The Ultimate Guide To Automated Crypto Trading

Cryptocurrency is the buzz right now. Bitcoin, Ethereum, and other cryptos now seem to be on everyone’s lips.

With more and more investors dipping their toes in the crypto world, broad interest in the crypto market continues to surge. That said, investing in crypto can be challenging, particularly for newcomers.

From the sheer number of available coins, you can trade to the steep tech learning curve on how to buy, sell, and trade cryptocurrencies globally, manual trading is a recipe for losing fast in this extremely volatile environment.

This is where automated trading tools come into play.

Understanding Automated Crypto Trading

It’s pretty self-explanatory— it’s trading that’s automated.

Basically, automated crypto trading refers to a situation when a trader uses automated tools and systems to implement trading rules that would usually be executed manually.

It’s often synonymous with crypto trading bots, which allow you to actively trade your crypto without frequent monitoring. Depending on the automated trading strategy you use, trades are automatically executed based on technical indicators, asset prices, and more.

In general, most Bitcoin trading bot is created by third-party developers. Using the trading bot application programming interface (API) you can easily connect to a popular cryptocurrency exchange to manage and automate your trading.

However, some crypto exchange platforms are fully equipped with their own crypto trading automation tools and bots to simplify your trading process. Plus, most of these exchanges have nice offerings such as a user-friendly app, no minimum deposit, and strong customer reviews.

Benefits of Automated Crypto Trading

Automated trading with crypto bots offers a range of benefits when compared with manual trading. Here’s a list of advantages:

  • Reliable Trading
  • Taking Out Emotions In Trading
  • Managing Risks
  • Saves You Time

By automating your trading strategy, you don’t have to worry about missed opportunities or trades anymore. Automated trading ensures that your crypto trades are executed reliably, accurately, and consistently.

When you automate your trading process based on predefined trading rules, these tools or bots ensure consistent execution accordingly. This helps optimize your long-term performance while eliminating the short-term cost of constant monitoring.

In the crypto world, you’ve probably heard these acronyms— hold on to dear life (HODL), fear of missing out (FOMO), and fear, uncertainty, doubt (FUD). A lot of these acronyms are associated with human emotions, particularly fear.

And with an extremely volatile environment where a coin can lose up to 30% of its value in just a few hours, who wouldn’t be scared? If you can’t keep your cool when a coin you’re holding ‘dips,’ then automated trading can help you out.

By automating your crypto trading strategy, you can prevent irrational decisions based on fear, greed, or impulse and avoid costly consequences.

As mentioned before, crypto markets can be volatile and automated trading can help minimize your risk. It helps in hedging against market dips by spreading your tokens across multiple exchanges and strategies.

You can diversify and spread your risk by running multiple trading bots. Although a diversified portfolio doesn’t equate to a risk-free portfolio, it does balance your risk-reward ratio to reduce exposure to any one specific asset.

Using crypto trading bots helps save you time and stress because it watches the market and executes trades for you. This means you don’t have to constantly monitor the market, allowing you to have to use your time on more important tasks such as your business or work.

Also, you can use crypto bots to execute repetitive trades 24/7, depending on your market indicators. This also saves you time in repeatedly placing trades.

Disadvantages Of Automated Crypto Trading

Although automated crypto bots do have their own benefits, they also have disadvantages.

  • Not Automatic
  • Security
  • Experience Needed

Most people think that with automated trading, everything is automatic, requiring little to no input or monitoring from traders. However, you still need to place trading rules and preferences. Also, system anomalies, although rare, can also occur, resulting from missing or duplicate orders. Thus, you want to check on your trading tool every now and then to ensure that it’s running correctly.

Most crypto bots are secure. But you need to hold your cryptocurrency funds on a crypto exchange to use the trading bot. However, holding your crypto in an exchange can increase your risk of being hacked. Although, most large and popular exchanges are generally safe.

Automated crypto trading bots are best leveraged by advanced traders. If you aren’t familiar with indicators and algorithms used by trading bots, then your trading strategy may not align well with the market conditions.

Take Away

As the crypto world remains volatile, along with more cryptocurrencies arriving at the scene, traders are challenged more than ever to improve their trade performances and have a steady portfolio growth.

Fortunately, technology allows traders to leverage the power of automated trading, granting them to expand their trading strategies and become more reactive to market conditions to ultimately reach their crypto investment goals.

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