What is automated crypto trading?
Automated crypto trading is a style of trading that involves utilizing specialized software (trading bots) to automatically buy and sell cryptocurrencies when certain conditions are met. Cryptocurrency trading bots allow traders to take advantage of price movements without having to monitor the market on their own.
When you trade without using any automated programs, you have a lot of multitasking to do: watch the charts, analyze the data, use various tools and indicators to find the best opportunities for entering the market, calculate potential risk, place buy or sell orders, etc. All of this can be quite stressful to manage at the same time, and it’s not uncommon for traders of all levels of proficiency to lose focus and miss an important piece of information that can make or break a trade.
However, crypto trading bots are immune to this problem. They can automatically (and much quicker) gather and analyze necessary data and open and close trades if previously entered requirements are met. Automated trading software can help traders save a lot of time, energy and profit for a relatively low price.
How does automated crypto trading work?
Automated crypto trading software is based on algorithms. Algorithms contain a set of instructions and rules aimed to solve a problem. Considering that trading involves waiting for certain conditions to occur, the whole process can be automated by creating algorithms that can analyze the market and carry out trades when the current market conditions comply with the algorithmic rules. There are many variations and types of automated trading programs. First, you can set yourself an expert advisor (EA). This software analyzes the market according to the settings you set up and gives you trading signals. For example, an EA may look after the RSI oscillator and send you a buy signal every time it reaches the “oversold” zone. Another thing you can use is a bot that trades while you are busy with other things. The bot searches for trading opportunities, opens and closes trades, and manages risks. Trading bots are external applications and aren’t built into the exchange platforms by default. There are several ways to integrate automated trading software into the platforms, but when it comes to crypto trading bots, the most prevalent are Application Programming Interfaces (API) trading and decentralized trading platforms.