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The crypto market is highly sensitive to external factors and volatile in nature. Adding to that, it works 7 days a week and 24 hours a day. One single news or a trend can bring drastic changes in crypto prices. And, it is practically impossible for traders to be on their screens 24/7 and execute orders.
Crypto trading bots solve this exact problem with the help of automated trading programs! But, what are crypto trading bots? How do they help investors execute trading orders? Crypto trading bots help investors auto-execute trading orders even in their absence with the help of algorithmic trading programs.
We will cover everything you need to know about automated crypto trading bots in the present article. Read on to learn!
Crypto trading bots are software programs that automatically execute trading orders, on behalf of investors, based on predefined criteria. The main aim of using crypto trading bots is to generate profits by taking advantage of market trends and executing faster and more efficient trades.
Even though the concept of trading bots exists even in traditional industries, its use-case in the crypto industry is noteworthy. A single crypto news can skyrocket or adversely affect a cryptocurrency’s price. By the time you learn that, login to your trading platform, and execute a trading order, the trend could reverse. In this type of scenario, crypto trading bots will be very handy to take advantage of market trends.
Since trading bots are software programs, they analyze and process market data, price trends, trading volumes, and orders faster than humans. The same way, they also execute trading orders faster eliminating human limitations.
Different trading bots are programmed to execute different types of orders based on different types of market indicators and parameters. Most of these market parameters include cryptocurrency prices, volume, time frame, order book data, and technical indicators like moving averages, bollinger bands, etc.
In manual trading, traders monitor these technical parameters and indicators closely and make trading decisions. When it comes to crypto trading bots, investors need to connect a crypto trading bot’s API to the crypto exchange platform they use. And, they pre program crypto trading bots and define a set of crypto trading strategies based on market parameters. Thus, trading bots automatically execute orders when these predefined conditions are met.
Among the many types of crypto trading bots, divided based on their functionalities and trading methods, we will discuss the most common types here.
The usage of crypto trading bots also comes with certain risks and challenges. Despite being an efficient and faster way of executing trading orders, they should be regularly monitored to adjust the predefined criteria. Let us discuss more of the crypto trading bots downsides here.
Crypto trading bots are preprogrammed software tools that allow investors to execute orders even in their absence. For a market like crypto, that works 24/7, crypto trading bots are helpful to take advantage of price changes around the clock.
In addition to the numerous benefits provided by crypto trading bots, there are also certain limitations and risks. Considering the technical complexity and the trading order execution methods, crypto trading bots are more suitable for experienced traders. Those who know the ins and outs of the market can only benefit from using trading bots!
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