Crypto Trading Bots: Do They Work And How To Use Them?

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Any financial market, including crypto, may scare beginners away with its charts, complex interfaces, and numerous analysis tools. That said, there are products nowadays that can significantly ease the trading process for newcomers and experienced traders. This article focuses on crypto trading bots responsible for 80% of the market transaction volume. Stay tuned to find out: 

  • What are trading bots, and how do they work? 
  • How much profit can a bot generate? 
  • What are the best apps for automated crypto trading? 
  • How to set up a bot? 

What are crypto trading bots? 

Crypto bot is special software that automates the trading process by independently performing trades. Instead of conducting all deals manually, individual traders and institutional investors use such programs to interact with the market. There are two main types of bots for digital assets:

  1. Signals bots. Such programs offer recommendations for opening and closing positions by analyzing the market conditions. They can also advise on the trade amount and current portfolio dynamics. 
  2. Automatic bots. Such programs are fully autonomous and do not require a person’s participation. They independently open and close deals based on the given parameters. 

Both types of bots analyze the market dynamics and make trading decisions based on logic and historical data. In most cases, professional traders use such software as a part of their already existing and effective strategy. However, it is unlikely that crypto trading bots alone will provide consistent profits without being updated to stay abreast with the changing market. 

What are the pros and cons? 

Like any other financial tool, trading bots have both advantages and disadvantages. Let’s review all of them so you can make an informed decision. 

Benefits 

Work 24/7 

It’s something no human can do. The crypto industry is stressful enough, and trading bots allow you to continue your daily routines without having to refresh the chart every five seconds to keep up. 

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Have no emotions 

This is also something no human can boast about. Fear and greed — these two triggers are the main reason 90% of beginners lose money. Automated trading software helps to eliminate the emotional factor partially or entirely. 

Operate with numerous trades simultaneously

Again, no human can analyze the real-time dynamics of several assets, given the volatility of the digital assets industry. On the other hand, trading bots conduct multiple trades simultaneously while maintaining objectivity and efficiency. 

Risks 

Need to be adapted and updated.

No program can make its own decisions in the changing market conditions. In simple terms, the bot will continue to operate as configured initially, even if the trend has changed. In this perspective, the user would have to change the bot algorithms by adding new data to maintain effectiveness and avoid losses. 

Have low flexibility 

Sometimes, there are additional factors to consider besides chart data and industry sentiment. Since the program runs on an automated algorithm, it will not be able to provide human flexibility while trading. 

Poor-quality programs 

The most considerable risk is, of course, inefficient software. There are hundreds of options on the market promising incredible profits, but very few of them work and can be considered reliable. As a result, you need to choose a quality product very carefully or pay an experienced developer to create a personalized bot for yourself.

Crypto trading bots: use cases 

Automated crypto trading is a popular method among different investors. We have prepared a list of the most common trading activities suitable for bots: 

Scalping Day trading Buy and hold Arbitrage 
Robots are used to reduce the workload of traders performing multiple trades within one hour. 
Market players usually prefer signal bots for day trading, as they provide tips for entry and exit points without making decisions for them. Automated trading software can also be helpful for long-term investments by buying low and selling high. Crypto bots are often used by arbitrage traders who take advantage of the assets’ price differences on multiple exchanges. 

How to choose a crypto trading bot? 

There are several main criteria to consider while choosing software for automated cryptocurrency trading. First, it’s credibility. Make sure that the company has been on the market long enough and has a proven track record. Checking reviews on an independent platform is always a good idea. Second, its compatibility. We recommend sticking with programs supported by multiple popular exchanges, as it significantly widens your trading opportunities. 

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Last, but not least — customization. There are several types of bots based on their operation principle: 

  • Ready-to-use software. The service operates as designed by the developer and does not require any changes. 
  • Customizable bots. Such programs can be configured based on your chosen trading strategy, goals, and possibilities. 
  • Script bots. Such software is open source and can be used as a basis for any trading algorithms. Naturally, a trader must be able to program a bot on their own.

All things considered, we recommend sticking with the last two options. Ready-to-use bots require less participation from the trader, but cannot create a one-time consistent working strategy. 

Best crypto trading bots 2022

Pionex 

Although Pionex is a cryptocurrency exchange, it’s primarily famous for its built-in bots. In fact, all 18 of them correspond to different trading styles and strategies. For instance. grid trading, arbitrage, hold, DCA and leverage. The platform’s monthly volume exceeds $5 billion, while the number of users reaches 100,000. Pionex’s main benefits include low fees, free registration, and good liquidity. 

Cryptohopper 

Cryptohopper is a popular trading bot supported by the majority of top exchanges, including Binance, HitBTC, and Kraken. The platform offers four different package plans with a price range of $17 – $84. The pioneer tariff plan is free and designed to get familiar with the system before making a purchase. Cryptohopper features mirror trading, allowing beginners to follow the steps of professional traders, as well as paper trading. 

3Commas 

This bot will be more suitable for experienced market players due to its sophisticated layout. 3Commas offers several softwares for the most popular trading strategies: DCA, grid, arbitrage, options, and hodl. Moreover, it can operate as a signals bot without conducting trades. There are 4 available packages with prices ranging from $15 – $50. 3Commas platform also includes a free trial with limited functionality. 

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How to use a crypto trading bot?

Let’s use the Pionex platform to set up a basic grid bot that allows one to place a series of buy and sell orders at predefined intervals around a fixed price.

  1. First, create an account and protect it with Google or an Email authenticator. This step is essential with Pionex and cannot be skipped. 
  2. Pass verification to get access to trading features. 
  3. Make a deposit: fiat or crypto.
  4. Choose a trading pair. In our case, we went with traditional BTC/USDT. 
  5. Select a suitable trading bot, in our case, the grid trading bot, and click Create. 

5. Choose between AI strategy or personal customization. The former involves automatically defined trading parameters such as timeframe, price range, volatility, and maximum drawdown. The system will also calculate your potential profits and losses and the necessary position size. 

Crypto bots are apps designed to automate the trading process. Most institutional investors, as well as professional traders, use bots rather than conduct all deals manually

If you want to configure the bot manually, you would have to indicate: lower and upper limits, grid parameters, and position size. 

Crypto bots are apps designed to automate the trading process. Most institutional investors, as well as professional traders, use bots rather than conduct all deals manually

6. Once you have filled in all the information, click Create bot. The system will display contract details for you to confirm.

Crypto bots are apps designed to automate the trading process. Most institutional investors, as well as professional traders, use bots rather than conduct all deals manually

7. You’re all set! Wait for the bot trading results to adjust, and then create an efficient automated strategy. 

Summing up 

Crypto trading bots can be a powerful tool in the right hands. Most professional traders and institutional investors use algorithmic trading to automate and ease the process. However, a bot cannot make decisions independently and adjust based on market changes. In this regard, we recommend using such software as an addition to manual trades and technical analysis. 

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