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Best Crypto Trading Strategies

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Trading cryptocurrencies can be challenging especially since the level of volatility in the cryptocurrency markets is significantly more than other financial trading markets. Many successful traders have overcome this challenge through the use of cryptocurrency trading bots. These are automated software applications which use advanced algorithms to determine the best timing to buy and sell cryptocurrencies profitably. The trading bots can be customized to fit your own individual preferences and to conform to your trading goals and your risk tolerance.

Some History on Trading Bots Strategies

crypto market trading

The concept of automated trading began in 1949 when Richard Donchian created a set of rules for buying and selling funds. At some point, more traders started to learn about the concept of “rules-based” trading. In the 1980s, many famous traders, such as John Henry, started using this style of trading. Eventually, traders started to integrate advancements in computer technology through the development of automated trading bots.

Why Should You Use Trading Bots?

crypto trading bot

There are two main reasons that traders prefer to use automated trading software to make money in the cryptocurrency markets. One reason is that investors are aiming to simplify the process for making longer-term investments. Automated trading software can be utilized to diversify holdings, construct indices and rebalance portfolios.

The second reason is that traders are looking to make consistent short-term profits based upon the daily fluctuations in the cryptocurrency markets. This can be accomplished through a variety of different types of crypto trading strategies which require more frequent trade executions. Many traders prefer to use automated trading bots for these types of strategies due to the heightened levels of volatility commonly found in the cryptocurrency markets.

The Ideal Trading Bot Strategy

trading bot vs trading man

Although cryptocurrency trading bots can vary in many different ways, there are a few things that you should do before starting to trade with any type of automated software. First, you should make sure to backtest the strategy of a bot you are looking to use. This means checking the strategy against historical price data. Therefore, you can see how successful the automated strategy would have been if you had been using it to trade against historical market fluctuations.

Also, after choosing a particular strategy, you can further customize the algorithm by adjusting the various trading parameters. This will specifically clarify exactly what the calculations and logic that the automated trading bot will use in order to determine when a profitable trading opportunity arises in the cryptocurrency markets. Adjusting parameters will either increase or decrease the number of trades executed. The more trades executed generally means the more risk is involved, however, this also means more potential for profit. Therefore, you should keep this in mind when adjusting trading parameters which will fit your trading goals and ability to take on risk.

Once you have fully back tested a strategy with your preferred parameters set, you will be ready to execute the trades using live markets. This means the logic and calculations you have customized into the bot’s programming will be converted into API requests that are understandable by cryptocurrency exchanges or brokers. Many cryptocurrency trading bots will allow you to trade with a demo feature, which means you will be trading with virtual funds based on real market movements. This enables you to get used to the various features on the software interface before you actually commit to putting real capital at risk.

After you have performed a proper backtest of your trading strategy and have tried out the automated software in demo mode you will be ready to turn on the software’s automated feature. This will activate the algorithm to continuously scan the cryptocurrency markets in search of the proper market conditions you had specified via customized trading parameters. Once a lucrative trade set up is identified, the software will automatically execute the trade on your behalf.

Benefits of a Crypto Trading Bot

crypto trading bot benefits

Automated trading bots have various advantages which many traders find helpful. One of these advantages is being able to streamline repetitive tasks that may normally be required when trading the cryptocurrency markets manually. Many tasks associated with investing require you to take the same action over and over again. With an automated trading algorithm, all you have to do is program the software once and the application will repeat the same action as often as you wish without you having to do too much at all. You will basically be making money while you sleep.

Another advantage that automated trading bots give you is providing better timing in entering trades. Normally, when trading manually, you would have to patiently wait for the right market conditions to arise in order to follow a rules-based trading strategy. However, this can be challenging if you do not have a lot of patience, which can result in you not paying attention and missing out on the optimal time to enter a trade. Lack of patience can also result in you entering a trade too early. Either way, not entering a trade at the optimal time can reduce profitability in your trading performance. Using an automated trading bot will make sure you execute your trade at exactly the right time, in accordance with your chosen trading strategy and parameters.

With an automated trading bot, you can make a living from day trading without having to make it into a full-time job. Usually, when trading manually, day traders will spend a lot of time researching and keeping up with the latest news that could affect the market direction. This can be quite time-consuming. However, with automated trading software, the trading bot will analyze the markets for you and will then make profitable trades with your account, earning you passive income.

Also, since the cryptocurrency markets are always open and never close, there are always opportunities to make profitable trades 24 hours per day, seven days per week. However, it is impossible for any human trader to be able to constantly scan all the various cryptocurrency markets non-stop. Obviously, at some point, you will have to eat and sleep and handle your daily activities. On the other hand, this will mean missing out on many trading opportunities in the cryptocurrency markets.

This is where an automated trading bot takes centre stage. The automated algorithm will continue to scan the markets and execute trades on your behalf while you are going about your daily routine. This means you can be sure you will never miss out on any potentially profitable trades.

