Unlike the stock market, the crypto markets never sleep. The 24/7 trading offered by cryptocurrency markets makes the field extremely stressful for traders and casual industry investors alike.
Opportunities in the crypto markets have the potential to arise at any hour of any day. For digital currency enthusiasts to take advantage of such opportunities, they had to be on the lookout for efficient solutions. The majority of traders ended up turning to cryptocurrency trading bots.
As a beginner, there are many features, functionalities and tools you need to learn about to understand cryptocurrency trading bots. To help you, we’ve put together a guide with everything you need to know about this technology.
What Are Trading Bots?
In essence, trading bots are software programs designed to automate trades and execute them as quickly as possible.
For the most part, people who trade cryptocurrencies passively use cryptocurrency trading bots. These software programs allow for more effective trading for users that don’t have time to analyze the market consistently and allow them to avoid manually making their trades. Depending on the strategies that a particular trading bot implements, these programs are capable of doing anything from trading to progressive real-time arbitrage across exchanges to constructing strategies for custom indexing.
Generally, each trading bot implements a specific trading strategy, which relies on algorithms created by the application developer. The possibilities of trading bots are nearly limitless.
How Do Trading Bots Work?
Put simply, cryptocurrency trading bots access an exchange’s data for the user. The bots communicate with the exchange through an application programming interface (or API), which is a part of a program that allows it to send and receive data.
The APIs used for cryptocurrency trading bots enable them to place buy and sell orders for their users. Therefore, to function properly, the users must grant the trading bots access to their accounts by giving them both their API private key and the API public key. With these keys, the bot is authorized by the user to access their account information to do its job.
The only issue with such a design is that not all cryptocurrency exchanges allow their users to utilize an API to connect to and use the exchange. However, the exchanges that allow communication have an interface that enables users to make particular changes in their accounts and pull data from the exchange using a program. The automated programs performing on exchanges are known as trading bots. By using an API and a trading bot, trades can be executed programmatically.
Due to the nature of such automation, emotion is excluded and human error is reduced when making trading decisions.
Is Using Trading Bots Legal?
In both the stock market and the cryptocurrency market, bot trading is fully legal. Not only is it lawful, it’s often welcomed. Given this, everything that is considered illegal in cryptocurrency trading is something that would be illegal outside of these markets as well.
Types of Trading Bot Strategies
Unlike many other financial markets, the cryptocurrency market is much less mature. However, this doesn’t mean the crypto market is having trouble catching up to its predecessors. Due to the use of technology and the integration of algorithmic trading, cryptocurrency investors are able to access a broad range of trading strategies these days.
Here are the two most popular trading strategies:
In short, arbitrage is a trading strategy that involves buying assets for a lower price on one market and selling the assets for a higher price on another market. Such a strategy, most commonly used in the early days of crypto trading, allows the user to earn profits on the difference between the asset’s prices.
Since there were often large dissimilarities between the prices offered on different exchanges in the past, arbitrage became one of the primary strategies for traders.
The implementation of arbitrage is much smaller today, but it still appears from time to time.
#2 Market Making
The market making strategy provides for continual digital currency derivatives contracts, buy and sell prices on spot digital currencies, in an attempt to catch the expansion between the buy and sell price.
To be able to carry out this strategy, the user must make both buy and sell limit orders near the current market price. When the price changes, in order to profit from the spread, the trading bot will continuously and automatically place limit orders.
While the market making strategy can be profitable during specific periods, it can be unprofitable in most cases, especially in intense competition or low-liquidity environments.
What to Look for When Choosing the Best Cryptocurrency Trading Bots
When choosing the best crypto trading bot, you should always look for five equally important factors.
Naturally, security is one of the most important aspects of cryptocurrencies. The built-in security features of cryptocurrencies are why, in case of a hack, it’s often true that you cannot blame anyone but yourself for your loss of funds.
When you adopt a specific crypto trading bot, you’re giving it full access to your funds. Therefore, it’s important to choose a trading bot that’s trusted and has been applauded for the security it offers.
The reliability of a cryptocurrency trading bot is important because trading has everything to do with time. For example, you don’t want to miss an excellent opportunity to trade just because the trading bot you’re using went offline of stopped working properly.
While there’s no telling which trading bots are the most reliable, you should always look for ones that other users prefer for their performance.
Generally, transparency is what makes the cryptocurrency and blockchain system so advantageous for traders. Therefore, transparency should be expected from the trading bot you decide to use. Since the trading bot will be able to access your funds, transparency should be non-negotiable.
It’s often best to choose a bot that was created by widely-known developers. This allows you to more confidently trust the bot and gives you the ability to reach out to the right people in case issues arise.
