In 2019, the value of the entire cryptocurrency market was $237.1 billion, according to Statista. This grew to $758.1 billion in 2020, and it was $1.1 trillion at press time. One of the crucial forces driving this incredible growth in the market capitalisation of cryptocurrencies is cryptocurrency trading.
Today, cryptocurrency trading is not complete without crypto trading bots. Many of them exist, and many more are being created every day. The problem is that too many options could be overwhelming. That is why we prepared this article to make it easy for you to choose the best crypto trading bots in 2021.
Our Top Picks of The Best Cryptocurrency Trading Bots
Cryptocurrency bots of every kind exist but potential users like you may not have enough time and information to make the right choice. This guide will list some of the best trading bots, and their features and advantages.
What Is The Purpose of a Cryptocurrency Trading Bot?
Cryptocurrency trading involves a lot of market research and risk management. Some of the tasks, such as technical analysis, are cumbersome and time-intensive. In response to the need to expedite this process, developers embarked on projects to create crypto trading bots that look for trading opportunities in the cryptocurrency market and make trades to exploit the opportunities.
The trading robot uses algorithms based on artificial intelligence (AI) technology to gather huge amounts of data and performs analysis faster than any human analyst. The bot then uses the resulting insights from the data to make trades.
Automated crypto trading bots work in three stages. Firstly, they conduct market analysis, after which they generate trading signals. Trading signals are simply cues telling the software to either sell or buy given trading pairs. The bot generates the cues from the insights gleaned from market analysis.
The second task that the pieces of software perform is risk allocation. This stage is an extension of the signal generation stage. Let us say the signal that was generated asked the bot to buy the trading pair in question. The bot will take the signal and decide how much it should buy. The most critical aspect of this decision concerns the amount of capital the bot should allocate to the trade.
Thirdly, the bot executes the trade. Execution will not happen unless the bot generates a clear trading signal and it has allocated risk properly. The best cryptocurrency trading bots in the market use separate algorithms for each of the stages mentioned above. Some bots go a step further by optimising their operational ability by employing machine learning techniques.
So, how do you start using these trading platforms? The trading bots have websites where new users can create trading accounts. Account registration is a fast and simple process as long as you satisfy all the requirements. The trading bots work in partnership with cryptocurrency brokers to facilitate access to the market. Further registration is required when you are directed to the affiliated broker’s trading platform. For instance, you might be required to provide personal information for the implementation of KYC guidelines.
If account registration succeeds, you should fund your account to start buying and selling cryptocurrency CFDs. For premium bots, you might need to pay some fees before accessing the full functionalities of the software. These kinds of bots often offer free trials to allow customers to decide whether the software fits their desire.
Even if a trading robot is free, you should take some time and paper trade with the demo account to get a feel of the platform. The demo account helps you to learn tricks such as risk management. Remember that the bot will take care of buying and selling activities, and all you need to do is fund your account and then activate the software.
How To Find The Best Cryptocurrency Trading Bots
Check Regulations and Security of Cryptocurrency Trading Bots
Trading robots embed themselves in affiliated brokers’ trading platforms to provide you with a seamless trading experience. These brokers ought to have relevant licenses from reputable regulators to legitimise their business activities. Also, the best brokers have necessary security protocols in place to protect crypto traders’ information and funds. Always ensure the broker has the right licenses before registering an account.
Check Fees of Cryptocurrency Trading Bots
Since the trading robot works in sync with the affiliated broker's trading platform, you might incur some fees from the broker. However, it matters what broker the bot directs you to when registering. Different brokers charge different fees but the lower, the better.
Additional Features of Cryptocurrency Trading Bots
Trading robots’ primary task is to automate tasks that would ordinarily demand a lot of a trader’s time. Additionally, some bots boast AI-based algorithms that make them intelligent enough to learn from the past and get better at market analysis. Other robots redirect traders to brokers who offer social trading functionalities. The more additional features, the better the bot.
Is a Cryptocurrency Trading Bot Trustworthy?
Cryptocurrencies are now a mainstream financial asset in many jurisdictions, including much of Europe and North America. As such, the law expects entities that offer crypto-related services to play within its confines. Playing by the existing rules and guidelines is an avenue through which cryptocurrency trading bots and their affiliated brokers earn traders’ trust.
This means you should check the licensing information of, particularly, the affiliated broker because this is the entity that links you to the cryptocurrency market. Most brokers include relevant licensing information on their sites.
Several online reviews painted a rosy picture of what the pieces of software can achieve. Nonetheless, it is our opinion that your experience with the trading robots is unique and whether the experience is a good one depends on your experience as a cryptocurrency trader and the depth of understanding of the auto trading systems. Sometimes luck also plays a part, especially when crypto market conditions agree with the robot's trading signals.
When signing up for an account with crypto trading bots, you will notice that they redirect you to an affiliated broker automatically. As such, you cannot choose your preferred broker. Interestingly, there is a window of opportunity here for you to determine if you can trust the bot. A trustworthy bot will pair you up with a broker whose trading platform looks legitimate. Such brokers display all crucial information, including customer support contacts. You should check all the contacts just to be sure that the channels are active.
Will a Cryptocurrency Trading Bot Make Me Money?
If there is a question that cryptocurrency traders have been asking for years, then it is whether trading bots are profitable. For this reason, the internet is awash with testimonies and FAQs, making a case for profitability. A substantial number of testimonials claim trading robots have turned around their lives because they earn insane amounts of money.
It is not easy to dispute nor support such claims because cryptocurrency trading is a profoundly private activity in which different players have unique experiences. Countless trading systems are in existence, and each one boasts unique capabilities. Nevertheless, we feel that the ability to earn an income using cryptocurrency trading bots is contingent on managing risk and your mastery of the trading robot.
A large part of the increased significance of crypto markets as an investment vehicle can be attributed to the rise of cryptocurrency trading bots. The bots have reduced trading difficulty by automating much of the legwork that goes into making trades. Right now, you can create a trading strategy that could potentially return profits by simply following the trading signals of a bot.
Some bots have AI-based algorithms embedded in their codebase to perform tasks more smartly. Nonetheless, the smartness of the bots does not imply riskless trading.
Frequently Asked Questions
Trading bots automate the cryptocurrency trading tasks that are repetitive and that usually require many hours for human traders to accomplish. With the bots’ AI capability, the trading systems can perform at levels of efficiency that are a dream even to advanced traders. Also, the speed at which the trading systems cruise through market analysis makes it easy for you to trade in fast-moving markets.
Different traders have unique desires and aspirations when thinking about a trading robot, but there are bare minimums that all good bots should contain. The trading bot should be easy to use. Complicated UIs lead to unnecessary losses because one finds it difficult to program the program properly.
Cryptocurrency trading bots are simply pieces of software that fall under the expert advisors category in cryptocurrency trading. Any jurisdiction that permits cryptocurrency trading authorises them. However, always perform due diligence, especially concerning the affiliated brokers, to ascertain the businesses' legality.
A crypto trading bot is an ideal companion if your trading activities entail a lot of repetitive tasks. The trading system also comes in handy when you need to follow price activity closely for extended periods. Finally, a crypto trading bot is useful when trading in a highly volatile market where price movements are too fast for human analysts.
No. Trading bots analyse markets and generate trading signals regardless of the trading pair in focus.
Many trading bots support fiat currency transactions.
A bot works for both amateur and experienced users since most of the tasks are automated. But some knowledge of trading and cryptocurrency will help you in your trading journey.
No, the software embeds itself in the affiliated broker's trading platform from where all the activities happen.