Using automated trading systems is a necessity for a contemporary retail crypto trader who wants to achieve consistent profitability and stay ahead of the competition. Despite being around for over two decades now, trading bots are still considered by many exotic tools used only by highly skilled individuals with deep technical know-how.
Nothing can be further from the truth. A modern crypto trade bot is an easy-to-learn and hard-to-master tool that anyone can start using regardless of their experience with financial markets and script writing!
Imagine the world of finances a couple of decades ago when the internet was still something futuristic. Back then, only high-rolling retail traders and institutional investors had access to digital communication systems employed by exchanges or could use advanced software to build automated trading systems. Flash forward to the 2010s and bots became a staple in the Forex market.
An automated crypto trading bot is a program that runs online and links up with a cryptocurrency exchange through an API to make trades for you. There are many reasons why modern traders, especially those buying and selling cryptocurrencies, choose to use different kinds of automated tools for their trading:
The global crypto ecosystem never stops. When the US market starts slowing down as more participants simply go to sleep or rest, the Asian market is just getting started. A professional trader does not want to miss out on opportunities that present themselves when he needs to sleep or make a pause to rest. Trading bots for crypto work around the clock.
Human traders often perform suboptimally. It is especially evident when you analyze results of traders working on short to medium time frames where decision making must be firm and quick regardless of the market conditions. Many people hesitate to enter the market at an opportune moment or mess up the order placement. Robots never make such mistakes.
The price has gone down dramatically. One of the reasons why automation was employed only by investment banks and huge hedge funds is the price of software and hardware that was required to run an automated trading system in the 1990s. Today, you can launch a massive fully automated statistical arbitrage system while paying a fraction of what those bankers had to pay.
While all these advantages are apparent even to newcomers to the industry, there is yet another big upside that contemporary automation platforms offer to their clients - simplicity. Many novice retail traders believe that bots are complicated and cannot be used by inexperienced users, but you will be surprised by how easy it is to launch your first bot.
First and foremost, you need to know what you need to have to run an automated trading system. Let's start our guide on crypto trading bots for beginners by describing components of a typical contemporary bot system:
Source of trading signals. Something must trigger a bot into action. The most popular analytical platform for signal generation is TradingView. It is a powerful charting toolkit that also has a rich selection of various technical indicators and script commands to build a strategy that will produce trading signals. Where do you send them?
An automation vendor. Today's automated trading systems are often based on advanced online platforms that specialize in trading automation tools. For instance, with services like WunderTrading, you can either make your own trading bots or use established strategies such as DCA and GRID. These platforms act on trading signals they get and make trades for you, sticking to the rules you've set out. They place these orders on the financial markets where you're looking to trade.
An account with a CEX platform. While some DeFi exchanges experiment with adding API functionality allowing some automation to be used on P2P and decentralized spot markets, the vast majority of people are still trading on centralized platforms which have functional API and can execute orders instantly - a highly important feature for high-frequency trading often employed by retail traders using automation.
You will need all three of them to get started. Creating accounts on all these platforms may seem like a chore, but you only need to do it once. Note that you will need a paid account at TradingView and WunderTrading to achieve good results. Trying to save money on tools is never a good idea. We recommend you paying for the lowest tier plan to test the waters!
Here are steps that you must make to build your first trading robot:
It is recommended to use mock trading accounts before you feel confident. These are offered by many centralized exchanges including Binance. Another important thing to remember is that back-testing functionality at WunderTrading allows you to iterate many times until you find the right settings to make profits consistently. We strongly recommend all retail traders to start with identifying the right approach to the market before automating it!