How to start with crypto trading bots
Cryptocurrencies are notable for their massive volatility, with values fluctuating dramatically even within minutes. In many circumstances, investors are unable to respond fast enough to price movements to make the best investments. Investors are unable to devote as much time to the cryptocurrency markets as is required to consistently make the best investments.
This would need 24-hour attention of crypto exchanges all around the globe. This is where cryptocurrency trading bots come into play. They are nothing more than automated trading and transaction execution platforms that work on behalf of human investors.
The simple beginnerguide below will introduce you to the topic of choosing the best crypto trading bots in 2022. We've selected a couple of trading bots that you can simply manage and will work with the most popular crypto exchanges.
What you will take away from this beginner article
In this guide, you will learn everything you need to start trading cryptocurrencies with trading bots. Once you end reading our guide, you will have all the background info on buying and selling digital assets with the help of best trading bots accessible in the market. There’s a lot to cover in this step by step guide, so let’s dive right in
Index of headings
- Best trading bots for beginners
- What are crypto trading bots?
- How do crypto trading bots work?
- Types of crypto trading bots
- Crypto trading bot strategies
- Advantages using a trading bot
- Disadvantages using a trading bot
- Backtesting crypto trading bot
- Paper-testing crypto trading bot
- How to setup a crypto trading bot?
- Best trading bots for Binance platform
- Best trading bots for FTX platform
What are crypto trading bots?
Crypto trading bots are self-contained software programs that automate all manual steps involved in trading. Because the crypto market is open 24 hours a day, a crypto trading bot may let you generate money while you sleep.
Every second, the program works nonstop to profit from crypto market volatility. Panic selling and greed buying are only two examples of how a winning deal may turn into a loss. These trading bots are intended to be dispassionate, removing the biases and emotional dangers that come with personal trading.
You might benefit in both bull and bear markets, depending on your crypto trading bots and strategy.
How do crypto trading bots work? And do they actually work?
Yes, they do work, in a nutshell. The longer answer is that there are many different ways to build and create trading bots that can do a variety of tasks for both rookie and experienced traders.
Access to the wallet and exchange you wish it to trade on is required for automated crypto trading bots. This entails using the bot's API key to connect it to your preferred exchange.
Crypto trading bots use market performance and the possible risk of a trade to make judgments. Unless you instruct it differently, it will execute on low-risk transactions and avoid high-risk choices.
Types of crypto trading bots
There are a few different types of crypto trading bots. Let’s go over them.
Arbitrage trading algorithms compare prices on multiple cryptocurrency platforms and trade between them to generate cash. While the price differences are only a couple hundred dollars at most, repeating the process several times might result in a compelling profit.
Market making bots, on the other hand, make buy and sell orders on a regular basis in order to profit from the spread. The spread is the difference between the highest bid and the lowest offer on a coin.
As a result, a market creating bot will repeatedly acquire a low-priced coin and sell it to a higher bidder.
Crypto trading bot strategies
The current crypto bot tactics need fast order placement, which is something that humans cannot always do. They also necessitate instantaneous calculation of data, which is why they are perfect for cryptocurrency trading.
To conduct a large number of minor transactions, this crypto trading method employs stop buy and stop sell orders. It also sets a stop loss and a profit target ahead of time. However, one of its most valuable options is that it can assist traders in predicting whether the crypto market will go up or down.
The drawback of this method is that it increases the risk of human mistake. This is due to the fact that traders must setup many deals at once. Cryptocurrency trading bot tactics come to the rescue in this situation. They have the ability to manage a large number of deals at the same time.
To find a solid entry point, this trading technique employs a number of technical indicators. EMAs, MACD, RSI, and other indicators are among them. The RSI is likely the most widely used indicator. In a sense, it examines the market's motion. When it reaches a value of more than 70, it usually recognises that a digital currency is overbought, indicating that a pullback is on the way.
When the value falls below 30, however, it indicates that the cryptocurrency has been oversold, indicating that a bounce is imminent.
Exponential moving averages (EMAs) are not the same as the Relative Strength Index (RSI). Crypto traders usually need to utilize at least two EMAs to produce the moving average convergence divergence.
This is ine of the easiest crypto trading bot methods. This is a buy low, sell high trading technique, as the name implies. To use this method, traders must instantly place a buy order followed by a sell order with a bigger proportion in order to take profit. When the sell order is filled, traders must immediately place a smaller proportion buy order.
They can keep playing ping-pong for as long as they wish. This is the best trading bot approach. They may compute whichever percentage trades desire to make and place all orders in real time. Furthermore, traders have the option of leaving the trading bots do their work indefinitely.
