Wednesday, October 27, 2021

How do crypto trading bots work? Why and why not should you use a bot for trading?

The Takeaway:

Cryptocurrencies are highly volatile, and it is nearly impossible to predict the accurate movement of the market at a given time. Crypto trading bots are used by several traders to make profits. In this detailed article, we take a look at how crypto trading bots work and how you can use them to your advantage.

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Unlike the stock markets, the crypto market never closes, which can be a stressful scenario for traders in the industry. There has been a long history of using AI robots (or a Trading robot) in stock markets. Some from the crypto industry frown upon using bots to trade cryptocurrencies and some prefer using bots to make the right decisions at the right time. 


What are crypto trading bots?

Cryptocurrency trading bots are computer programs that are specifically designed to buy and sell various cryptocurrencies at the right time to generate a profit. However, it is not guaranteed that all bots will make you profit. Because of the volatile nature of cryptocurrencies, trading bots have become increasingly popular among traders by allowing them to remain in control of their trading at all times.

Note: Different trading bots use a different algorithm to place orders on the user’s behalf. 


Bots monitor market’s price movement 

Essentially a trading bot is a software program that interacts directly with crypto exchanges and places buy or sell orders on users’ behalf depending on the interpretation of the market data. The trading bots make decisions by monitoring the market’s price movement and reacting according to a set of pre-programmed rules. 

Note: Bots can also be programmed to suit a user’s taste and preferences.


How do crypto trading bots work? 

Crypto trading bots work with three moving parts that include a signal generator, risk allocation, and execution. The signal generator is where a user makes predictions, and some data goes into it, and it tells whether to buy or sell at a particular time. Risk allocation takes the buy or the sell signal into account and then decides how much you should buy or sell. After allocating risk, the bot performs the last action, which is execution. All three parts require their own distinct algorithms and optimization processes applied. 


Why should you use a crypto trading bot? 

As mentioned earlier, crypto markets never sleep or close down, unlike the traditional stock markets. As the crypto market is highly volatile, several investors have woken up to see huge losses or gains without having the chance to execute any orders. Crypto bots solve that problem as they can place orders at any time of the day or night. The other factor that bots beat humans is speed. Crypto trading bots operate magnitude than a human thinking time plus reaction time. Boots can also ignore the sentiments in the crypto market that humans can not. 

Note: Bots place orders strictly based on statistics and numbers that are likely to make you profits. 


Are crypto trading bots profitable? 

There are several crypto trading software like immediate edge bot website that you can sign up for to start crypto trading, but it is important to remember that not all bots work that same, and not all of them guarantee profits. Choosing a trading bot can be quite confusing, and it is advised to go through trading software review 2020 before you decide what trading bot you should buy. Crypto trading bots can be profitable if you are a full-time crypto trader, as investing in a bot is quite expensive and not affordable for casual investors.



There is no denying that the crypto market is highly volatile, and crypto trading relies heavily on speculations. Trading bots is not exclusive to the crypto market such bots have been in use for many years in the traditional market. However, one needs to have extensive knowledge about how bots work and what type of bots should they rely on to make profits with crypto trading. 

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Disclaimer: The article reflects the opinions of the author and is not representative of Chaintimes’ views.
The article does not offer any investment advice. User discretion is advised when investing in or trading with cryptocurrency. Extensive and diligent research should be carried out by the reader before making a decision.

Ramon AnderSon
Ramon AnderSon
Ramon is a senior market research analyst who is very passionate about bitcoin. He has a degree in Applied Science from Assumption College, Worcester.

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