The exchanges are busy with trading deals. Therefore, let’s scrutinize all about the crypto trading bot today! The world experiences pandemic crises not only in terms of health & environmental aspects but also in the economic decline. Financial experts believe that the impact of the Corona Pandemic may seriously affect all the industry’s growth graph for at least years. The unexpected, negative scenario of COVID-19 is addressed as “Black Swan”, and the investors swap their funds to stable investments. In this digital era, investors are interested in purchasing cryptocurrencies in exchange for other assets to maintain stability. Hence, financial experts have coined cryptocurrencies as “Gold 2.0!” With the intense rise of cryptocurrencies
In this blog post, let’s go through why cryptocurrency trading bots are employed for trading, what are crypto trading bots, the best crypto trading pair, and all about trading strategy!
Also Read: Know About Automated Crypto Trading Bot
Why are crypto bots employed for trading in crypto market space?
The investors are always fond of making money out of assets rather than holding them in wallets ideally. Cryptocurrencies can also earn lucrative profit rates by trading with distinct coin pairs. But, in the case of cryptocurrencies, it becomes tiring to analyze the price volatility between distinct coin pairs. Moreover, the price ups and downs are observed for every second in the crypto market space. This sudden rise and fall of cryptocurrency values across multiple exchanges make it tiring for the human to perform trading. A human requires at least a minute to scroll through multiple exchanges and conclude the trade decisions, even if he/she is an expert.
For this purpose, the crypto traders who have technical knowledge developed their personalized crypto trading bots with unique strategies. Let’s peep through these crypto trading bots in brief now!
What is cryptocurrency trading bot?
A CRYPTO TRADING BOT is a computer protocol that is automated to trade crypto coins in the platforms on behalf of humans.
Every bot has its unique trading strategy, and the crypto trader can decide to build their bot with customized strategies. It’s not mandatory that every crypto bot must be used for trading purposes, some may be utilized for monitoring the crypto market volatility too!
The crypto trading bots can compare price volatility of multiple coins across multiple exchange platforms within seconds and conclude the profitable deals for you. The aspiring feature of crypto trading bot is that it can increase your crypto assets with multiple small trades. It can be tiring for the human mind to compare price volatility and conclude trade for just small differences, but crypto trading bots can be customized as masters of small profit trade deals! The small profit rates may seem tiring, but the crypto trading bots with these strategies can earn a heap of crypto assets in your wallet over time!
Now, let me guide on choosing crypto coin pairs for better trade deals!
Also Watch: Build A Cryptocurrency Trading Bot
The best crypto coin pairs for trading!
The professional crypto traders are fond of utilizing the BTC and ETH as base coin pairs to perform trading strategies. Most of the exchange platforms offer these coins as base coins to trade other crypto coins. The popular cryptocurrencies have a huge trade volume, and the traders earn reasonable profit rates with these coin pairs.
It’s up to the crypto trader’s decision to conclude the trade deal with small profit rates. If the crypto market is found to swing in price volatility, then holding the small trade deals can be a wiser choice!
Today let’s learn about all types of trading strategy and sign-off the discussion!
1. Grid Trading Strategy
Grid trading strategy is executed when there is the desired degree of price volatility in the specified crypto coin pairs. The crypto trader can set the desired profit and loss rates in the bot and automate the trading process with a grid trading strategy. The grid trading strategy works efficiently in the crypto markets that are stable to an extent and fails when there are extreme fluctuations. The crypto traders can set their monitoring bots to notify the extreme price volatilities and could stop the grid trading bot to prevent losses.
The crypto traders must set their profit rates and stop-loss in grid bots by taking the transaction fee into account. The transaction charges must not suck your profit rates completely; it must be negotiable! A penny earned today would be a big residue in your wallet in one or the other day!
2. Arbitrage Trading Strategy
The Crypto arbitrage trading strategy involves buying and selling crypto assets by leveraging the price differences on multiple exchanges to make profitable trades. It is a low-risk trading strategy that needs little to no trading experience. Any trader, novice or experienced trader, is capable of using the arbitrage strategy, and they don’t need an expensive setup.
Example: Buy a bitcoin on exchange A at a lower price and sell it on exchange B at a higher price. Types of arbitrage trading strategy are as follows.
1. Inter-Exchange Arbitrage
2. Triangular Arbitrage
3. Statistical Arbitrage
4. Spatial Arbitrage
3. DCA Bot Trading Strategy
Instead of investing a whole sum of the amount in one go, the Dollar-Cost-Averaging strategy allows a trader to divide the amount and buy cryptos in small amounts at regular intervals. DCA is preferred by traders who want to reduce the risks of paying more before the prices drop.
Since the crypto market doesn’t move in a single direction, a trader can apply the DCA method to maximize the chance of paying lower average prices and making multiple trades. DCA is a time-tested strategy that helps traders avoid short-term price movements and accrue wealth over time.
4. MACD Trading Strategy
The Moving Average Convergence Divergence (MACD) strategy is a momentum-based indicator that illustrates the correlation between two moving averages of the same crypto. The MACD indicator is graphed as two distinct lines: the MACD line and the signal line. A histogram is implemented to monitor the distance between the MACD line and the signal line.
The MACD is a technical tool traders use to spot trading opportunities and manage open positions in the market. The MACD strategy also helps to identify market conditions, price action behavior, and solid entry and exit points.
While using this strategy, traders only need to monitor the relationship between the signal line and the MACD line. They need to understand the following terms.
Convergence: Convergence occurs when the market is compressed. The MACD line and the signal line come closer to each other.
Divergence: Divergence occurs when the market is trending. The MACD line and the signal line move away from each other.
5. Trailing Take Profit Strategy
Crypto traders use the Trailing Take Profit strategy to increase their profits when the prices move in a favorable direction. This strategy is designed to lock in profit and limit losses. The trailing profit increases once the crypto’s price crosses the previous high. When the profit increases, it cannot move back down, thereby securing the profit and eliminating losses.
Using the Trailing Take Profit strategy, a trader can keep the trade open and profit till the price moves in their favor. The open order will be automatically closed when the price changes direction.
Here’s an example of how the strategy works.
- A trader buys a bitcoin at $10,000 and sets the Take Profit at $11,000 and the Trailing Take Profit at 5%.
- When the price reaches $11,000, a Stop Order at $10,450 will be triggered. Then if the bitcoin’s price goes down to $10,500, the Stop Order is not changed.
- When the coin’s price increases again and hits $12,000, the Stop Order changes to $11,400. Then again, if the price falls to $11,000, the Stop Order is executed at $11,400.
You’ve come a long way from cryptocurrencies to earning profits from them, just through swapping and trading in platforms. As a bonus, you’ve earned a crypto trading strategy too! The customized cryptocurrency trading bot strategies can help you conclude lucrative trade deals throughout the day, and you can maintain immense liquidity in your crypto portfolio!
To know more about, crypto trading, stay tuned with us!