Crypto Trading Bots Guide: What Are They and How Do They Work? - Coindoo
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Crypto Trading Bots Guide: What Are They and How Do They Work?

Editorial Team Avatar
Nov 6, 2019
3 min reading time

Crypto trading, in the traditional sense, involves a lot of monitoring and control of market prices before placing an order.

But manual trading comes with its downsides. Fortunately, the emergence of trading bots has also reached the crypto market. Trading bots are complex pieces of software that automatize the trading process. If you want to check out a new crypto bot, access the Libra Method official site and find out more about this product.

Brokers and financial traders have been using automatized software to make their trades for them. Actually, roughly 75% of trades on U.S. stock exchanges are made on an automated basis.

Cryptocurrency trading software has seen great strides both in technological advancements and usage. Even people without prior trading experience are able to get involved into the Bitcoin and altcoin markets with the use of such bots. You just have to set your rules, and the software automatically performs the trading from your computer.

How Do They Work

Crypto trading bots use an algorithm that completes a defined task based on its set parameters. These algorithms allow the user to set certain rules of execution, such as the timing of the trade, the price or volume of the asset before trading, and many others.

The algorithm allows you to set your trading parameters, and when it receives the trading signal that matches these parameters, the algorithm proceeds with the bid.

To increase its accuracy, the bot looks through a large amount of historical data and proceeds to compare it to the current market trends. This technical analysis allows it to generate trading signals based on which it executed the most profitable trades.

Most sophisticated trading bots are based on a three-part system consisting of:

Signal Generator

This is the part of the bot that makes the predictions based on the inputted data into the signal generator and then outputs the buy or sell signal.

Some bots use technical indicators for these predictions, which include historic price, volume, or open interest information.

Risk Allocation

This part takes the buy or sell signal and decides on how much it should place on the order. For example, the bots weigh in if it should allocate their owner’s entire capital in one particular trade or just a share, or if the purchase should be executed in one instance or a series of several others.


The part of the bot that places the order on the exchanges you have selected.

These three instances we have specified require their own distinct algorithms and optimization processes and should all be working in perfect sync if you want to make the most of your trading.

The Advantages of a Crypto Trading Bot:

  • Automation: The software automatically analyses and predicts trading opportunities on your part. You just have to set your trading parameters.
  • Easy to use: Bots can be used by both new and experienced traders, as everything is neatly displayed on a compact interface.
  • No risks of human errors: It is very easy to be affected by your emotions and make a trade you will regret in the midst of a very volatile market. Since the software does not have any emotions to hinder its judgment, it effectuates the trades as it was supposed to. If you want to have control of your trades, you can just set it to manual mode. You may learn more about the advantages on TradeSanta’s blog.

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* The information in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We advise you to do your own research or consult a professional before making financial decisions. Please acknowledge that we are not responsible for any loss caused by any information present on this website.
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