We all need a helping hand from time to time. When it comes to cryptocurrency investments, many people need a helping hand. These assets are not your average volatile assets you would expect in the financial markets, they are extremely volatile. This certainly means that if you are the kind of investor who buys and holds assets for the long-term, you might be in for many painstaking moments. Generally, short-term traders find the cryptocurrency market quite an interesting place to be, since you can make so much in less than a day.
This brings us to the concept of investors vs traders. An investor in the cryptocurrency market would generally purchase some crypto assets, hold them for some months or years, then sell them. A trader, on the other hand, can buy assets and sell them in a few hours when the price is right. Therefore, while the investor might loathe the volatile nature of the cryptocurrency market, a trader, on the other hand, will love it.
How Bots Work for Your Investment
Before we look at how your cryptocurrency investment will benefit from the use of trading bots, it is important to look at how they work. There are different bots out there, and you will come across many more over time. However, there are three important steps that trading bots perform, and this is the foundation that most of the bots you come across use.
Most trading bots work in a three-step process:
- They generate signals
- They determine and apportion risk
- They execute decisions
What happens in each stage will depend on the type of data available. For the best results, you have to ensure you use credible sources so that your trading bots can make decisions relevant to the market, and your investment plans.
What happens at signal generation? It is at this stage that the bots first make the decisions that determine your predictions. They make use of the data available to make a buy or sell decision.
After this, the risk allocation takes place. In risk allocation, the bots determine following the buy or sell decision, the number of crypto assets to purchase. This will also depend on your decision pattern. Should the bot invest all your capital or just part of it? Should the bot purchase all the assets at the same time, or perhaps create averages and buy-in proportionately? Of course, buying everything in one go doesn’t sound like a good idea. You might get into the market at the wrong time and lose everything. Then again, if you are a high-risk investor, this sounds like something you might be interested in.
At this point, we have already figured out what your trading bots are about to do. They have determined whether to buy or sell based on specific instructions, they have also figured out how much assets you are willing to move, or capital you wish to invest. The only thing remaining is executing the transaction.
Depending on how much you are about to buy or sell, it is always wise to execute such trades in stages. You do not wish to flood the entire market with money. Say you are about to buy $8,000 worth of cryptocurrency assets, buying this at once would be a mistake. You will certainly not get the best price. Think about it this way, what if there are other individuals like you out in the market, using the same trading bot, and are all about to make the same decision you are about to. This is why you will not get the best price. It is wise to meter down your investment in stages.
The workings of such bots, however, require a deeper knowledge of artificial intelligence or machine learning algorithms that are beyond the purview of our discourse.
Why You Need This Service
Do you really need to use trading bots for your investment? This is one of the first questions many investors ask themselves. Primarily, you are leaving everything about your cryptocurrency investment in the hands of some code. Here are four important factors you need to consider, which will help you make the right decision.
- Transaction Processing Ability
Bots are very fast. Even the not-so-good bots in the market can process gigabytes of data every second. Unless you know an investment manager who can perform transactions with similar or better speed, you really could benefit from using bots for trading.
- Intuitive Trading
Trading bots rely on statistics and data available to them. It is up to you to provide credible sources of data from which they can read and make decisions. They do not depend on heresy or emotion. More importantly, trading bots are not afraid to execute transactions because they are afraid of losing, neither are they driven by greed in the pursuit of a favorable position.
- Precision in Operation
The reaction time and thought process of an investment bot is faster than any human you will come across. They make split-second decisions based on factual information available in the system. They, therefore do not need time to rethink, regroup or consult. They make decisions based on what is going on in the market at any given time.
- Real-Time Investment
You need to sleep, you need to take a holiday and a break. You also need to have a social life, go out with friends and so on. Bots do not need that. While you are away, bots are always working as long as the cryptocurrency market is open, which is 24/7.
Based on this information, we can now go back to the initial question of whether we need investment bots to handle our cryptocurrency trades. The choice is ultimately yours.
One thing that we have seen over the years at CoinCheckup is that you must have a personal investment profile. You need to have clear goals of why you are interested in buying specific crypto assets over all the others in the market. Without investment goals, you will end up chasing prices all over the market, and this never ends well.
