15 November 2024
Disclaimer: All information is for educational purposes only and are not intended to constitute legal, tax, accounting, financial or investment advice. I am not a professional financial advisor, attorney or account, nor am I holding myself out to be. There is no guarantee that you will earn any money using the techniques and ideas mentioned in this video. All financial opinions expressed are from personal research and experience. There may be affiliate links, meaning that I’ll receive a small commission when you click on my link. The information, opinions and views contained herein have not been tailored to the investment objectives of any one individual, are current only as of the date hereof and may be subject to change at any time without prior notice. I do not take ownership of the information described here. Your level of success in attaining the results claimed will require hard-work, experience, and knowledge.
There’s been a rising interest regarding Trading bots these days, and yet with the dubiousness of potential returns as well as the need to pay for subscription fees do little to placate our suspicions. Let’s take a moment to explain what Crypto Trading Bots are, how they work and answer some frequently asked questions about them.
To put in simple terms, a bot is an automated program that operates on the internet and generally performs repetitive tasks more efficiently than humans.
Crypto Trading Bots operate under the same basic principle. They are software programs that execute buying and selling functions based on preset parameters. This prevents emotions from getting in the way of making sound decisions or missing an opportunity for a trade.
Crypto Trading Bots allow you to automatically buy, sell or hold an asset in an automated manner, regardless of time of day or market conditions, if your bots preset parameters trigger, so will your buy/sell position.
The biggest misconception about Crypto Trading Bots is that it’ll be a get rich quick lottery or every trade made will be profitable. Just like with other human traders, nobody wins 100% of the time.
Another common misunderstanding is that all bots do the same thing. Crypto Trading Bots are created with a different set of parameters and are based off different indicators or trading patterns. Therefore different parameters produce different results for different scenarios to ensure greater success.
Do make sure that before jumping into a Crypto Trading Bot that you have previous results of the bot so you can get an expectation of how the bot will perform, how many trades it makes and how often. While history may not always repeat itself, it helps you gauge the potential returns as well as decide whether the bot or strategy is worth paying a monthly subscription.
Setting up a Crypto Trading Bot isn’t very challenging but there are some steps you need to go through before getting connected.
In order for you to start trading using a Crypto Trading Bot, you need to have an account with a Crypto Exchange such as Binance, FTX or Kucoin etc. (Which I’m sure many of you already do)
Next, you will need to give your bot access through an API key. You can generate this key through your exchange and then copy/paste it into wherever your bot is hosted.
When generating the API key, only give the bot access to execute buy/sell trades, do not give it access to withdraw or deposit funds.
This ensures that all your funds stay on your exchange, and that none of your funds will be compromised. The bot will simply be responsible for sending trading signals to your exchange and acting on them on your behalf.
Unlike humans, bots can identify, gather and analyze data much faster and in smarter ways than us.
After analysis, bots make the decision based on existing data whether to buy or sell, replacing the job of a trader traditionally based on existing information and technical analysis indicators.
Based on preset parameters either by the strategy creator or yourself, bots will automatically act on the signals based on the pre-determined risk allocations.
The specified cryptocurrency is bought and sold based on the trading signals that were preconfigured by the bot creator. During the execution phase, the bot will send buy/sell signals to whatever exchange you connected the API to.
Based on my personal experience, they do! Though I get better and more consistent performance with bots that trade over a longer time frame.
This is a swing trading bot for Ethereum that I’ve been using for some time now which has easily doubled what I put in initially.
There are all kinds of different bots out there whether it is an arbitrage bot, token lending bots, margin or leverage bots, or market maker bots. On top of that, you have a handful of strategies within each bot, Scalp bots, Day Trading bots, Swing Trading bots, Buy & Hold bots. It gets really overwhelming to decide what type of bot you want to use to trade.
Scalping bots revolve around making frequent high speed trades with usually very low profit and stop loss levels. These types of bots may also be trading the 1 minute or 5 minute time frames.
For instance, a Ethereum scalper bot may operate on the 1 minute chart and has a 0.5% take profit level and a 1% stop loss. So Ethereum may only need to go up or down a few dollars and you could be in and out of that trade in a matter of minutes. These strategies usually offer up multiple trades per day.
Day trading operates quite similarly to scalping, just a tad slower. Day trading bots may execute buys and sells same day or within a few hours, whereas scalping bots may be in and out in minutes. Day trading bots generally target volatility in the market and capture it intraday. These bots usually operate off of the 1 minute, 5 minute or 15 minute chart.
Swing trading bots generally try to generate profit from price fluctuations that may occur between a 2–7 day time frame. These bots you may be entered into a trade and it may not hit take profit or stop loss levels for a few days or a week. The longer time frames utilized generally result in lower risk levels as they have more data to base their trades on. Swing trading bots generally operate off of the 15 minute, 1 hour, 4 hour, or daily chart time frames.
Buy and hold bots operate off a fairly basic premise, they identify buy points based off the bot creators preset parameters but usually don’t have take profit or stop loss zones set, or if they do, they are set very high. The point of this strategy is to allow the bot to catch lows on a token you want to hold long term and the bot can help you DCA your position. These bots are usually created off of the daily, weekly or monthly chart.
When using leverage you are borrowing capital from your exchange to make a trade. This amplifies your buying and selling power and allows you to trade a larger amount of capital than what is in your account. This can be beneficial especially to accounts operating with a smaller amount of capital as it allows them to trade with a larger bank roll. While leverage can multiply your profits, it can also multiply your losses.
You have $10,000 in your account and you want to trade Bitcoin (BTC)
Assuming you use 10x leverage on this trade, this means you now have $100,000 at your disposal to trade with.
Your initial $10,000 is used as your collateral.
If BTC goes up 20% after you enter the trade,
Without leverage, you would have made $2000,
However since you were using 10x leverage, you made $20,000!
That’d be a 200% profit.
You have $10,000 in your account and you want to trade Bitcoin (BTC)
Assuming you use 10x leverage on this trade, this means you now have $100,000 at your disposal to trade with.
Your initial $10,000 is used as your collateral.
If BTC goes down 20% after you enter the trade,
Without leverage, you would have lost $2000,
However since you were using 10x leverage, you lose $20,000! (200%)
Since $20,000 is more than your collateral of $10,000,
The moment the trade went down by 10% — $10,000,
Your account would have been liquidated, meaning that your account balance will be $0. Thus the 10% loss will become 100% loss.
The higher amount of leverage you use, the higher risk you are going to take. However with the right bots, and stop losses set, you mitigate a large amount of your risk involved with leverage and can use it to your advantage.
BTC
ETH
USDT
USDC
TRX