Are you interested in building bots for cryptocurrency trading? Then you are in the right place. In the article, we will go over everything you need to know. Rather than disappear, cryptocurrency is being embraced as an alternative to common currency. the features provided by blockchain make cryptocurrencies secure. this, coupled with its mutability, has resulted in people trading cryptocurrencies every day.
So, let’s dig deeper and start by discussing what cryptocurrency trading bots are and the principle on which they work.
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what is a cryptocurrency trading bot and how does it work?
Cryptocurrency bots are needed to distinguish trends in the market and make transactions. they physically take on the monotonous press of the buy and sell button and trade on behalf of the trader. Traders typically set up a bot with a set of pre-programmed custom rules that use market markers and trends to suit the trader’s wishes. You can get a trading bot for free through an open source platform, get a licensed one for a fee, or, with enough technical expertise, create one. Unlike stock trading bots, crypto bots are more affordable and can be used by both beginners and professionals.
The way the bot works is quite simple. Investors search for cryptocurrency trading bots that are most beneficial to them and then download the code from the developer. Many bots charge users fees, some of which can be quite high. each bot has different hardware and software requirements. To maximize the impact of a bot, an investor needs to know how to best use this tool.
In many cases, investors still have investment decisions to make, such as when to buy or sell. A crypto bot is generally not a get-rich-quick fix for an investor who is unwilling to put in the time and effort required to become prosperous.
key benefits of using a cryptocurrency trading bot
In this part of the article, we will go over the salient benefits of using bots for trading to help you decide whether to invest in them for your own business.
✅ robust there is a certain limit on the amount of data a merchant can process at one time. even if all the data is processed, it is difficult to find an understanding based on this data.
✅ performance trading crypto assets using a crypto bot is always considered more efficient. there is no point in worrying about delays and human error. As long as the bot receives the proper data and works with the proper algorithms, it can trade assets with the best chances of making a profit. An added benefit is that these bots can run 24/7.
✅ emotionless bots make each decision based on what it implies. unlike humans, he does not fear loss or thirst for gain. good traders can make rational decisions by suppressing their emotions, but this is not always the case for everyone, especially newcomers.
✅ preset goals it is said that more than half of investors lose profits due to a combination of factors, most of which involve decisions based on emotions. crypto bots can help you set targets, thereby eliminating human interaction.
✅ faster than people the cryptocurrency market is unstable. a cryptocurrency can rise 25% in a matter of minutes and crash in a minute. users can lose this gain if they do it manually as it takes a while. this is where cryptocurrency trading bots help the most. once you start using bots to generate income, you rarely lose profits.
✅ testing on historical data if you are using bots, you can perform paper trades and backtesting, and use historical data to test whether a pricing model or strategy is profitable. It doesn’t matter if you’re a veteran or a novice, everyone has a lot to benefit from with these machines. When combined with backtesting, forecasting can help traders understand whether the approach they want to take will deliver significant profits.
✅ restriction by pre-established trading rules panic is one more reason why people lose money. that is, if the cryptocurrency you are investing in crashes, you can panic and sell it without a second thought. bots are immune to these glitches.
the types of cryptocurrency trading robots
Not all crypto bots are the same. here are the most popular types of them.
- trend trading bots as the name of the bot suggests, it takes into account the momentum of a specific asset and, after analyzing it, executes buy or sell orders. If the trend shows a price increase, the bot will open a long position. likewise, you will go short as soon as the price drops. Simply put, trading with a trend implies that the asset will continue to move in the same direction it is currently in, and trend trading bots make this work to your advantage.
- arbitration bots this particular bot uses the concept of arbitration. arbitrage is a transaction that exploits price imbalances in various markets or in various ways. this is especially true in inefficient cryptocurrency markets. By buying and selling an asset at the same time, you can benefit from the existing imbalance. therefore, crypto arbitrage bots are programmed to track the distinction between the price of a coin in various markets. then buy a coin where the price is lower and sell it where it is higher.
- coin lending bots one of the fun ways to make money with cryptocurrencies is to lend margin currencies dealers who will then repay the loan with interest. Some exchanges like Bitfinex and Poloniex have this margin funding option. however, setting the number of parameters manually every time the margin trader returns your money is tedious and you need to process a new loan. coin lending bots help automate the process, spend less time finding the right interest rate, and exploit potential spikes in lending options.
- market making bots the more actively the asset is traded, the wider the spread and the more profit the market-making bots can make. The key principle is to sell to investors at a price higher than the asking price and to do so as often as possible. the market maker bot places an order with a different price than the market price and thus makes the market make money for the owner of the software. analyzes markets with wider spreads and does so 24/7 giving the trader an advantage in time, volume and price.
the functionality of a cryptocurrency trading bot
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If you want the best performing bot, make sure the software performs many basic and advanced functions. The list of must-have features of any cryptocurrency trading bot includes the following:
⚙ notifications the focus of this feature is ease of use, which can be implemented in various ways depending on user preferences and individual circumstances. Traders can receive notifications to their email addresses, via popular messaging apps, or via SMS. therefore, they can be informed when the bot completes a successful transaction or when the price of the monitored coin reaches a threshold value preset by the user.
⚙ Dynamic strategy implementation and change The core of a cryptocurrency trading bot is the ability to execute a specific strategy, which must be flexible and change based on the adequacy of the algorithm.
⚙ Market Tracking and History Keeping These two related functions allow you to collect market data and save it for later retrieval, reference and analysis. this information is important for developing new algorithms and improving old ones. In addition, this function includes the presentation of reports with data in the form of tables or graphs.
⚙ Backtesting This is a must if you want to test a new strategy by simulating its outcome using past market monitoring data. backtesting usually takes into account market fees, latency, and other aspects that have a direct impact on transactions.