Types of Crypto Trading Strategies

different bots for different trading strategies

Automated trading bots can vary in strategy, purpose, function and style of market analysis. There are four general types of automated trading bots for the cryptocurrency markets. They all have different ways in which they analyze the financial markets in order to profit from market fluctuations. Some are more long-term in their focus while other crypto trading strategies are more short-term. The four main types of cryptocurrency trading bots are arbitrage, market making, technical trading and profile automation.

Arbitrage Crypto Trading Strategy

Automated arbitrage bots use algorithmic technology to implement what is known as an arbitrage strategy. This type of trading strategy is based on capitalizing on the price discrepancies between various cryptocurrency exchanges. An arbitrage bot will buy cryptocurrency from an exchange with a lower price listing and will then immediately sell the cryptocurrency at an exchange offering a higher selling price.

This strategy is in large part possible due to the cryptocurrency markets being a relatively new asset class. There are fewer participants in the cryptocurrency markets compared to other more mainstream asset markets, such as stocks or Forex. Therefore, due to less liquidity, the price differences between exchanges can be more significant than they would be between different Forex or stock exchanges. As a result, there is more potential profit to be earned with an arbitrage strategy before the market is able to correct itself.

However, attempting to use an arbitrage strategy by hand would be quite difficult. You would need to constantly keep an eye on multiple cryptocurrency exchanges simultaneously while also monitoring the multitudes of different cryptocurrency tokens. There is no way a human could identify all of the arbitrage opportunities and then execute the trades manually. Therefore, using an automated trading algorithm is the best way to go for making a profit via arbitrage in the cryptocurrency markets.

CryptoHopper

cryptohopper screen

One of the best automated trading software, utilizing an arbitrage strategy, is CryptoHopper. This powerful trading bot was first started as a piece of hardware by two brothers, one of them a successful trader and the other a professional web developer. The first CryptoHopper was encased in a 3D printed case and was only available to the two brothers and some of their friends and family. But after seeing the amazing results for all who used the bot, the two brothers decided to develop a software version of CryptoHopper which they have also released to the public.

CryptoHopper’s arbitrage trading feature is quite versatile. You have the ability to connect the software with all of the exchanges in which you have funds stored. Also, CryptoHopper allows you to select from numerous cryptocurrencies. This ensures you never miss out on any profitable arbitrage opportunities that may arise. Also, this will keep you from having to make multiple withdrawals from exchanges in order to transfer funds between the different exchanges.

Another great feature of CryptoHopper is the excellent customer service department. If you ever encounter any problems or issues you can always contact the support team through email or live chat. The representatives are responsive and are informed about the markets. They are also well-trained to be quite knowledgeable about the CryptoHopper platform. Therefore, they will likely be able to help troubleshoot whatever issues or questions that may arise.

READ THE FULL REVIEW FOR CRYPTOHOPPER

Market Making Strategy

Automated software using a market making strategy will place multiple orders to buy and sell with the aim of making an overall profit. For instance, if a cryptocurrency is currently trading for $1, the algorithm will place a buy order for $0.99 and then simultaneously place a sell order at $1.01. When both orders are filled, the net profit will be $0.02.

Market makers are considered essential for healthy financial markets because they provide liquidity to the markets. This allows financial markets to operate more efficiently. Usually, market makers are large banks and other financial institutions.

HaasBot

Hass Online home page

When it comes to automated bots for a market making strategy, HaasBot is one of the more trustworthy and reputable bots available today. HaasBot is highly versatile and customizable and can be adapted to numerous types of crypto trading strategies, such as market making. Since 2014, HaasBot has provided investors with the ability to design their own strategies from scratch using the platform’s own advanced programming language. You can even buy and sell trading tools developed by users for the platform. Also, you can follow trade signal providers or even provide your own trade signals to other traders.

You can choose between using the online web-based version of HaasBot or if you need an on-premise option, you can choose the HaasBot Trade Server option. The web-based version gives you the benefits of convenience that comes with cloud management. On the other hand, the Trade Server option will give you increased speed, power and privacy. The Trader Server version is commonly utilized by larger enterprise users.

HaasBot also has a variety of tutorials and guides which can help you learn the basics of using the programming language and creating your own trading tools. The website also provides a community message board on which you can interact with other HaasBot users and ask questions that you may have regarding how to use the features on the website. Also, if you need to, you can contact the customer support team by filling out the form on the website. The customer service representatives are well-trained and responsive to questions from users.

READ THE FULL REVIEW FOR HAASBOT

Automated Crypto Trading Strategy

Using automated algorithms to trade the cryptocurrency markets can be advantageous for a variety of reasons. Cryptocurrency markets are notoriously volatile which means it can be easy to be caught off guard and end up with losing trades. Automated cryptocurrency trading bots can help you avoid this by using algorithms which can accurately analyze the financial markets at lightning speed, much faster than any human trader can do. Once a trading opportunity is identified, the trade is automatically executed, making you passive profits.

Another advantage of automated crypto trading is that you do not have to have any previous knowledge of cryptocurrencies, blockchain or the financial markets. Since automated trading bots will analyze the markets for you, there is no need to have any prior experience in trading at all. This means both beginners, as well as expert traders, will be able to enhance their investment results from utilizing automated crypto trading bots.

