What are stock exchange bots for? How can they help you on a daily basis trading investors? And most importantly – how do they work? These are classic questions that novice investors ask themselves when they first encounter trading with a bot for Bitcoin or other cryptocurrencies. You will learn everything in this article.
BTC Trading Bot – what is it? What does it do?
Time doesn’t stand still for anyone in the cryptocurrency markets. Unlike the stock market, trading on Bitcoin and other decentralized assets takes 24/7. Monitoring such activity is a real challenge. Therefore, special stock bots help traders in this task.
A bot is an automated program that runs on the web and performs repetitive actions much more efficiently than humans. It is estimated that about half of the traffic generated on the web is generated by bots interacting with pages and users.
Bitcoin trading bots operate under the same assumptions as regular bots. They are software that performs tasks with the help of artificial intelligence based on predetermined parameters. By using a set of different algorithms, we can automatically buy, sell or hold assets in an automated manner. Everything regardless of the time of day and place.
How do bots work?
Bots communicate directly with exchanges. They automatically generate and execute orders without the emotional approach that is often characteristic of traders. Each bot that we connect to the exchange must be authorized by the API of the platform. Each bot works on the basis of 3 key elements – signal generator, risk allocation and execution.
The signal generator does the trader’s job. It is this mechanism that is responsible for creating predictions and identifying opportunities based on market and technical indicators.
Risk allocation, as the name suggests, is the stage in which the bot performs a risk analysis and then adjusts its strategy based on the parameters created by the trader.
Execution is nothing more than the phase of the actual operation of the bot. It is at this stage that transactions are made based on the signals set in the previous configuration.
Types of trading bots
Trading bots come in all kinds of forms. Therefore, now we will introduce some basic types.
Trend Trading Bots
This type of bots tries to secure the investor’s profits by analyzing the dynamics of a specific asset. Identifying and predicting trends can be useful when setting take profit and stop loss orders.
They identify price and exchange rate differences between different markets and then try to buy / sell in order to profit from these differences.
Those interested in the topic of lending cryptocurrencies to earn interest use loan bots to automate the process and measure ROE volatility as well as the risks associated with borrower repayments.
These bots specialize in generating profit from the difference between the ask and bid rates.
Stock bots – advantages of using
Bots provide a number of benefits to traders who use them. First of all, we should pay attention to the unemotional approach to trading – bots are able to automate processes that traders would not choose for emotional reasons. Along with the automation, the speed of transactions also increases – the bot will always outrun the trader’s reflexes. Additionally, the bot will diversify the risk for us.
Bots can be especially useful in stressful situations where patience and nerves are required. Bots can effectively support traders in margin trading. Trading with margin on platforms such as Geco.one may require additional support when executing short term orders with a leverage of 1: 100. Therefore, if you are serious about trading – it is worth exploring the topic of trading bots.