As we all know, the crypto market is highly volatile, and sometimes it gives an unpleasant surprise for crypto investors. To avoid all such scenarios and losses, a crypto trading bot came into the play!
Crypto trading bots have become popular among traders. This bot controls the trading process without the involvement of the trader.
A perfectly encoded bot allows traders to execute faster and more efficiently than the trader would be able to do manually.
You can witness massive popularity in the currencies, which resulted in a big increase in the number of crypto trading bots.
Now let us know some of the common features of trading bot.
Before starting a trade, you must backtest it against historical market data. Collecting high-quality data is usually done by exchange APIs.
To simulate a realistic backtest your latency, slippage, and trading fees need to be considered. It is possible to retrieve historical price data but impossible to retrieve historical order books.
The code that implements the strategy creates a tiny fraction of the whole project. Here is where you specify the logic and calculation that determines when to trade and in what quantities.
Once the strategy is created, you are able to backtest in order to analyze its performance. Profitable strategies can make out the backtesting phase because so much can go wrong in the real world. So it is necessary to be careful here overfitting your strategy to historical data.
Once the strategy is decided, the next phase is order execution. Consider this phase as a bridge between your strategy and the exchange of your trading.
This code turns your strategy into an order request. Some bot might have a paper trading feature that allows you to stimulate your strategy in real time with fake money.
Finally, you want to let your bot run anonymously. You will need to spin up a server and set up the job scheduler to autonomously execute live strategies.
Why are crypto trading bots useful?
The main aim of the crypto trading bot is to remove fear and emotion from the trading equation and allow investors to execute a trade based on a predefined strategy.
The bot also helps you to run your trading process 24/7. If you are a person who is hardly involved in trading or if you are unable to stay on top of the market all the time, then the crypto bot is the solution. The bot allows you to trade efficiently without having to dedicate your time to market analysis.
The crypto trading bots execute trade orders instantaneously. This instantaneous process makes them much more effective than humans.
It is believed that cryptocurrency trading bots development are vital for crypto traders. If the trader can manage and adjust the bots setting and define effective trading strategies, the bot can be the best trading tool.