Traders can use Bollinger bands as standalone tool but they are often used in conjunction with other technical indicators. They are narrow when the market is trading in a range and broad when the market is turbulent. In the crypto market, this trading method is quite effective.
The market will be trading in a range to see whether a tremendous move is on the way. This isn't always the case in traditional stock exchange. This is due to the fact that equities can move sideways for years.
This trading method employs a well-defined level that a lot of traders employ in order to increase the likelihood of a large continuation and a successful entrance. It takes use of the motion of a coin and is quite simple to comprehend. Traders must first identify support and resistance levels before placing their sell or buy orders.
How to test crypto trading bot
Backtesting crypto trading bot
Most bots are built on the foundation of backtesting. Before you send your bot to a cryptocurrency exchange, you must complete this step.
Backtesting your bot against the previous six months or a year is an smart place to start. After the backtest is completed, you will receive the findings, which will include all of the necessary information to decide whether the crypto bot is performing as expected (e.g. total return, maximum drawdown, number of trades executed, etc.).
Paper-testing crypto trading bot
Paper trading gives you the option to trade with simulated crypto using real-world exchange data. This way, you can get a feel for the exchange without putting yourself at risk.
How to setup a crypto trading bot
Regardless of the language or framework chosen, a trading bot includes a couple key components.
- Strategy implementation
The code that implements the approach is only a small part of the overall project. However, this is where you would define the logic and computations that decide when and in what amounts to trade.
After you've decided on a strategy, the following step is to put it into action. Consider it a link between your trading technique and the exchange you're using. This code converts your plan into API queries that are understandable by the platform.
- Job scheduler
Finally, you'll want to let your bot run on its own. It is not a good idea to leave your computer on full day. You need to start a server and set up a task scheduler for it to run.
The best way to lose all of your cash is to use an algorithmic trading method blindly. You must backtest your approach against history market data to verify if it works.
You may construct as many bots as you prefer to scale your trades. On each freshly constructed bot, you can use a various strategy.
Best trading bots for beginners
We will shift into the high gear and talk about the best crypto trading bots:
#1 Shrimpy (our recommendation)
Shrimpy is a great portfolio management solution for the busy person. Shrimpy adapts ideas from smart investors outside of crypto to introduce simple automated strategies which can help decrease risk and increase returns. It even offers historical data, 7 day forecasting & social trading.
Start today with Shrimpy * our recommendation
Link multiple exchanges
Shrimpy has over 20 connections to crypto exchanges, this way you're almost sure your crypto platform is ready to connect. (not yet active on a crypto exchange? Signup at Binance today) For all crypto platforms Shrimpy provides a guide so its very simple to connect your accounts.
Manage your portfolios
Within the Shrimp account you can manage multiple portfolio's. This way its easy to have several portfolios within one account. For example manual trading portfolio, investing portfolio and a trading bot portfolio. This way you can de-risk and have multiple strategies.
Portfolio Stop Loss
When the market crash, you want to be safe, also while having a nap. With the option Portfolio Stop Loss you can set a stop loss on your whole portfolio. This way when a big crash happens you can get out without being behind the computer.
Smart order routing
Smart Order Routing is a unique system designed by Shrimpy that searches on crypto exchanges and evaluates all trading pairs with coins. This way you can optimize trades by using the different pairs and use exchanges as a tool to move your assets around for the best outcome.
In the trading dashboard you can find historical price data, market cap information, and statistics through a simple asset. Also you can backtest your strategy and setup of your trading bot, this way you're able to make the best and accurate trading setup based on data.
Within the Shrimpy account you can see a 7-day display price for every asset. This is automatically generated bij the Shrimpy machine learning models. These prices are updated daily and using the data of the last 90 days.
Copy (other) Top traders
Another big benefit of Shrimpy is that you can copy other crypto traders. This way you can find top traders and (auto)copy their strategies. The leaders (aka Top Traders) get paid per follower, so they benefit from doing well. This is a two way benefit as they will do their best to trade well and create a long term relationship. Besides, as a beginner you probably learn a lot from all strategies & trades made.
Large Shrimpy academy
As Shrimpy has aexcellentteam behind them. They offer a lot of easy to digest information and tutorials how to setup your trading bot and use all the tools within the crypto trading bot and platform.