Also, automated crypto trading bots can save you a lot of time. Normally, professional day traders will have to work full-time to continuously research the markets and the latest financial and economic news updates. However, since a trading bot is completely automated, the software will do all of the hard work for you.

Crypto Engine

Crypto Engine page

Crypto Engine is one automated crypto trading bot that is well-known for its accurate algorithms and user-friendly software interface. There are around 200,000 traders from over 160 different countries around the globe currently using the Crypto Engine trading platform. By the end of the year, Crypto Engine is expected to double its number of users.

The trading software is completely free of charge to access. This means no commissions on trading profits. Also, there are no fees charged for trade transactions, registering for a new account, withdrawals or deposits. The minimum required deposit to start trading is only $250, making the Crypto Engine software accessible to almost anybody.

Crypto Engine is available across all International borders which means traders can register from any country in the world. Also, the Crypto Engine allows for numerous, secure payment methods to make the process as convenient as possible. If you do not see the payment option that you prefer available, you can even contact Crypto Engine and they will look into possibly accommodating your preference.

If you happen to have any questions or run into any issues using the Crypto Engine software, you can always contact the customer service department. You can reach the support team by filling out the contact form on the Crypto Engine website. A representative will be able to reply to your questions and concerns quickly and professionally. The support team is highly knowledgeable about the software and will be able to address all your questions.

READ THE FULL REVIEW FOR CRYPTO ENGINE

Portfolio Trading Strategy

Some investors are not looking to make short-term profits from day trading but are more interested in a longer-term strategy. In this case, these investors may prefer an automated portfolio bot which is designed to maintain a certain portfolio balance, rather than more actively trading for fast profits. Portfolio bots will automate the mundane tasks of repeatedly buying the same basket of assets, saving investors significant time

Of course, you will need to customize the basket of assets regularly purchased to fit your own financial goals as well as your personal tolerance for risk. In some instances, you will have to change the balance of the portfolio purchases in order to respond to changing circumstances in the market. Therefore, although a portfolio bot does indeed save you time from having to manually execute the transactions yourself, you will still want to keep up with the latest developments which may affect market dynamics.

Shrimpy

shrimpy home page

An example of a dependable portfolio bot platform is Shrimpy which provides you with the ability to continuously invest while maintaining your desired portfolio balance over a longer-term strategy. It is free to use Shrimpy’s Hodler level account which allows you to track your portfolio over an unlimited number of exchanges. However, if you want to use the platform’s automated portfolio management features, you will have to pay monthly fees. You can also use Shrimpy’s social trading feature to copy other successful cryptocurrency traders.

The Shrimpy platform also provides a variety of features designed to help you with your trading endeavors. One important feature is the backtesting feature which allows you to backtest a potential investment strategy against historical price data. Therefore, you will be able to better predict future results based upon past market fluctuations. Also, Shrimpy users will be able to take advantage of the website’s demo feature which allows you to familiarize yourself with how the trading interface works before putting real capital at risk.

Shrimpy has a solid customer service department which has a well-trained and knowledgeable team. You can reach the support team through email or by live chat. The representatives will be more than happy to assist you in whatever issues which may occur while using the Shrimpy trading platform.

Technical Analysis Trading

Technical analysis is another type of trading strategy which can be automated. Technical trading bots will use chart analysis in order to identify profitable trade setups when they arise in the cryptocurrency markets. These automated trading bots use technical indicators and look for various chart patterns in order to analyze markets and pinpoint lucrative opportunities to trade cryptocurrencies.

There are a variety of different types of crypto trading strategies based on technical analysis. Some are riskier than others. Therefore, before choosing a technical trading bot, it is a good idea for you to research the bot to see exactly which type of technical strategy is being utilized. Many technical trading bots will allow you to choose between various technical strategies. Also, most technical trading bots will allow you to adjust some of the parameters of a particular technical strategy in order to make sure it fits your trading needs and risk tolerance profile. Also, backtesting against historical price data can give you a better idea of the risks and benefits of a particular technical strategy.

3Commas

3commas home page

3Commas is one technical trading bot platform that has become quite popular among cryptocurrency traders due to its intuitively designed interface and solid functionality. Founded in 2017, 3Commas provides traders with accurate automated trade signals which allow you to continue making profits 24/7. Also, 3Commas does not charge any commissions on profits earned while trading. However, you will be required to pay a reasonable monthly fee to access the powerful trading software.

The automated software will do all of the work for you, which includes analyzing the financial markets and then executing trades on your behalf. On the other hand, there are some traders who prefer to have more direct control over trading activities. For these individuals, 3Commas provides a manual trading option. However, the manual trading feature still provides automated stop losses and take profit orders. Also, the take profit and stop loss orders can be automated to adjust with changes in price.

3Commas also prides itself on providing top-notch customer service to its users. You can easily contact the support team by sending an email or contacting through live chat. The representatives are courteous, attentive and ready to help with whatever you need.

Dov Herman