2018 was one of the most difficult years for the cryptocurrency market. The prices of almost every cryptocurrency experienced the biggest price drop, which almost crippled the entire crypto ecosystem. However, as the market continues to recover, there has been an emergence of multiple companies giving potential investors ways and platforms to engage in the cryptocurrencies world without necessarily having to mine them.
Key among these platforms are Crypto trading bots. These computer programs are used by individual investors to gather intel using different market indicators, recognize trends, and execute trades automatically when the market conditions are ideal.
Although similar algorithmic trading software has been a staple in the hedge funds and currency markets, Crypto trading bots are a relatively new concept. And with the availability of technology to build on, they have continued to evolve both in sophistication and functionality.
In this article, we are going to look at how to create a trading bot and the advantages of the same.
Brief Overview of Crypto Trading Bots
Contrary to the stock markets, the cryptocurrency market operates perpetually without sleeping, meaning its highly volatile. This can be stressing to traders considering one may sleep a millionaire only to wake up with a wiped portfolio.
In 2013, one finance worker named Joseph Lee discovered a way overcoming thing by creating BTC.sx. This trading platform worked under a very simple concept; It monitored multiple trading platforms looking for price differences and exploiting these loopholes by automatically buying Bitcoin and selling Bitcoins on different platforms.
Fast-forward to today; the cryptocurrency market has expanded, bringing along more opportunities. To exploit these opportunities, trading bots have increasingly become sophisticated and the weapon of choice for traders, which allows them to keep tabs on the market even when they are asleep. Moreover, the demand for skilled professionals to build the bots and specifically Ruby Developers has continued to rise.
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Before we get ahead of ourselves, let’s briefly look at the types of Crypto trading bots.
If you are looking to build your own trading bot, they mainly come in 4 major categories. This includes;
Technical Trading Bots
Technical trading bots are by far the most widely used Crypto trading bots on the market. Basically, they use market indicators & signals to predict any price movements in the future and using these parameters to make profits.
Arbitrage Bots
These bots are used to buy Crypto from one market at lower prices and sell them at a mark upon a different market.
Market Making Bots
Market making entails placing both buy and sell orders simultaneously hoping to make a profit from the bid-ask spread. Market making bots act as intermediaries and help the traders to provide liquidity to the trading market.
Portfolio Automation Bots
Instead of focusing on active trading, portfolio automation bots helps investors and traders to automatically create, obtain, and maintain their investment portfolio.
Advantages of Using Crypto Trading Bots
If you are looking to earn money online through crypto trading, you need to have a clear idea of the inherent benefits that they bring. After all, no one wants to invest in a redundant program that brings nothing new to the table.
Here are some of the reasons why you need to invest in a bot.
Helps Save Time
As a trader, trade calculations and executions are time intensive and tedious work. However, with a crypto or bitcoin trading platform, automation becomes easier; hence, you don’t need to spend countless hours cranking repetitive work. In a business setting, it means you get more time to focus on other core areas to improve your bottom line.
Efficient Execution
Nothing comes close to the efficiency of Crypto bots when placing a buy or sell orders. For starter, they are able to use info sift through loads of information and make a more accurate decision compared to a human. Moreover, bots are able to place multiple orders instantaneously meaning a trader is able to jump onto opportunities at a faster pace compared to when placing orders manually.
Consistent Strategy
Under normal circumstances, It’s very difficult for a trader to manually follow a consistent strategy. This is especially the case with newbies learning how to trade cryptocurrency as emotions tend to get the best of them, prompting them to make alter their strategy on the fly.
With a bot, all the emotions are kept aside as algorithmic trading is super-reliable in making and executing consistent strategy repeatedly.
Helps Supplement your Income
No one hates making an extra buck. And one of the reasons why people use crypto trading bots is because they are more efficient compared to humans; hence they can help earn some extra cash. It shouldn’t then come as a surprise that the past few years have seen an increase in the number of bots and their usage.
5 Tips to Build a Crypto Trading Bot
You will come across many blogs making false claims on how to make money online using bots. Most will even go further to liken bots to AI, which is absolutely false. Crypto trading bots aren’t artificial intelligence programs as they won’t think for you or even help you score the most profitable trades. Instead, you will need to configure them to perform a predetermined set of actions repeatedly.
And since Crypto trading bots can only be as smart as the developer who build them, here are 5 tips to help you develop a better program.
Ensure the Trade Execution Code is Coherent
The secret behind creating a successful Crypto trading bot lies in the patness of the code. It is important to note that the code tasked with implementing your strategy makes up a tiny fraction of the entire bot. However, it plays the biggest and most important role in specifying the logic & calculations used in determining when to trade and the quantities to trade.
As soon as you have your bot ready, ensure you evaluate the performance of the code to avoid running into problems in the real world.
Conduct Multiple Backtests
Blindly deploying an algorithmic-based bot is the easiest way to blow your investment. To ensure your Crypto trading bot works properly, conduct multiple simulations by correlating it against a historical market data model. For this, you can tap into already existing APIs to collect tick-by-tick data. A good example of such an API is the CCXT library. It allows you to interface your bot with a wide range of exchanges for more realistic simulations.
Compatibility with Your Preferred Crypto
Whether building your bot from scratch, its also important to keep in mind the type of cryptocurrency you will be dealing with. Lack of compatibility would mean that you spend a lot of your time building it only for it to end up being useless.
Secure your Bot
For a larger part, the biggest reasons why you would be looking to build a bot/s is for purposes of making decisions like when to buy, sell, and hold on. For this reason, you should limit their capacity to just doing that.
There have been instances of people losing their entire investments or getting their actual bank accounts hacked courtesy of giving their trading bots withdraw access. When it comes to cryptocurrencies, the security of your bot should be a priority as you won’t have anyone to blame in case you are hacked.
Ease of use
The whole point of building an automated Crypto trading bot is to ease the entire trading process. A good bot should come with an intuitive and easy to use interface. Additionally, it should be super-easy to control with few mouse clicks as slight delays could mean a lost opportunity.
Final Thoughts
If you are keen on learning how to make money from home through Crypto trading, you may have already realized that your chances of winning are slim when the odds are stacked up against you with hundreds if not millions of bots. Instead of spending countless hours churning through all the technical aspects of trading, you need to build a trading bot.
With that said, it’s important to note that different trading bots have different capabilities. If you choose a poorly coded trading bot that runs on faulty software, there is a high likelihood that you will lose money using the same bot. Luckily, if you don’t have any coding experience, there are multiple platforms to build trading bots. Alternatively, you can hire a team of developers to help you out as they have the necessary skills to build bots, plus they can help you to choose the best technology to do so.
