trading stocks compared to educated managers from Wall Street. Bots have several advantages over humans:
Robots do not need to sleep. This quality is more than just a good trait to have. The cryptocurrency market never stops meaning that a trader who wants to be truly efficient must work 24/7 which is, for obvious reasons, not possible for any living being.
Bots are consistent. Humans are prone to hesitation, mistakes, and second-guessing when dealing with finances. Emotionality often prevents even the best of us from acting decisively during moments when reaction time is pivotal. Machines don’t make such rookie mistakes.
Speed is a key to success. While on the topic of reaction, it is necessary to mention that modern computers respond to inputs nearly instantly. Using a trading bot is a good way to stay relevant and competitive in a market that can change in a matter of seconds.
Automation became one of the most commonly used tools in the whole industry. However, many people still do not understand some basic principles of machine trading. A crypto bot works similar to what follows:
A terminal like TradingView generates signals with technical indicators. These signals carry information usually used by traders to make decisions on whether to long or shorten an asset.
A script interprets the information and refers to the instruction which dictates how to act on specific inputs from indicators. When certain conditions are met, a script sends commands to an exchange.
An exchange receives commands via API by placing an order. Some exchanges allow automation on the spot and derivative markets (Binance).
If you want to test the process, using free services like WunderTrading is a great idea. You can launch a Binance bot for free and try all features without paying a dime. It is a good strategy for people who do not have enough experience to run bots efficiently.
What is a bitcoin trading bot?
It is a robot that works only with BTC. While other cryptocurrencies exist, BTC enjoys intense demand and has large liquidity pools meaning that it is the best candidate for a strategy where consistency and reliability in terms of buying and selling assets are most important. Ethereum and USDT are also great choices.
Bitcoin is also an asset that appreciates over time meaning that investors are more focused on accumulating more of this particular coin. Some tools like DCA bots can help you do exactly that: grow your portfolio slowly by making purchases across a period to reduce the average cost of coins.
Does a trading bot work?
Most strategies relying on automation have different outcomes depending on a variety of factors. To ensure that your investments yield good returns ask yourself several questions:
Do I have a sound strategy? Using technical analysis is a skill that you must acquire before trying to create a good trading pattern. Robots cannot come up with solutions without initial inputs from users.
How much does a trading bot cost? The size of recurring payments can greatly affect the overall efficiency of your investments. Account for expenses related to running software.
Do I have sufficient funds? Automation is all about consistency which is impossible to achieve without a great number of trades. You must have enough funds to work with most strategies.
Do I need a crypto bot in my investment plan? Some people don’t have a big enough portfolio to diversify without losing efficiency. Use automation only when there is a disposable portion of your portfolio that can be dedicated to riskier strategies.
In general, we can safely say that robots work and can generate income. However, it depends on your skills and the size of your portfolio!