Having a crypto trading bot that can bring you a profit while you relax on the beach with a margarita sounds like the way to go. Whether you’re trading stocks or cryptocurrencies, software that does everything for you almost sounds too good to be true.
And it kind of is.
However, classifying every single trading bot as a scam is unfair. Some legit providers will give you a piece of software to help automate your trading.
But at the end of the day, even the most expensive, professional, premium trading bot you can acquire is only as good as your trading strategy.
Let’s see why.
What are trading bots?
First, regardless of whether it is trading stocks, collectibles, or cryptocurrency, a trading bot is software. You install it on a computer and set it to trade assets on your behalf while you’re away from your computer.
As a trader, you must provide the trading bot with trading parameters and a strategy it can execute to trade faster and more accurately.
Furthermore, a trading bot software can use more than one bot to track and trade several assets simultaneously. The practical side is that you don’t have to follow countless screens simultaneously to catch as many market opportunities as possible.
How does a cryptocurrency trading bot work?
There is no exact bound to one programming language for building trading bots. A cryptocurrency trading bot can be developed using C/C++, Python, or even MATLAB. However, the type of algorithmic strategy, frequency, and volume employed will have a substantial impact on the design of the system.
And without more technical knowledge, you need to investigate the software to determine if the trading bot can be used for day trading or long-term strategies.
A trading bot software usually contains a back testing tool, a portfolio manager, a risk manager, and an execution engine.
The back testing tool allows you to simulate your trading strategy in a sandbox of historical market data. This will enable you to check if your approach fits the market conditions and what results it can bring.
The portfolio manager administers a set of trades and optimizes the allocation of funds to various strategies according to factors such as sectors, asset classes, volatility, etc.
In trading, there are several ways for the risk to come as increased volatility, increased correlations between asset classes, or “black swan” events. Therefore, a trading bot’s risk management systems have the role of trying and anticipating these events’ effects on the trading capital.
And in the end, the execution system has the task of receiving filtered trading signals from the portfolio management and risk management components and sending them to a brokerage or other means of market access.
And no, it will not make a phone call to the broker.
The trading bot will connect itself through an API to a trading platform. The software will then read information from the exchange about the asset prices and volumes to execute trades on your behalf.
The trades are only executed when the markets hit specific parameters. And this is where the strategy comes in.
So, we mentioned before that the trading bot could only be as good as your strategy is. That’s because the software will only act according to your strategies and settings.
What can and can’t trading bots do?
In a way, trading is a lot like a strategy game. You devise a plan to reach various goals while adapting to random events thrown at you by the game. The main difference is that in games, the uncertainty factor goes down the more you play, and the better you become.
A random event like a draughty year or an invasion from a neighboring country is less impressive around the endgame. No minor setback can prevent you from beating the game when you have already stockpiled food and have an invincible army.
But this flaw of strategy game design does not apply to the world of trading cryptocurrency or other assets. You can spend your whole life mastering trading, and a random event like the 2020 Pandemic, the 2022 Russo-Ukrainian War, or the 2022 bankruptcy of FTX can still come as a surprise.
But we can say for sure that trading bots have their strengths. And when it comes to facts, here are some of them.
What can trading bots do?
- Trading bots can execute trades 24/7, according to the strategy. However, the software needs constant attention, and the parameters require optimization. You can let a trading bot operate successfully overnight but not over a week.
- The trading bot doesn’t have emotion and only acts on parameters. Sudden drops and bounce-back are quite the norm in the cryptocurrency space, so it’s no surprise to feel the temptation to sell everything when you see the price of your assets falling 10%. But a trading bot set to buy at -5% and sell at +2% will stick to this parameter, whatever crypto fear and greed index might show. And if you set a stop-loss order at -20%, the bot won’t panic even if the price goes as low as -19%.
- Algorithmic trading software tests strategies on historical data. This happens to evaluate if a trading strategy could fit the market. But because the plan is tested on past events, it wouldn’t be surprising to get positive results in back testing and wake up with a loss on the live market. That’s because even though there are similarities and cycles in a market, the conditions are never the same.
- Algorithmic trading software can help you save time. The sole fact that the bot takes care of placing the order and tracking the parameters can save you anything from a few minutes to several hours.
On the other hand, there is a lot of fiction surrounding falsely advertised cryptocurrency bots.
What can’t trading bots do?
