A crypto trading bot uses an algorithm that tracks the live crypto market and analyzes it using technical indicators such as trends and moving averages. It then gives buy and sell signals based on its analysis. Simply put, crypto trading bots buy/sell crypto on your behalf.
Remember that crypto trading bots are not perfect. Since cryptocurrencies are very volatile, bots can sometimes generate false signals. Like with independent trading, there is an inherent risk factor that comes with crypto trading bots. With that in mind, how do you choose a trading bot?
Before you choose your first crypto trading bot, do some market research and monitor the changes. This will help you determine the overall sentiment in the market. Your choice of the bot will change depending on the strategy you want to rely on. That is best determined by analyzing the market conditions.
Safety and trust-factor are both crucial because literally anybody can create and publish a trading bot on the internet. So analyze the bot’s reputation in the industry. Alternatively, you can create your own trading bot if you have the prerequisite skills.
Crypto trading bots are usually not compatible with all exchanges. So, before choosing a bot, double-check whether it works with your preferred exchange. A solid bot will be compatible with multiple cryptocurrency exchanges. However, this is the hallmark of the more advanced and premium bots.
Do not rely on past performances keep in mind that trends and market conditioners keep changing. Instead of relying on past performance, try to understand which strategy is the best suited to the current market and then pick a trading bot accordingly.
Sometimes, trading bots will close and open positions within microseconds or seconds. However, being patient is the key here. So before making trade decisions it is wiser to wait for the right market conditions to occur.
It is tempting to choose coins that have a higher potential for returns. However, these alt-coins are much riskier and more volatile as compared with established cryptocurrencies such as Ethereum and Bitcoin. Before you get fully accustomed to the crypto market, it is a good idea to stick with Ethereum and Bitcoin.