While every market is subject to its volatility, over recent years, due to its breakthrough technology and emerging trends, cryptocurrency has become one of, if not the most popular markets. This has also crowned it as one of the most volatile.
Because of this, traders are limited by their physical capabilities; they can only react to price fluctuation to a degree, but not quickly enough to fully maximize the potential of every trade consistently.
However, there are lasting solutions that can bridge trade gaps. One of which is bots, an automated tool that provides crypto signals and conducts trades on behalf of humans.
In this article, you will learn what a trading bot is and how it provides crypto signals for traders.
What Is A Crypto Trading Bot?
Crypto trading bots are automated tools programmed to trade cryptocurrencies. Crypto trading bots can analyze and interpret market data. It gathers information on the market, analyzes specific data such as price movement, and executes trades by buying/selling cryptocurrencies at lightning speeds.
These bots are like professionals who trade for you while you watch your investment yield returns. Since hiring institutional or professional investors costs significantly more than setting up a bot to trade for you, many traders are shifting towards using automated crypto bots. It’s easier now than ever to become a crypto auto trader.
How Do Bots Provide Signals?
There are various bots, each one providing its unique benefits as well as different software and hardware requirements. You can search for a bot that suits your needs and download it as a program, unlike years ago, when it usually required some coding experience or a highly technical background to operate.
To benefit from the execution of a bot, you must know how to use the tool and have accounts set up on exchange platforms. Again, some short time ago, this was a daunting task to many, but in modern times most platforms have guides, tutorials, and even support teams to help with the process.
In addition, you should already have your crypto assets in these accounts. Although the bots help with providing signals, you still have to make some decisions about buying and selling crypto assets. Here’s how a crypto trading bot provides signals:
● Firstly, you will need to choose the kind of crypto trading bot that will satisfy your trading needs because several types are available. Some bots only offer pre-programmed trading strategies, while others are developed for a long-term investment. Crypto trading bots function through Application Programming interfaces (APIs), and it’s developed on an investor’s trading account.
For clarity, most bots come with a built-in pre-programmed trading guideline. In contrast, in other bots, the user (trader) must create market conditions, set support and resistance areas, and create oversold and overbought areas, among others.
● Then, you can use the trading bot signals with the exchange platform you want. Crypto bots are mostly linked to a live market statistic feed or an exchange platform. For example, certain exchanges have their own trading bots built in to their platform (while other platforms provide bots as a service to connect with exchanges).
After selecting the exchange, the next thing will be to open an account and transfer funds into the exchange to use with your chosen bot.
● Crypto trading bots help you to analyze the crypto market and conduct trade on your behalf with up to 99% accuracy. But, first, you must adjust the bot’s settings to your trading strategy (unless copy trading, which is the act of copying trade setups from professional traders.)
● The bot gathers, analyzes, and interprets data more intelligently, quicker, and efficiently than humanly possible. Then, it does the trader’s work, makes predictions, and identifies different potential trades based on market statistics and technical analysis indicators. After the bot has analyzed the data, it begins signal generation.
● It allocates risk according to parameters and configurations already set by the trader, which involves setting how funds are distributed during trading. Then trades are conducted based on the signal generated by the trading bot. The signal will either create a buy or sell order and is then executed.
● An example of what the bot does is that it automatically buys crypto, say at $5k, and then sells at $6k. Though it depends on how you configure the bot to operate, in this trade, you have made a profit of $1k. It also heavily depends on a trader’s strategy and trading type. For instance, a scalper and day trader may have a shorter take-profit level than a swing trader.
Crypto trading bots are gradually becoming popular in the Decentralized finance space. And the bots have been helpful to traders in conducting successful trades; it just needs to be appropriately configured to meet the trading needs of the user. If you still wish to make some advanced decisions, you can program some resistance or limits to the bot.