- Trading bots don’t come up with new strategies on their own. A trading strategy can be profitable for a while, but it will most likely fail to bring the same results when the market condition changes.
- A trading bot will not correlate real-world events with the market conditions shown in the exchange platform’s charts. A stock trading bot won’t take any action to sell or buy airline companies’ stocks when governments worldwide put or lift restrictions on traveling. And in the same way, a cryptocurrency trading bot will not take any action when the news comes out that Ethereum Classic suffered a 51% attack. Although a human trader will immediately make a correlation and change the tactic, the trading bot will still stick to the initial plan.
- Algorithmic trading software does not foresee the future. Although probability and statistics are legit fields of study, no algorithm in any trading bot can predict what will happen and how a market will evolve, whether cryptocurrency trading or stock trading. Risk management components and indicators can only show probabilities that the markets will evolve in one way or another.
- Algorithmic trading software won’t make you a billionaire. Yes, they do save time. But trading software can only be as good as you can set it to be. And it will still need supervision and reviews.
It is possible to make lots of money from investing in the markets, but this is a high-risk activity.
The average Joe will not gain more profits with automated trading than manual trading. Not working with strategies in the software will work in the long term. Trading is as complex as getting a degree, and the markets change fast.
Are trading bots legal?
Before cryptocurrencies, the question was, “are stock trading bots legal?”. And as cryptocurrency trading took proportions, Bitcoin trading bots started to pop up on the market.
In both cases, trading bots are not specifically regulated as being illegal globally. However, you may have to check if there are any legal mentions in your area.
But generally, cryptocurrency trading bots and stock trading bots are legal.
Also, you may have to check the platform you use for trading for any policies regarding trading bots.
Automated trading software offered by legit companies does usually tell what trading platforms they support.
But while trading bots are legal, you still have to look out for scams. Any offer that sounds too good to be true broadly is. There is no guaranteed returns and no magic behind algorithmic trading software.
And giving access to your assets to sketchy software can result in phishing and loss of your funds.
Although there is no legislation to fight against it, even legit automated trading software providers sometimes leave faults in their codes that lead to the incorrect execution of a strategy.
As a rule of thumb, a good trading bot will never be free or cheap.
Top Crypto Trading Bots You Should Look Out for in 2023
Here is a list of the best trading bots that you might find:
Cryptohopper is one the most recognized automated crypto trading bots that allow crypto enthusiasts to have all their crypto accounts and manage them in a single place. Since it’s a cloud-based bot, Cryptohopper uses an algorithmic programming approach that helps users come up with intelligent trading decisions.
Currently, those using Cryptohopper can connect to up to nine different exchanges. The features of Cryptohopper include an automated technical analysis feature, protection of security protocols, and data privacy. Cryptohopper also has a straightforward and intuitive user interface that allows new users to explore.
The advantage of this crypto bot trading is that it’s easy to set up, as it requires no credit card information for new users. Cryptohopper also hosts all its cloud storage services, allowing traders to paper trade without being exposed to financial risk. These features are among the best trading bots crypto platforms have to offer.
However, this bot has several disadvantages, including a limited technical support force. Several charges are attached to Cryptohopper if you wish to enjoy its features. The Pioneer Package is free for all users, while the Explorer Starter package has a 7-day free trial, after which you will be required to pay $19 monthly.
The Adventurer Trader Plus package asks for a monthly fee of $49, and the Hero, Pro Trader package, is $99 monthly. But, overall, it still falls among the best crypto bots trading options.
Founded in 2019 in Vienna, Austria, Trality is a leading FinTech company offering state-of-the-art automated algorithmic trading tools for every level of investor. Their Rule Builder enables beginners to create bots using boolean logic (no coding required). At the same time, their flexible Code Editor — the world’s first browser-based Python editor — includes end-to-end encryption, a blazing-fast back tester, financial data, numerous packages, and a robust debugger. Exciting additions include the Trality Marketplace, where bot creators can develop and rent bespoke bots to investors, and the Trality Masterclass, which reflects their commitment to empowering investors through education. Trade like a professional quickly and easily with Trality’s professional-grade tools.
Bitsgap created a unified solution with an easy-to-use interface to provide a hassle-free trading experience. The Bitsgap trading bot is a unique feature that allows you to profit from every market move in minor but consistent amounts.
In addition, Bitsgap features a fully secure and consistently quick interface, with over 10,000 cryptocurrency trading pairings available on the site. You may also check transaction history, track open positions, and manage your balance on your linked exchanges.