#4 Ease of Use
As we mentioned earlier, the point of using an automated trading bot is to make the process of cryptocurrency trading easier and less time-consuming. This is why you should always go for a bot that not only has an interface that’s easy to understand and use but also is controllable with just a few clicks. The simpler the bot, the better it is.
At the end of the day, it all comes down to whether the trading bot is profitable or not. There’s no point in using an unprofitable bot, so you should always research the bot’s profitability before you invest your money and time into it.
Top 5 Best Cryptocurrency Trading Bots in 2019
3commas is a crypto trading bot that allows automatic trades on multiple exchanges. This Miami-based platform is a major player in the cryptocurrency space.
3commas is very easy to navigate and use. Users have the ability to see all of their own trades. The software also gives users access to extra features such as copy trading, trailing stop losses, mean-reversion automated trades and more.
- Integrations: Binance, Bittrex, Bitfinex, KuCoin, HitBTC, Coinbase Pro, Bitstamp, CEX.io, Yobit, GDAX, Huobi, OKex and Poloniex
- Software: Cloud
- Price: Starts at $22 per month. Free option is available with limitations.
Through an online account, 3commas will help you learn from the best traders in the industry to better automate your cryptocurrency trading. This crypto trading bot offers more than just bots for crypto trading. 3commas allows you to set up advanced trades and access a number of exchange accounts.
Advantages of 3commas:
- Stop Loss: This feature is probably one of the best things about this platform. With Stop Loss, users can automatically sell their assets when the percentage of loss reaches a threshold value.
- Functionality: 3commas uses a web-based platform and users can take advantage of simple, composite and short bots in order to fully customize their trading strategies.
- Take Profit– As another main feature, 3commas allows users to stop trading and collect their profits whenever they want. This, of course, can lead to missing out on higher profits, but that is the nature of trading. Either way, users can truly benefit from this feature in the long run.
- Smooth Exchange: Because 3commas has already created partnerships with many exchanges, users are allowed to perform transactions on different crypto exchange services.
- Annotations: The users of the 3commas platform are able to add comments and notes to their trade orders. With this feature, users can maintain and recollect their audit trails so they can keep track of their transactions. Adding comments and notes can prevent users from making the same mistakes twice as well as help them repeat a lucrative strategy.
Gunbot is one of the best cryptocurrency trading bots available today. This bot is perfect for both beginners and more advanced users because it’s easy to use and offers advanced options for customization.
Thanks to the customization features, users can pick their own trading techniques and strategies, and allow the bot to execute them.
- Integrations: Binance, Bittrex, Bitfinex, CEX.io, Kraken, Cryptopia, Coinbase Pro, KuCoin, TradingView, Poloniex and GDAX
- Software: macOS, Windows and Linux
- Price: Starts at .02 Bitcoin (lifetime license to use the bot)
The best thing about Gunbot is that it supports the top cryptocurrency exchanges and it draws from your chosen cryptocurrency using APIs.
In short, the main objective of Gunbot is to sell and buy cryptocurrencies for you, while considering all the factors of the market on the designated platform. The software makes an intelligent prediction to allow for selling or buying a cryptocurrency at a specific price point. Gunbot does not require you to do much work as it continually engages in trading and rakes in the profits itself.
Advantages of Gunbot:
- Effectiveness: Gunbot, as a crypto trading software, rarely makes illogical trades. It always sells at high prices and buys at lower rates. The algorithm is very effective in both its operations and market analysis.
- Offers Customization: As mentioned, Gunbot is highly customizable. Users can choose what they want to trade and customize their trading methods.
- Number of Options: For trading, Gunbot offers multiple options using Trend Watcher, BBs, EMA Love and Candlesticks. As a result, Gunbot hardly ever makes mistakes because it takes a lot of trading factors into account before making a decision.
- Provides Freedom: With Gunbot, users can set and test parameters they feel are perfect for their trading needs. Users can set exact limits on the quantity they are willing to risk as well as the levels at which they want to take profit and stop loss. This broad range of customization options gives users the freedom to combine strategies and test new ones.
Released by HaasOnline in 2014, HaasBot is one of the best crypto trading software programs currently on the market. Like most other cryptocurrency trading bots, HaasBot uses artificial intelligence algorithms that monitor cryptocurrency markets and make automatic trades. Like most of the bots on this list, HaasBot also integrates all major exchanges and provides users with unique benefits.
