Initially, automated trading instruments, also known as crypto trading bots, went mainstream in crypto during the ICO boom of 2017. How do they work and why are they so popular among crypto newbies and OGs?
What is a crypto trading bot?
Crypto trading bots are software mechanisms that place and execute orders on trading platforms on behalf of their users in an automated manner. As a result, users don't need to check the market dynamics manually.
Many of the reliable services are sophisticated applications like wallets, exchanges, and other similar types of platforms, with some of them directly accessing blockchain nodes such as Binance Smart Chain node, Ethereum node, Bitcoin node, and Polygon node.
Typically, a user needs to set up the range when the automated trading service is active (e.g. between $33,000 and $35,000 for BTC/USDT pair), to customize the intervals (e.g. $1,000 interval would mean a bot monitors levels reaching $33,000, $34,000 and $35,000), and to fuel it with a certain sum of money (required to place the orders).
Once this is done, the bot starts buying crypto ‘at lows’ and selling it maximally close to the upper border of this or that interval.
Thus, the mechanism scans the price fluctuations of a certain trading pair. If it is activated for the futures trading pair, it also checks the ratio between short and long positions.
How do crypto trading bots work?
Crypto bots gained massive popularity due to their intuitive interfaces, easy usage, and high potential rewards. While using these types of platforms, crypto enthusiasts are free from ‘heavy lifting’ as the so-called AI-powered trading bots execute orders in an automated manner.
Tech-savvy users can write their own bot. This takes advanced skills in Python, JavaScript, Go, and/or other top programming languages. Once a ‘home-brewed’ trading service is up and running, it should be connected to an exchange via API or directly deployed to the blockchain. Therefore, high-quality trading platforms can’t work without a reliable connection to one or several nodes.
In a nutshell, a good trading service should be compatible with different exchanges, support an array of trading pairs, demonstrate a proven track of reliable operating with high uptime, and have good reviews on third-party platforms.
Advantages of crypto bots
Cryptocurrency automated trading mechanisms may be profitable in various ways. More importantly, they help investors gain additional income by enhancing the trading experience.
First and foremost, the mechanism utilized by these platforms is automated, meaning there would be no fear of missing out on profitable deals among traders. Instead, investors can benefit from the faster speed and high-level efficiency offered by trading bots, which can scan entire sections of the market in a matter of seconds.
Furthermore, crypto bots are great for fast transaction execution. Not only do crypto markets operate 24/7, but they are also incredibly volatile, therefore it could get extremely hard to monitor market positions, and profitable opportunities could become less feasible unless a trading bot is deployed.
Some experts also highlight the importance of bots for rookie traders. The knowledge gathered by watching the system work could be a massive help when it comes to effective and profitable operations.
Disadvantages of crypto bots
Like most digital financial instruments, crypto trading bots carry several risks. The most obvious one is the opportunity of coming across a fraudulent bot, which can steal sensitive information from a user and perform a number of other illegal activities.
The mechanism is, nevertheless, fully compliant with a specific algorithm, whereas a person could be more flexible when analyzing the market, including abnormal and emergency situations.
Besides, it is important to monitor your bots on a regular basis to prevent the possibility of unstable work. The proper maintenance requires some deep background knowledge. Many analysts point out that with no prior history in trading, investors could actually lose money and are, therefore, not recommended to implement a trading bot in the first place.
Last but not least, these services are not easy to build, especially when it comes to creating a program from scratch. Developers have to be familiar with smart contacts and other on-chain mechanisms required to guarantee successful results.
What is the best crypto trading bot?
In this section, we are going to mention a few popular examples of cryptocurrency trading bots. Remember to do your own research before participating in any online activities. You can also check out top 10 telegram channels for crypto signals.
Pionex
Pionex is a cryptocurrency exchange platform that also works with Binance and Huobi Global. On top of great functionality, Pionex offers access to 18 unique trading bots. Moreover, the platform is free to register. Pionex lets its users automate their bots. Besides, the service charges low fees and commissions and could be a good option for mobile users as well. For US-based traders, there is a separate platform under the name Pionex US.
AvidDot
AvidDot is yet another interesting bot that can be integrated into DEXs on multiple blockchains. The platform interacts with the public node for Binance Smart Chain (BNB nodes) and executes orders at lightning-fast speed leaving no space for front-running.
LimitSwap
LimitSwap bot also boasts multi-chain functionality as it works with both DEXs on BNB and Ethereum (ETH) nodes. Its ecosystem is built around LIMIT tokens so that its holders can utilize the bot in a privileged manner.
Final thoughts
In this short review, we tried to address an interesting and turbulent segment of trading bots. Some of them went on-chain and started to work directly with Binance Smart Chain nodes, Ethereum nodes, Polygon nodes, and others.
By accessing public nodes, these AI-powered instruments ensure the fastest and cheapest interaction with blockchain and the most accurate execution of automatically placed orders.
