The cryptocurrency market is busy and volatile 24/7 and presents an interesting problem for traders: How do we keep up? Traditional trading approaches cannot navigate a fast-paced and highly risky trading environment. This problem has created a rise in crypto trading bots, which are automated programs that execute trades based on the user’s strategies.
In a 2023 report by Grand View Research, the future of the algorithmic trading market is expected to be worth $31.49 billion by 2030, and crypto bots will be a large portion of that market.
What are Crypto Trading Bots?
Crypto trading bots are software programs that utilize APIs (Application Programming Interfaces) to connect with virtually all exchanges for many cryptocurrencies to analyze trends in market data and automatically execute trades.
Things to Consider Before Choosing a Crypto Trading Bot
Reputation
As the onboarding process for trading bots becomes easier, scams have also become easier to develop and run. It is critical to select bots through a reputable platform with positive community feedback or 3rd party reviews. Dedicated feedback sites such as Trustpilot and online communities such as Reddit’s r/cryptocurrency can help provide validation.
Security and Compliance
Bots should always be selected based on the security protocols in place. Security protections should include encrypted API keys, two-factor authentication (2FA), and limited access to withdraw funds. Additionally, ensure there are no legal issues within your jurisdiction or KYC/AML requirements.
Core Features and Functionality
Consider what the bot provides. Does it list your favorite exchanges? Does it provide your preferred indicators, such as Bollinger Bands, RSI, and MACD? Can it handle shorting and/or margin trading?
Usability and Customization
For its sake, newer traders should expect an application with an easy-to-use dashboard and drag-and-drop strategy builder. More advanced traders may be looking for a bot that allows for scripting or customizing it through the API level.
Support and Maintenance
Responsive customer service, routine software enhancements, and active engagement through user forums are key. You don’t want to be in the middle of a market crash with a glitch and without support.
Final Thoughts
Cryptocurrency trading bots are no longer reserved for IT professionals, developers, or the institutionally privileged. These platforms are incredibly easy to use and increasingly feature-rich, and are accessible to everyday (non-institutional) investors looking to automate and improve their trading game.
If you’re serious about crypto investing, it would benefit you significantly to familiarize yourself with trading bots today, if not for anything else, to keep yourself ahead of the curve tomorrow.