Cryptocurrency Bots – When do you know you need one?


Bots are common tools used by people to help them automate their processes. Like any other platforms online, bots are available so that it replaces the work of the user as they are more reliable, quicker and more efficient.

Timing is everything

When you invest in a money market (like cryptocurrencies), timing plays a crucial role. You want to buy and sell at the right time so that you do not lose out on the price as they could change within seconds. In the cryptocurrency platform, investors have since moved into using crypto trading bots. Basically, they are computer programs that are designed to trade cryptocurrencies at a certain time which means they will monitor the price of certain crypto and then take certain actions. So, if you have profited from cryptos and would like to take your transactions to the next level, you might want to consider using bots. But, are you ready for this?

A popular investment tool

Bots have been around for quite some time now. It was made popular through the ‘rule-based trading’ in the 80s. In cryptos, bots can be used to help you analyze the market in terms of price, volume and time and then take actions based on your pre-determined conditions. This is because the crypto market is open all-day which means you might not be around to monitor these data all the time. That itself is a reason good enough to consider using a bot for your trading.

What do Bots do?

Generally, bots are used in crypto trading in the following ways:
Backtesting – Use historical market data to carry out some backtesting with the bots with data like trading fees, slippage and latency.

  • Trading Strategy – Implement a trading strategy with the right calculations and then backtest it before implementing it.
    Start investments – Once all the testing is done, then you can use them. Some bots have a feature where you can use a simulation platform.
  • Scheduler – With all that done, you can now put the schedule into action and let the automation take its course.

Does this mean you are home-free?

The answer is no. While your bots can do a lot of the hard work for you, it does not mean that you are completely free from doing anything. Bots are good to help you with tasks such as data collection and rebalancing but you will still need to get your hands dirty, especially in setting the rules. As a basic practice, you should let your bots carry out:

  • Tasks that are repetitive – Bots are perfect to help you do things that you need to do all the time and repeatedly. Periodic rebalances would be the best option here. Some investors need to carry out bi-hourly rebalances and that is what bots will be best.
  • Targeting a time – If you want to predict a specific time for a trade, this is a great option. You do not want to lose out when BTC hits a certain high (or low) but you cannot be monitoring it 24*7. Another aspect that you must consider here is that you might not be able to lock-in the price at the stipulated time because of issues like connection speed and network latency.
  • Portfolio management – If you are going to do this as a full-time job, then you should seriously consider investing in a bot. The crypto market after all might not be the only platform you are investing in. Hence, bots will be your handy assistants.

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