- Integrations: Binance, BitMEX, Bitfinex, C-Cex, Bitstamp, Bittrec, CEX.io, Gemini, Coinbase Pro, Deribit, HitBTC, Futures, KCoin, KuCoin, Kraken, Huobi, OKEX, Nova Exchange, WEX and Poloniex
- Software: macOS, Windows and Linux
- Price: Starts at .025 Bitcoin for three months
HaasBot is the most used crypto trading system. Users have the ability to set up different kinds of trades starting from the simplest ones to the most complex strategies that exist in trading.
Advantages of HaasBot:
- Range of Tools: The HaasBot software includes more than 50 technical indicators and a number of testing tools. Among the features, there are also 13 insurance types that protect users’ trading.
- Functionality: Haasbot can be put into use very easily and quickly. All users have to do is download the software from HaasOnline on their Windows, macOS or Linux computer. From that point on, the program will automatically complete the trades on behalf of the user.
- Technology: HaasBot currently has 15 pre-built types of bots and supports fully programmable script bots. This feature allows more advanced users to create their own customized bots, while still offering an easy option for beginners.
- Exchange Integration: HaasBot is compatible with 20 major exchanges, all of which are mentioned above.
- Customer Support: This cryptocurrency trading bot has a very active and efficient customer support team that allows users to smoothly interact with the moderators regarding any problems or questions they might have.
Formerly known as Leonardo, Margin purchased the bots that the once-popular automated cryptocurrency trading software used. Today, the Margin platform emphasizes strong security, effective bots and clean layouts.
Among the masses, Margin became even more popular than Leonardo ever was by making trading easier for the users. This crypto trading bot lists a number of features and exchanges it supports. The platform is also available in many languages including English, German, Spanish, Chinese and Portuguese.
- Integrations: Binance, Bitstamp, Bitfinex, Bittrex, Kraken, Coinbase Pro, Bleutrade, Huobi, HitBTC, OKCoin and Poloniex
- Software: macOS, Windows, Linux and Raspberry Pi
- Price: Starts at $129 (lifetime license to use the bot)
Out of all crypto trading bots, Margin is most known for the significant investment into their graphical user interface. Some experts consider this bot to be the best looking automated cryptocurrency trader that currently exists.
Advantages of Margin:
- Technical Indicators: Margin provides users with a number of technical indicators for better market analysis. The bot helps to predict future prices of different cryptocurrencies. Some of the best-known Margin indicators are MACD, Bollinger bands, VWAP and EMA.
- Visual Trading: As mentioned, Margin has an amazing graphical user interface, which is well received by every trader. The visual representations are extremely convenient and users can view up to 25 markets at the same time if they attach a second screen to their device.
- Customizable: Users of Margin can customize the platform to their liking. This makes the bot perfect for those who love to play around and make the most of crypto trading bots’ features.
- Security: This system does not practice storing the users’ funds on their servers. Margin allows access to the exchanges straight through their platform. This security measure is not something that many crypto trading bots apply.
- Bots: By using the Margin trading terminal, users are able to get access to all bots available on the Margin platform.
One of the unique features of ProfitTrailer is the fact it comes with various buy-and-sell strategies. The bot distinguishes itself through its effort to follow the biggest crypto trends.
- Integrations: Binance, BitMEX, Bittrex, KuCoin, Huibi and Poloniex
- Software: macOS, Windows and Linux
- Price: Starts at €25 per month
Many useful features come with ProfitTrailer. A subscription gives you access to all the supported exchanges, meaning you will not need additional licenses.
Advantages of ProfitTrailer:
- Easy Dashboard: Users of ProfitTrailer can easily monitor everything through the dashboard. This gives them a full overview of the bot’s movements and trading activities.
- Number of Strategies: ProfitTrailer offers more than 20 different strategies for buying and selling assets. Among these strategies, users can find RSI, MACD, LOWBB, EMAGAIN, BBWIDTH and many more.
- One License – Multiple Exchanges: As already mentioned, users are allowed to trade on six crypto exchanges with a single license.
- Flexibility: This feature can be found in the subscription offerings. The ProfitTrailer crypto trading bot offers annual subscriptions at a competitive price. There are lifetime subscriptions available as well as one-, three- and six-month subscription plans.
- Hundreds of Possible Crypto Trades: Trading through ProfitTrailer, users can trade any fiat or crypto pair listed by the exchanges the bot supports.
Crypto trading bots can be an extremely useful tool for traders. However, in order to benefit from these software programs, they have to be used properly.
If you know what you’re doing, trading bots can become a crucial part of your trading strategy. If you’re new to cryptocurrency trading or have never used a trading bot before, our advice is to proceed with caution. Go for bots that are well recommended, such as the ones in this list. Lastly, make sure you do your own research and pick the trading bot you feel will be most suitable for your cryptocurrency trading purposes.