Cryptocurrency Trading Bots Explained

The cryptocurrency market is quite the same as the traditional markets (Forex, Stocks, e.t.c) when it comes to down cycles and up cycles, commonly referred to as volatility. However, the digital asset market’s cycles are known to exhibit an extreme form of this price volatility. This volatility is then thrown into a boiling pot of the fact that we are only human and a trading environment that is active 24/7 and accessible from anywhere in the world with an internet connection. The result is a situation where a human may not be able to act quickly enough to catch a profit, or to mitigate a loss. Plus, the human body’s natural need for sleep can also be an achilles heel to those looking to make a career out of cryptocurrency trading. However, “where there’s a will, there’s a way”. For traders, one of the most popular ways of getting around these obstacles is to acquire the assistance of a trading bot.

What Are Cryptocurrency Trading Bots?

Trading Bots are computer programs that are designed to autonomously buy and sell – in this instance cryptocurrency – on behalf of those traders who have chosen to make use of them. Naturally, the aim is to do so in such a manner that the traders gain a profit. A good number of trading bot available today analyse an exponential moving average (EMA) to get a feel of what the market is doing, and are programmed to respond to those price fluctuations. Algorithmic trading software – as trading bots are otherwise known – first saw use with hedge funds dealing in the commodities, currency, and equity markets. It wasn’t until the Forex boom that retail investors got to have a go at them. This was soon followed by a proliferation of bots in the cryptocurrency market.

Possible Advantages Offered By Trading Bots

Apart from being able to trade non-stop as long as the electricity supply and internet connection remain constant, there are a number of other ways in which a crypto trading bot could be used to gain an edge. The first advantage a bot has over a human trader is the ability to process larger volumes of different data sets in a space of time that is impossible for a person to achieve. The second advantage is the bot’s ability to complete trades in a manner that is as swift as its ability to process information. A third advantage is that bots do what they are programmed to do. Trading bots are not subject to fear or greed.

How Effective Are They?

Well, this is a recurring concept of life. There are very few – if any at all – things that are all ups and no downs, trading bots are no exception to this. Bots dig through market data that they get from trading platforms in order to make decisions on whether or not to execute a trade. This would be perfect if that was all the cryptocurrency market’s price action revolved around. However, the reality is that the cryptocurrency market is still very sensitive to the influences of the rumour mill and popular Twitter accounts. Unfortunately for traders, no available bots are able to factor this into their calculations. Generally speaking, good quality trading bots are not a fire and forget way to being a pro trader. The efficacy of the bot is still very dependent on human input to help maximise your potential returns.


There are a number of factors that one needs to take into consideration before diving into these waters. Are you more of a casual/passive investor? Do you have any basic knowledge of programming or creating financial strategies?  For casually investing in cryptocurrency, a buy and hold strategy might be a little less of a headache than working with a trading bot.

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CoinFractal - The Latest Crypto Market News & Insights

Joel Bonga

A part time cryptocurrency trader, mostly a hodler, and Blockchain/crypto freelance writer. Plus an occasional contributor at BIZZNERD.
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