Bitcoin Trading Bots

By | November 9, 2016

There have been a wide variety of situations in which algorithmic trading programs have proven to be beneficial for investors. However, investors who only trade a cryptocurrency can also take advantage of bitcoin trading bots. Through bitcoin bot trading, traders can become more flexible and prompt, minimize errors and process information more rapidly. At this point, cryptocurrency trading bots are quite undeveloped, as a result of which their potential in the markets is relatively higher.

Ever since stock markets began to get digitized, there was a rapid growth in trading bots, and they have existed for decades. However, it was less than a decade ago when digital currency markets came into existence and they have obviously not had enough time to incorporate algorithmic trading.

If traditional markets are compared to crypto markets, the high-frequency trading (HFT) that takes place in them tends to be quite different. Time, even seconds, are literally money and matter a lot when it comes to using high-frequency trading for stocks. However, such extremely small increments of time do not really matter as much when it comes to cryptocurrencies.

If bitcoin trading bots are utilized, a huge variety of trading strategies can become available to investors. For instance, since trades in high-frequency trading take place very rapidly, using a software program becomes necessary.

Arbitrage is another strategy that can become accessible to bitcoin traders by using a bot. For bitcoin traders, this would mean buying bitcoins in another crypto market and earning profit by selling those bitcoins at a higher price in another crypto market. With intuitive arbitrage, bitcoin bot trading can prove to be profitable in the long run as well.

Market making is another strategy that investors can avail through trading bots. In market making, investors provide constant buy and sell prices on a wide range of spot digital currencies like bitcoin. This way, the spread between the buy price and sell price can be captured. Furthermore, limit orders have to be placed near the present market price, on both buy and sell orders.

Due to the gradual fluctuation of prices and with the bot placing automated, constant orders, the resulting spread ends up being profitable for the investor. However, it must be kept in mind that market making is surrounded by heavy competition, which means that earning profit is not that easy. The liquidity of the environment should be high enough.

The great thing is that just about any investor can capitalize on and take advantage of bitcoin bot trading. There are plenty of off-the-shelf solutions available, but it is actually not recommended that they rely on these pre-made algorithmic trading programs. Before any profits can even be earned, these programs are quickly purchased by a large number of investors.

It is definitely a plus point if an investor knows how to program a software, but if not, open source bots are also available that can be configured based on an investor’s view of the market. Even after they start proving to be profitable, bitcoin trading bots also need to be constantly revised and tinkered with.