⚙ transaction data logging, archiving and retrieval this feature keeps a history of all transactions made by the trading bot. In this way, clients can keep track of their previous financial performance and remember when a particular transaction was made.
⚙ scheduler this simple functionality allows the bot to work autonomously and only during pre-set periods defined by the user. if necessary, the bot can wake the device to boot and put it to sleep or turn it off after a certain period.
⚙ Security Security is another highly requested feature, as account and transaction security is of concern to all online merchants, regardless of market. Since a trading bot has access to your cryptocurrency wallets, some security measures are needed, such as strong ones (such as biometric authentication).
Furthermore, a cryptocurrency trading bot needs to support several of the most popular currencies and exchanges. Of course there are common forex bots and you can develop them yourself, but such a severe limitation is not always a smart choice. At the same time, it should be noted that bitcoin-only bots cost less and take less time to develop, which can be defined for many entrepreneurs.
the list of the most popular cryptocurrency trading robots
It will be helpful if you research some suitable applications and get some ideas. you can collect some important ideas before starting a software development project. explore the following apps:
🔹tralidad‘s in-browser coding features include smart autocomplete and backtesting. While this new platform adds features, its easy python integration and unique documentation make it clearer to build sophisticated bots.
🔹 cryptohopper cryptohopper has tremendous power: it trades more than 100 tokens on 13 exchanges. has a variety of packages from $0 to $99 per month. therefore, everyone will find a suitable option. furthermore, cryptohopper has an extensive toolbox and a convenient interface.
🔹 tokensets tokensets is a robust defi wallet management infrastructure with no set trading fees. while some kits are managed by individual or institutional developers, others are “robotic kits” that automatically rebalance based on certain technical indicators. tokensets are a great option for investors interested in getting started with defi.
🔹 cryptohero With a very affordable price and easy user interface, cryptohero is amazing for beginners. it’s also AI-optimized, another benefit for the (gullible) time-constrained or newbies.
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🔹 superalgos superalgos opens up access to crypto trading bots for newcomers. their opportunities are incredibly robust and include automated trading, visual strategy design, and round trip testing.
🔹 ichibot ichibot is a platform for developing trading strategies for those who select code. clients can develop sophisticated trading strategies for binance and fx and execute them in real time to take advantage of market fluctuations.
how to build a cryptocurrency trading bot from scratch
Now when you are familiar with cryptocurrency bots and how they work, let’s move on to a cryptocurrency bot development workflow. Follow these steps to create a helpful bot:
- stage #1. select programming language there are two programming languages, we recommend that you choose. the ideal options are javascript and python. they will make life easier for you and the programmers.
- stage #2. list all trades list all feasible trades your bot should work with. it will give the coders an idea of the services you will use.
- stage #3. create accounts on listed exchanges create accounts on all cryptocurrency exchanges. Please note that some services allow you to operate anonymously, while others require approval.
- stage #4. select the type of cryptocurrency bot you want to use before developing a cryptocurrency bot, select the type of trading strategy you will use. just keep in mind that a complicated algorithm will take more time.
- step #5. define the architecture confirm that the algorithm you are using for the bot has a solid foundation. on the contrary, you could lose money.
- stage #6. coding coding is the key part of the process. discuss with the programmers your expectations. a qualified development team will help you with everything from algorithmic complications to user interface design.
- stage #7. testing when the coding is done, it’s time to test the bot. make sure your bot works properly, doesn’t crash or catch errors. check if your trading bot can handle complex data.
- stage #8. implementation A good company provides support for a while, even after the application is released. allows the business to move smoothly.
how to create your own cryptocurrency app: everything you need to know
technologies needed to develop your own crypto bot
The choice of programming language depends solely on the capabilities and characteristics that a trading robot should have. therefore, it is best to use a programming language that is widely supported and has an active cryptocurrency community. furthermore, you should confirm that it can be easily scaled, adapted, and added to as the need arises. this is useful when you want to connect with the community to support development. In 2021, the most widely used programming languages for writing trading bots are Javascript and Python.
javascript ranks first with approximately 11.7 million active developers, followed by python with approximately 8.2 million active developers. Both programming languages are widely supported in the developer community and are largely compatible with the crypto environment. python is primarily used by developers who need the ability to express concepts in fewer lines of code. In addition, high-performance Python libraries make research and prototyping easy. other programmers choose javascript because it is dynamic, prototype-based, and multi-paradigm.
In addition to the programming languages already mentioned, you may need to use other technologies. here is the list of the main ones:
✔ ui: reactjs + material ui ✔ strategy implementation: nodejs ✔ transaction data logging: rds + redis ✔ scheduler: cron ✔ cross-currency (eth) support: web3.js ✔ reliable security measures: encryption data with ssh keys ✔ market monitoring — restful api /socket.io ✔ notifications — push notifications or ses (firebase)
final thoughts
In short, cryptocurrency trading is gaining momentum again and is attracting many brave investors. If you just want to try your luck and treat this activity as a game or a fad, you can play with open source trading bots. If you are looking to test and test your investment skills, there are several solutions with reasonable subscription plans. however, if you want to make cryptocurrency trading a staple of your income, consider creating your own trading bot for the best security and performance.
Your own professionally developed trading program or platform gives you complete control, including strategy selection, customization, fraud protection, and more. Furthermore, you can earn income both by using the bot and by selling it to other enthusiasts. there are many monetization models available to make your software beneficial to you and attractive to your users.
📌 read also:
▪ nft wallet development: the ultimate guide for 2022
▪ How to Create a Decentralized Cryptocurrency Exchange: 6-Step Guide
▪ how to hire a blockchain developer: required skills & traps
▪ How to Create a Cryptocurrency Wallet App: A Detailed Guide for 2022
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