Start now with crypto automation on Shrimpy platform
Shrimpy Trading Bot tutorial video's
3commas is crypto trading bot that is founded in 2017 in Estonio and operating all over the world. 3commas has developed a powerful crypto trading tool with the intention of upsetting the traditional traders and tools
Start today with 3Commas crypto automation
The amount of platforms that are supported is tremendous. This aspect also suggests that there are more arbitrage opportunities because there are a lot platforms that there is a high chance of finding a significant price differential between them. With a trading volume over 22 billion every month 3commas has huge impact.
So 3commas is a cryptocurrency trading platform that also offers portfolio management, arbitrage, trading signals, and bots - a comprehensive range of cryptocurrency services that can be handled from one dashboard.
3commas offers a set of automations that ar easy to setup. Also portfolio management and copy trading are developed on the 3commas platform.
Below the most used features of 3commas
- Concurrent Take Profit and Stop Loss
Deal closes when the indicated price is reached, or the deal closes when the price drops at or below the indicated value.
- Stop Loss timeout
Take Profit and Stop Loss Trailing feature Automated value adjustments as coin prices rise. Take Profit and Stop Loss points can automatically set to increase if a coin rises.
- Sell by multiple targets
Sell your coins by multiple targets. Sell 50% your coins for $2,000, then 30% for $2,500, and whats left for $3,500.
- Smart Cover
Accrue additional profit with unexpected market moves. Sell and buy back coins.
- Charts and Signals from Trading
View. View concurrent currency rate charts and TradingView signals in a single window.
- Single-pair bot
Runs one trading pair
- Multi-pair bot
Multiple pairs trading
- Long algorithm
Bot buys a coin with settings you build. Next, orders for sale are placed at a higher price. For example, buys it for $10 and sells it for $11.
- Short algorithm
Bot sells a coin after you create settings, and then set a buy order at a lower price. For example, sells it for $10 and buys it for $9.
- Deal Close Signals
Bot trades according to Trading View signals: RSI - 7; ULT - 7-14-29; TA Presets; CQS Scalping; Trading View custom signals. You can set a deal start condition manually and open trade asap.
- Analyze and copy bots
Bots can analyze performance, view and copy other bot settings on the 3Commas platform
- Portfolio creation
Simple create portfolios with any coin amounts
- Portfolio balancing
Balance your portfolio by maintaining coin ratios so you will always have thee stack you want divided by the coins
- View & social platform
Check trade incomes of other users of the platform anonymously
- Copy trading & social trading
Watch other traders and copy their setup bot. This way you can learn quickly and avoid mistakees they have made before.
3commas offers papertesting, this way you can test a certain period if your bot setup is doing what you expected before you go LIVE for real.
What is you holding back? Start today with 3Commas crypto automation
Also 3commas has great (video) content available to learn before you start trading for real. Their team is updating their content and shares new updates about new features and functionality
Cryptohopper is a popular cryptocurrency trading bot with a number of unique and intriguing options, such as cloud trading, broad social trading possibilities, and a wide range of exchanges to trade on. Stop losses and tail stops are extremely helpful in this situation, as they greatly aid risk management.
This is likely one of the best crypto trading bots available, as evidenced by its huge client base (over 150k users) and signal marketplace.
Mirror trading, paper trading, trading methods creator (easy drag and drop design), automated trading, and trailing stop loss are just some of the options included in Cryptohopper.Start now with Cryptohopper
Videos about Cryptohopper
Explanation different automatic crypto trading bots
GRID Bot: When you need to profit from fluctuating marketplaces, grid bots are perfect. The procedure is straightforward. You must select a range, and the bot will guarantee that you buy low and sell high within that range.
Infinity Grids Bot: This bot is beneficial when you mess up the tending profit when there is a price pump. Although it operates in the same way as the GRID Bot, you'll note that it only takes a small fraction of the cash.
Leveraged Grid Bot: The Leveraged Grid Bot has a lending function. This implies you'll be able to make more cash off of your first investment. There's also the possibility of liquidation.
Margin Grid Bot: Using this bot, you may pick between LONG and SHORT with collateral that does not include the Grid Bot.
Reverse Grid Bot: By using this bot, you can significantly raise your quote amount. It will sell your cryptocurrencies at higher rates and purchase them back at lower prices.
Leveraged Reverse Grid Bot: This bot is a mixture of the Reverse Grid Bot with a crypto-loan feature. Leverage might also help you generate more cash.
DCA Bot: The Dollar-Cost Averaging bot provides a feature that enables you to set the time frame of your plan and the bot assists you to DCS.
TTP Bot (Trailing Take Profit): When the market is volatile, you may utilize the TTP bot to scalp.
TWAP Bot: This bot helps you in selling bags in a timely manner.