The Bitcoin (BTC) market has been growing since its inception in 2009. The surge in price has seen everyone try cryptocurrency as an investment option. Others are still hesitant to buy and invest in BTC coins.
Unlike other financial markets, cryptocurrency trading is available 24/7. It doesn’t close at any time of day or night. It’s available for traders to invest and trade. However, it can also get stressful for these traders as it requires them to be awake at all times.
But that’s not all, the BTC price fluctuations give two results; pleasant or not so pleasant outcomes. For instance, you might wake up to large profits or losses.
As an investor, how do you mitigate these risks? Well, by investing in Bitcoin trading robots. The bot works to improve your trading skills. It ensures your investment is safe even when you’re sleeping. Further, it ensures faster and efficient trades.
The growing bitcoin market necessitates the need for several trading robots. Choosing the best bot to help you trade is quite a challenge. Well, don’t worry, here’s an article on bitcoin trading robots. Use it to understand everything about these robots. It’ll help you select the best bitcoin trading bot that works for your firm.
The Bitcoin Trading Bot Defined
It’s a software that seeks to help traders make sound investment decisions. It uses API to collect and make sense of available financial data. It then uses this information to either sell or buy your Bitcoins.
The bot monitors the price fluctuations in the crypto market. It then uses predefined rules to react to these changes. Even better, you’re at liberty to program the bot as you wish.
The Types of Trading Strategies
The Bitcoin market is still growing. The price fluctuations are still common here. However, this hasn’t prevented the invention of trading robots to help investors make profits on their trading strategies.
The strategies include:
1. Market Making
It involves unceasing buying and selling Bitcoins to benefit from the difference in the two prices. Here the trader places sell and buy limit orders that are close to market prices. If the prices decline, the robot places a buying order. When the price increases, the bot sells the BTC allowing you to benefit from the price spread.
Yes, the market-making strategy is quite profitable at certain pricing points. However, it encourages stiff competition resulting in losses in illiquid trading environments.
2. Arbitrage Trading
It’s an old age trading technique. As an investor, you acquire cheap assets in one market and dispose them at a premium in a different market. The premium in this case is your profit. Since bitcoin is decentralized, there’s a large price spread in different markets. As such, investors can make money through arbitrage.
But that’s not all.
Investors who want to focus on future contracts can use this strategy to make money.
The Effectiveness of Trading Robots
The robot works to place a trade on behalf of the investor. It works by using several indicators like moving averages. The bots work to help you make money while saving on time.
The robots use the assumption that computers make better calculations than people. Remember, successful trading involves tough calculations relating to probability. You cannot beat a computer on this.
The robots use the exponential moving average to analyze the Bitcoin market. The EMA tracks down the price changes over a specified period. The programmers use this data to program how these robots react to this data. However, as a trader, you can also set the bots per your risk appetites.
Yes, EMA trading is quite effective in the financial markets. However, analyzing past data doesn’t always guarantee better results in the Bitcoin market. The reason, price fluctuations are very common in this industry.
But the question is, do these robots work? Yes, they do work depending on bot choice. Therefore, they work for some but not all investors.
Trading bots presents several benefits to the traders. First, the bots continually work for you at all times. It doesn’t matter whether you’re awake or sleeping, the robot will place a trade-in your favor. This increases your chances of making profits.
But that’s not all! It eliminates the human component of your trades. The bot uses the available data and programmed rules rather than emotions to trade. With this, you’re able to maximize your chances of earning higher profits.
Remember, the effectiveness of a trading bot depends on its programming. Therefore, make an informed choice on the bot you choose. If possible, go for one that offers more than trading options.
The Risks in Bitcoin Auto-Trading
Using trading robots increases your chances of making profits. However, they also have their risks.
The common risks in auto-trading include the following:
The risk of trading in financial markets is high, it’s even higher in crypto markets. Here, the price of a coin can gain value by 500% or more. If the bot makes a wrong trade, the loss could be devastating.
Some trading software has zero allowance on risk management. In an ideal market, the risk in a single trade shouldn’t exceed 3% of what’s in your account. However, most software programmers do not account for this fact. Therefore, the trading robot will trade without a stop loss.
The only way to make a profit in your trades is by managing possible risks. Plus, take the time to analyze trades and choose the best ones to place your money. Also, when choosing a trading robot, select one that prioritizes on this simple fact.
We are living in an era of persistent technological growth and disruption. Most of these advancements show huge potentials of being life-changing.
However, despite the technological growth, people’s desire to make money is still intact. The cryptocurrency market through bitcoin trading offers investors an opportunity to generate digital wealth.
Bitcoin, decentralized crypto facilitates faster transactions. It also eliminates the need to engage third parties like governments or banking institutions.