The Wall Street was digitized in the 1970s—something which gave rise to the electronic economy that released on micro-measured based spewed, fast execution, as well as powerful computers. Nowadays traders bank on exclusive tools to work on financial services. The cryptocurrency market is witnessing a major revolution—creating new ways to make money.
Plus, the paradigm is quickly shifting. New heights in terms of algorithmic trading have been achieved. The cryptocurrency market is ripe with numerous opportunities. Even more, digital markets are now easily accessible. Also, cheaper hardware have been innovated—making it possible for anyone to programmatically execute trades.
Understanding Trading Bots
A trading bot refers to a software program that interacts directly with financial exchanges and places purchase or sells orders on your behalf according to the market data analysis.
The bots usually make these decisions by closely monitoring the movement of the market price and reaction according to certain predefined as well as pre-programmed rules.
A trading bot will also analyze market actions, like volume, time, price, and orders, though they can as well be programmed to suit your personal tastes plus preferences. However, it’s important to note that trading bots are quite costly, and haven’t been traditionally accessible to the average investor.
For instance, a Bloomberg terminal can always cost more than $10k. Nonetheless, due to the level of transparency offered by blockchain, cryptocurrency exchanges grant their clients direct market access which provides them with the opportunity to evaluate the exchange’s electronic order book. In short, Bitcoin bots allow users to execute more efficient trading without necessarily having to stay on top of the market every time. Common types of trading bot strategies include arbitrage and market-making.
Algorithmic trading refers to a certain type of trading that involves programmatically executing trading approaches as opposed to manual orders. Traders run a set of instructions on computers to automatically purchase, sell, and hold different assets.
There are numerous benefits that come with algorithmic trading and these include reducing costs as well as saving time. Algorithmic codes can execute trades while also making simultaneous market condition checks on multiple exchanges.
The Technical Requirements
Implementing a profitable crypto trading bot often takes three simple steps; data collection, creating a unique strategy, and backtesting. And this generally requires access to trading platforms as well as access to live market data feeds. It’s imperative to note that even though you may not be an expert in coding, understanding the basics behind automated trading is very important in itself.
It Starts with Data
Market data is what defines algorithmic trading. By summing up cryptocurrency prices over a given period of time, you can pinpoint initial patterns and backtest your strategies. This will, in turn, play a significant role in ensuring that your business models respond in real-time. You’ll need to clean and process data in such a way that it’s easy to use and access.
The Bottom Line
Trading bots are incredible online platforms that allow users to create accounts, log in to buy/sell, and also trade cryptocurrencies. So, why not try it? It will improve your chances of earning huge profits.