Looking for the best crypto trading bot but not sure where to start? We are here to help!
A crypto trading bot uses an algorithm that tracks the live crypto market and analyzes it using technical indicators such as trends and moving averages. It then gives buy and sell signals based on its analysis. Simply put, crypto trading bots buy/sell crypto on your behalf.
However, remember that crypto trading bots are not perfect. Since cryptocurrencies are very volatile, bots can sometimes generate false signals. For example, the bot may calculate a downtrend while the market may actually be moving up.
As with freelance trading, there is an inherent risk factor with cryptocurrency trading robots. As always, it is advisable not to invest more than you can afford to lose.
How to choose the best crypto trading bot?
There is no doubt that crypto trading bots can make trading easier for you. There are many types of robots available in the market. For example, some robots follow a long-term strategy and follow trends, while others follow the more aggressive impulse strategies.
However, beginners may find it difficult to decide which bot to use.
To help you, we have put together some tips for choosing the best crypto trading bot.
Do market research
Before choosing your first crypto trading bot, do some market research and watch for changes. This will help you determine the general sentiment in the market.
We also suggest that you review all the recent crypto events and find out which coins are performing the best.
Is the market currently trading in a range? or is there significant volatility with rapid ups and downs? Your choice of bot will change depending on the strategy you want to rely on. This is best determined by analyzing market conditions.
Thus, a basic knowledge of cryptocurrencies and technical analysis is a prerequisite for using a crypto trading bot effectively.
The importance of researching the bot you want to use cannot be stressed enough. Security and the trust factor are both crucial because literally anyone can create and publish a trading bot on the internet. However, these bots usually access your exchange account to buy/sell cryptos on your behalf. So analyze the reputation of the bot in the industry. Alternatively, you can create your own trading bot if you have the prerequisite skills. Have you heard of the binary code method?
Check the exchanges it supports
Cryptocurrency trading robots are generally not compatible with all exchanges. So, before choosing a bot, check if it works with your favorite exchange. A solid bot will be compatible with multiple cryptocurrency exchanges. However, it is the hallmark of the most advanced and premium bots.
Some common mistakes to avoid
Before getting started with crypto trading robots, it is important to know some common mistakes.
Build on past performance
As a crypto trader, you must remember that past performance does not guarantee a good future. This is because market trends and conditioners keep changing.
There is always a chance that a bot that has performed very well in the last 6 months will fail in the next 6 months if it follows the same strategy. Due to changes in the global market, the bot’s existing strategy may no longer apply.
Instead of relying on past performance, try to understand which strategy is best suited for the current market, then choose a trading bot accordingly.
Be reckless and impatient
Sometimes trading robots close and open positions within microseconds or seconds. However, being patient is the key here. Beginners often switch bots too quickly without waiting for market conditions to become favorable for the bot to perform well.
For example, a short-only bot will be neutral if the market is currently in an uptrend, making higher highs and higher lows. However, as soon as there is a market rebound and prices start to fall, the bot will be ready to go. So, before transferring all your funds to another bot, it is wiser to wait for the right market conditions to occur.
Choosing risky coins to start with
Of course, it’s tempting to choose coins that have higher return potential. However, these alt-coins are much riskier and more volatile than established cryptocurrencies such as Ethereum and Bitcoin. Before you fully get used to the cryptocurrency market, it’s a good idea to stick with Ethereum and Bitcoin.
Indeed, choosing your first cryptocurrency trading bot can be difficult. However, now you know the main mistakes that beginners make when choosing trading bots, as well as tips for choosing the best bots. With these tips in mind, we hope it becomes easy for you. Keeping at the top of your consideration set (1) precision and adaptability, (2) the strength of a combined human and artificial intelligence, and (3) flexibility and choice in how you deploy and use your solution, you can have more effective bot management strategy.