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Ultimate Guide on Cryptocurrency Trading Bots and its working process

katrinkunze8 profile image KatrinKunze ・3 min read

Let us have an overview of what cryptocurrency trading bots are and how they help facilitate trading in the realm of crypto. Predominantly, trading bots have served conventional trading in the past, but bots today, operate differently for crypto traders. Crypto bots are not deemed to be a utility owned only by the elite. Their versatility offers wider use cases.

How do Crypto Trading Bots work?

They operate on 3 phases, namely: Signal generation, Risk Allocation, and Execution.

During signal generation, the trading bot formulates an algorithmic recommendation to purchase or sell cryptos or related assets. They help in identifying trading opportunities.
Risk allocations aid in determining the capital investment threshold for the trade opportunity identified. Depending on user preferences, they help mitigate losses and risks.
Execution relates to the actual deployment of the ‘buy’ or ‘sell’ order into the market. Often, they are timing-based owing to the volatility of the crypto market.
Different crypto trading bots adopt different trading algorithms and thus operate differently providing an edge to the trader.

Why are Bots considered?

Trading is impacted by a variety of factors that have the potential to improve a below-par proposition and mitigate a promising one. Here are some of the reasons why bots are preferred over humans.

Crypto bots possess the potential to execute hundreds of order placement within minutes. Such speeds are impossible to achieve by humans.
Crypto trading bots can facilitate trading around the clock, which means seamless, break-free trading at all times.
Humans are unable to process great amounts of data, process the information, and exercise precise decision making. Bots perform all the above with ease.
Trading Bots are not influenced by emotions, unlike their human counterparts. This ensures error-free and unbiased trading, with only the core idea of improving profits.

When to use cryptocurrency trading bots?
Crypto trading bots can perform a lot of tasks for you in the exchange accounts like rebalancing, managing portfolio, smart trades, monitoring the exchange prince ranges. When it comes to setting the protocols of the trading bot, you must know when to use them and what are the tasks to be automated. Here’s the look around on the scenarios at which you must employ crypto trading bots!

Repeated tasks and schedules
Repetitive admin tasks like rebalances and other specific processes can be automated with trading bots. You can manually set alarms and rebalance your crypto portfolios every hour. But, in the busy schedules and office meetings, it is viable to lose rebalances in your crypto portfolio. Hence, you can employ crypto trading bots to automate the repetitive tasks in the exchange platforms.

Appropriate timing
Crypto market space is volatile and experiences price volatility for every second. Before concluding the desired profit rates, the crypto market may change. Hence, employing trading bots for completing swift deals without any losses can be appreciable. Monitoring multiple crypto exchanges and closing the deals at the appropriate time can be tedious for human, but it’s compelling in case of bots.

Round the clock tasks
Whatever the profession maybe, we are humans at the end of the day! We need breaks, sleeps and we do get tired of working. Performing day trading round the clock is impossible for humanity, whereas bots are invented to do that jobs efficiently. Crypto trading bots can diversely manage portfolios effectively and conclude the lucrative deals with desired profit range at any time.


The automated crypto trading bots development has achieved newer heights. The irreplaceable value of bots ensures their permanent spot in the crypto realm for the years to come.

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Tobias Nickel

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