Cryptocurrency trading is becoming a hot topic for day traders since the market runs 24/7. One of the most often seen questions surrounding day trading is whether or not it’s possible to make a profit with bots. The short answer to that question is yes. The long answer is that it’s complicated and requires just as much work as standard day trading. So, let’s take a look at how cryptocurrency bots work and how they generate a profit for their owner. You should also be aware of scams surrounding cryptocurrency bots, especially if you’re paying someone else to use their code.
Cryptocurrency Bots Completely Automate Trading.
While a market that is live 24/7 is great for trading when you’re awake, it can be devastating if a huge move happens while you’re sleeping. Cryptocurrency bots address this concern by trading through a series of parameters. These bots execute the conditions immediately and can give cryptocurrency day traders peace of mind. Day trading with cryptocurrency bots is relatively simple, but you still need a good grasp of trading strategies to make money. This is not something you can set and forget as the bot will need to be guided as the market sentiment changes.
Cryptocurrency Trading Bot Strategies
Day traders looking to make money in the cryptocurrency market have a few different strategies at hand, and the day trading rules are fairly straightforward. Arbitrage is the most common strategy in which a bot buys assets from one market and sells them on another to earn a higher price. The spread between exchanges can be significant enough to make a reliable profit, but it is nowhere near as substantial as it was in cryptocurrency’s youth. Market making is another common bot trading strategy. Bots use this strategy to continuously place buy and sell orders as the market progresses, profiting from the spread. Market making can be profitable in consistently bull markets, but unprofitable in down-turning bear markets.
Rent A Bot or Code My Own?
If you’re a savvy programmer who likes working with APIs, several major bitcoin exchanges offer hooks for you to code your own bot. Some cryptocurrency bots are available on GitHub to experiment with, but you should be wary of executing code you don’t fully understand. Other services like 3Commas offer bots that are specially tailored to a strategy and cost a monthly subscription fee to maintain. These specialized bots usually take a portion of the transaction, too. Think of it like paying broker’s fees on traditional exchanges. You should be aware that every third-party bot service usually has some cost attached to it. Some services are built on top of already existing cryptocurrencies. Gimmer is an example of an automated trade platform that uses its own tokens based on ETH as a form of payment for maintaining the bot on the exchange.
Before deciding to use a bot, you’ll need to have some understanding of technical analysis to use it. Analyzing trading charts will help you pick the best trading strategies based on market performance. If you’re unfamiliar with technical analysis, there are plenty of free resources online to help you understand the process.