I’ve noticed a lot of discussions on forums recently about bots on the crypto markets and figured it was time to post about the use of bots for trading.
In those discussions I’ve noticed how upset some folks got about bots on the various exchange platform. We’ll, trading bots and automated trading are something very common in Forex and more importantly it’s perfectly legitimate to automate your trades either with the help of a trading bot or by placing stop orders which are send to the market when predefined conditions (such as a specific price) are met.
How you trade is up to you and your strategy or goals.
The bots will constantly trade and usually rely on market indicators such as the MA (moving average) or RSI (relative strength index) to predict the markets direction. If it’s configured right the bot will automatically execute your buy and sell orders while you’re asleep.
Stop orders are generally placed manually based on the results of your chart analysis and various indicators on your chart including the moving average price, resistance lines and so on. The are send to the market when a predefined condition is met. A classic stop order would look something like
sell 100 BLK at 0.00009675 if price is higher than 0.00009550 or
buy 100 BLK at 0.00009250 if price is lower than 0.00009300
The advantage is that your order wont go to the order book until your condition is met and thus does neither create buy or sell pressure and it’s unlikely to get blocked by a bot. You could even match the buy price with the if price so the order will instantly fill in most cases.
Personally I prefer to day-trade manually based on my charting (good old crafting and grinding the trading the floor) in combination with buy/sell stop orders set across a couple of coins but I know a few peeps that love their bots. So like I said how you trade or what tools you use is up to you. Just bear in mind that trading bears financial risks so blabla blabla don’t invest more than you’re willing to lose.
I’ve dug up this CoinDesk article from last year about bot trading for anyone who’s interested to read more into the topic.
With all the allegations of Mt. Gox’s automated trading bot, which has been dubbed “Willy”, algorithmic trading is getting a bad rap. However, using bots to trade on the financial markets is a long-established and legitimate activity – and it’s easier than anywhere in the cryptocurrency markets.
So, how do these bots work, and can they really make you money?
Trading bots are software programs that talk directly to financial exchanges, and place buy and sell orders on your behalf. They make those decisions by watching the market’s price movements, and reacting according to a set of predefined rules.
Lee may have written his own bots, but today, the bitcoin trading bot market is far more established, with several available off the shelf.
Examples include Butter Bot, which offers an online trading bot accessed via a Google Chrome plug-in, and Haas Online, which sells a Windows-based personal trading server. CryptoTrader offers a trading bot marketplace, which allows people to develop bots using different trading strategies, and then rent them to others.