The platform employs RSA 2048 encryption, making it twice as secure as most banks. Employees aren’t allowed to see sensitive information. Bitsgap has three pricing plans: Basic Plan – $25/month; Advanced Plan – $59/month and Pro Plan – $129/month.
Zignaly is among the newest crypto trading bots in the cryptocurrency market. This bot allows its users to develop their trading strategies from scratch. Looking at its features and pricing, Zignaly can be considered one of the best crypto bots trading options.
When you register to use Zignaly, you can use all the resources available for free until you make a profit. Users have the option to automate or semi-automate their trading exercises fully. However, it has over eight exchanges to which users can connect the bot, which is a significant disadvantage as there are not enough options.
Some of the features of Zignaly include the trading view integration, where the user can keep up with their latest trades. It also accepts copy trading, allowing users to copy the transactions made by other experienced traders.
Besides, Zignaly offers free and paid signals, which could be an excellent resource for a trader. Finally, if you wish to perfect your trading skills using bots, Zignally is the best trading bot crypto platforms offer.
3Commas works on over 20 crypto exchanges, offering users dollar-cost averaging strategies and an integrated trading view from third parties. 3Commas is among the trading bots crypto platforms currently have to provide for those interested in securing profit with minimal effort. This bot has several attractive features, including copying the settings you used on other bots. Traders can also balance their portfolios by maintaining coin ratios, allowing paper trading.
3Commas also assists its users in making money in Bull, Bear, and Sideways Markets. This crypto trading bot’s pros include its intuitive interface with the advance buy and sell feature on a single window. You can also trade options on an exchange. It is, however, daunting for newbies.
3Commas has four plans with different features. The first plan is free to use with basic features. The Starter package is charged at $29 monthly, while the Advanced package rates at $49 and $99 for the Pro package.
Notably, the 3Commas bot is available for both iOS and Android; therefore, users can easily make use of trade anywhere. 3Commas is gradually gaining in popularity, which means that it ranks among the best crypto trading bots.
The Shrimpy application has been designed as a social platform for cryptocurrencies with an automated trading strategy feature. Those making use of this application can improve their performance in trading and reduce risks. Shrimpy also helps track performance, monitor the market, and build a proper portfolio strategy.
When using Shrimpy, users are assured that their API keys are encrypted and stored securely as FIPS. The application also offers its users a dashboard inclusive of statistics and portfolio performance metrics. Traders using Shrimpy can easily automate their trades, multiply them simultaneously, and track the changes between their software and hardware wallets.
Shrimpy has a well-established and easy-to-use interface, which means new users can easily understand the procedures needed to better their trades. In addition, Shrimpy allows its users to track their followers and know when they were last active with the Follow feature.
Unlike other automated crypto bots, Shrimpy has no free version for its users. Instead, those willing to use its features will have to choose among its three packages. The Starter package is charged at $19, while the Professional and Enterprise packages cost $79 and $299, respectively, each paid monthly.
In the history of crypto, HaasOnline stands to be one of the oldest and the most reputable crypto trading bots. Most experienced traders prefer this bot due to its efficiency and profitability. Furthermore, those using the bot can connect with leverage platforms and crypto exchanges using their API keys.
This application has 15 bots that allow you to define your trading strategy, such as dollar-cost averaging and paper trading. In addition, HaasOnline has leveraged marketing data and other tools to maximize profits, MACD, and other indicators. The current pricing plan for HaasOnline is 0.005 BTC for the Beginners package, 0.007 BTC for the Simple box, and 0.012 BTC for the Advanced package, paid for three months.
- A trading bot is a software that executes trading orders automatically when it meets specific parameters according to a strategy.
- A trading bot software usually contains a back testing tool, a portfolio manager, a risk manager, and an execution engine. The software connects to trading platforms through APIs.
- Regarding facts about trading bots, they can trade 24/7 according to the strategy, only act on parameters, test strategies on historical data, and save you time.
- Blowing up the fiction, trading bots do not: come up with new strategies on their own, correlate real-world events with the market conditions shown in the exchange platform’s charts, foresee the future, or make you a billionaire.
- Trading bots are legal in most places but check for any mentions in your area. Also, stay away from bots that seem fishy and inadequately programmed software.
- Also, some of the most recommended bots in 2022 are: Cryptohopper, Trality, Bitsgap, Zignaly, 3Commas, Shrimpy, and HaasOnline.