Trading cryptocurrency allows you to keep abreast of fast-paced price changes. New traders are bound to become perplexed by the plethora of crypto, trading strategies, and accessible tools. Fortunately, technology has made this easier by introducing automated trading solutions.
Using auto trading solutions is legal in jurisdictions where cryptocurrencies are acceptable. Using a bot for trading is well-regulated, although not all bots are made the same. Choosing one that will give you good value for your money requires due diligence.
Understanding Automated Crypto Trading
Auto crypto trading involves using crypto trading bots, such as Bitsgap Data View, to buy and sell digital currencies on your behalf. The bot reacts to market changes to allow trading at an appropriate moment.
Using the bot eliminates the uncertainty and emotions many people have when trading manually. Most trading bots utilize an application programming interface for your account to communicate with the crypto exchange.
The bot opens and closes positions on your behalf according to set conditions. Crypto trading bots rely on functionalities including grid trading and arbitrage to do this. Grid trading is a buy-low, sell-high strategy, while arbitrage benefits from price differences at various exchanges.
Automated crypto trading happens through various steps, including:
- Data analysis – Crypto trading bots analyze data to perform their functions efficiently. Machine learning software handles data mining tasks faster than humans.
- Signal generation – The bot predicts market trends and identifies possible trades depending on market data and technical analysis indicators after data analysis.
- Risk allocation – The bot determines the distribution of risks among different investments according to your set parameters. The process involves defining the percentage of capital for investing while trading.
- Trade execution – This process involves purchasing and selling cryptos in response to signals from pre-activated trading. These signals generate buy or sell orders passed to the exchange.
Benefits of Auto Crypto Trading Solutions
Here are the top eight benefits of using an automated crypto trading solution:
1. Minimizes Acting on Emotion
Auto trading systems eliminate the emotional aspect through the automatic execution of trades. Users set the parameters for the bot to meet before execution so they don’t have to make second guesses or hesitate before taking action.
Apart from helping traders who take a long time to decide, the automated systems also help those who may overtrade by buying and selling at any opportunity.
2. Allows Backtesting
You can back-test auto trading solutions using historical data to generate results. Backtesting is experimenting with trading ideas and strategies to determine the system’s expectancy. This is the average amount a trader expects to win or lose from each trade.
Backtesting allows for refining and improving a trading strategy before risking your bankroll. Developing the platform disregards biases because it doesn’t make assumptions and requires instructions before executing anything.
Other benefits of backtesting include:
- Allows discovering technical or theoretical flaws
- Gives traders confidence before using a strategy
- Allows comparison of options
3. Encourages Disciplined Trading
There’s discipline throughout the crypto trading process because of established rules and automatic execution. Emotional factors such as fear of losing and desire to make more profit are eliminated. Trading bots follow a well-executed plan throughout all their activities.
There are no pilot errors, and trading happens according to plan. The platform keeps trading according to your plan, regardless of the outcome. This allows consistency in all trading activities.
4. Boosts Speed of Order Entry
Trading bots respond swiftly to changes in the market and execute trades immediately after set parameters are met. Opening and closing a trade happens in seconds, which can significantly impact the trade outcome.
Orders are generated automatically after entering a position, including profit targets and protective stop losses. Auto trading platforms prevent reaching a profit target or blowing past a stop level before entering orders.
5. Encourages Diversified Trading
Traders can utilize multiple accounts and different strategies simultaneously. This allows the risk to be spread across various trading instruments. Also, diversifying hedges against loss positions within milliseconds — something humans can’t accomplish.
A trading bot scans for trading opportunities across thousands of markets to generate orders and track trades.
6. Promotes Transparency
Trading bots are usually open sources that allow users to easily understand how it works and even inspect the code. It’s so easy to understand what happens in the background, unlike other financial software.
Additionally, most of the source codes of auto crypto trading bots are available online. You can check the codes easily and determine whether using the software is safe or not.
7. Easy to Use
You don’t need any programming knowledge to use a crypto trading bot. They are easy to use, and you just need the assets for trading, desired exit/entry conditions, and when to trade depending on your set parameters.
Traders can even use a bot to trade on various exchanges simultaneously. It saves you from having to spend time switching between various platforms. After setting your trading strategies, there’s no need to keep watching the platform to notice when prices change. The bot does all the work while you focus on other important things.
8. Saves Time
Trading crypto using a bot saves a lot of time while boosting your profits. It’s nearly impossible to keep an eye on price fluctuations and market movements all the time. Doing it manually would be time-consuming.
Using auto trading frees up your time since you only spend a few minutes setting parameters. Then you can spend the remaining time managing your regular schedule.
Whether you’re an experienced or newbie crypto trader, consider investing in an auto trading bot. You set parameters and sit back as the bot does the trading on your behalf 24/7. It minimizes relying on emotions that may lead to poor decisions and encourages diversified trading.