Should you not trust yourself to trade cryptocurrencies, there are a couple of other options. One is to join a paid group and get tips from “experts”, while another is to use a cryptocurrency trading bot to make the trades for you. In this article, we will explore what a cryptocurrency trading bot is and whether you should use one.
What is a cryptocurrency trading bot?
Trading bots have been used in the traditional finance sector for many years now. Simply, they are computer algorithms that look for specific indicators and news to place trades on your behalf. As they are lines of code, they do not need to sleep or rest, meaning they can run 24 hours a day.
The quality of cryptocurrency trading bots can vary depending on how talented the person who made them is. There are a variety of cryptocurrency trading bots on the market and each one will have its own parameters and methods of finding the best trades.
Many people work full-time and have families to look after at home. This means that finding the time to research and trade cryptocurrencies is hard to come by. This is one of the reasons why people might look into utilising a cryptocurrency trading bot. The issue with this though is that cryptocurrency trading bots can be extremely difficult to use for beginners.
Other’s may fear that they don’t have the knowledge to trade cryptocurrencies and again might view using a bot as an easier route into trading.
Popular cryptocurrency trading bots
There are many trading bots available on the market, but they will cost you. This is the risk involved in using a cryptocurrency trading bot. Finding reputable developers and providing your hard-earned money to gain access to a bot but then not knowing whether it will be successful or not is a worry for many.
Here are some of the most popular bots on the market right now.
- Cryptohopper – Cryptohopper is a bot that utilises the cloud, so it can continue to trade even if you have your computer switched off. It works on a variety of cryptocurrency exchanges including Binance and Poloniex. The fees for using Cryptohopper begin at $19 a month but can go as high as $99 depending on your membership level.
- CryptoTrader – Similar to Cryptohopper, CryptoTrader is another cloud-based platform. It is usable with a wide variety of exchanges and the cost to use it starts at 0.0043 BTC per month – which is equivalent to around $20 at today’s prices.
- Gekko – If you would rather try out a free trading bot, then the open source Gekko is a good option. Whilst it might not have as many features as its pricier competitors, Gekko is a good entry-level option to test out the software and get used to harnessing a trading bot.
Criticisms and risks
There are many criticisms and risks in using a cryptocurrency trading bot.
The first criticism of trading bots is that, for the majority, you will have to pay a subscription with no guarantee of results. If you are new to cryptocurrency trading, the difficulty in setting one up may prove more hassle than it’s worth. Instead, trading on your own time would probably make more sense.
Like any aspect of cryptocurrency, there are always going to be scams around. Trading bots are no stranger to this controversy either. Finding reputable bots to do your trades for you is always going to be a risky business. Verifying the profitability of a trading bot without using it in the first place will prove difficult.
Trading bots are also not averse to risks in the market. Many cryptocurrencies still suffer from pump-and-dump schemes along with flash crashes. With trading bots performing your trades for you, this could possibly lead to big losses should you not take the required precautions.
Conclusion
Using a cryptocurrency trading bot is risky. Whilst placing your trust in a machine to trade your cryptocurrencies might sound like an easy shortcut to some money, shortcuts rarely work. On top of this, a lack of knowledge of cryptocurrencies coupled with a lack of knowledge about trading bots themselves means that the learning curve when using one is extremely steep.
If you are willing to accept the risks of using a trading bot and accept that the chances of you losing money are just as great as winning money, then ensure that you have fully completed your due diligence. Like always, never invest more than you can afford to lose.
If you are new to cryptocurrencies, then the advice would be to learn how to trade on your own first before using a bot. That way you gain an understanding of the market and a knowledge of cryptocurrencies. Then, if you find you are a deft hand at trading cryptocurrencies, the need for a bot is minimal.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.