How much money can you make with a crypto trading bot
How can traders earn passive income with crypto trading bots?
Crypto Bots — How can traders earn passive income?
There are people who claim that you can trade profitably if you follow simple rules. You all remember those times when people shouted about cryptocurrencies from every iron! “Bitcoin has renewed its highs again! It’s already worth $10000, $20000, $30000!”
It seems that then it was simply impossible to stay away from this topic. Cryptocurrency exchanges have given access to trading tools to a very wide audience, and the overwhelming hype has forced many to learn how to use them.
How to trade profitably?
A bunch of experts on the Internet will be happy to answer this question. There are articles, books, and even instructional videos. People argue that there are simple rules that can be followed to predict price changes and make a profit.
You’ve probably heard terms like Fundamental Analysis and Technical Analysis, where the first one involves an in-depth study of the company, its market position, financial flows and products. Meanwhile, the second one is mostly utilized to search for patterns on the chart of the price of an asset or a currency pair.
Since everything is so simple, it is obvious that you need to write a program that would follow these rules and generate income!
We apply professional algorithms
One of the strategies used by algorithmic trading companies is Arbitration. It consists in exploiting the imbalance that can occur on the exchange between different currency pairs.
For example, sometimes you can buy 10 ether coins for 1 bitcoin, buy 100 litecoins for 10 ether coins, and buy 1.1 bitcoins for 100 litecoins. If the commission is less than 0.1 bitcoin, you have earned.
The short time span of the imbalance is called the “Arbitration Window”. Usually, its size is in units of milliseconds.
Crypto Bots
One of the best ways to earn income by trading cryptocurrencies is to use automated crypto bots. A fully automated crypto trading bot is a mechanism that trades automatically without the involvement of a real person. According to experts, it is effective, powerful and safe to use. When you want to earn some additional money from crypto trading it is a good idea to consider crypto bots. Finding one could be difficult but for sure after you find a proper crypto trading bot, it will do a lot of things for you.
Crypto bots started to appear with the development of artificial intelligence in trading. As the Internet and modern technology develop rapidly, it is essential to have automated trading systems to ensure the maximum efficiency of your work.
How Much Can You Earn with Crypto Bots?
This is a question that is different for every trader, and various factors can be crucial. First of all, you do not know how the market will react to certain incentives. Robots are of course better than humans in terms of emotions, but the absence of these emotions could sometimes be harmful. A lot depends on the size of your budget as well. If you have low amount of money, you are going to make less than the ones, who trade with thousands of dollars.
On average you are going to make roughly $2000–3000 but once again these numbers are individual for every trader. Some think that if they start using crypto bots everything will be good but it does not always work that way. Knowledge, proper strategies, experience are key pillars of success in crypto trading.
Awareness
There is no easy money in algorithmic trading. It is an endless struggle in which those with the most resources win.
On December 18, 2017, the Great Bitcoin Crash occurred. By this time, some people realized they were not one step closer to success, and they decided to spend a lot of resources to improve their positions. With algorithmic trading, it was possible to manage a project that would benefit people.
This point of view is still close to many people: if you are going to use high-quality product the success will come soon. Money, time and effort are best invested in projects that will be beneficial.
The headline of this article is a little clickbaity. For that, we apologize, but as long as you’re here, might as well sit down and read a spell. We’ll keep it interesting. As to the question of whether a cryptocurrency trading bot can make you a billionaire – yes, it can. Will it? The odds of becoming a billionaire by ANY means are 1 in 578,000. So there’s that.
Let’s lower our sights a bit. Can you learn to become a profitable cryptocurrency trader using bots? That’s more doable if you also study the market, develop appropriate trading skills, and don’t blow out your account with revenge trading (more about that later).
For now, we’ll address a few burning questions: What is a trading bot? How do they work? Can you get rich with them?
What is a Crypto Trading Bot?
Let’s get dead simple. A crypto trading bot is a computer program that automatically buys and sells cryptocurrencies for you with the goal of making a profit. Why do you need a trading bot? You don’t actually NEED one, but the cryptocurrency market is open for business around the clock every single day of the year. Some of the best trade setups will likely occur when you’re not paying attention.
Unless you plan to never sleep – not good for your physical or mental health – a bot can act as a trading assistant of sorts.
One of the first things you’ll notice as you begin the trading bot search is that the market is flooded with options. Yeah, sorry to break the bad news to you but there is more than one. To further complicate matters, not all of them are profitable. In fact, the vast majority aren’t. It’s no mean feat for a software developer to hit on the right combination of code that works well in prevailing market conditions. It’s been shown more than a few times that a trading bot tends to leave you in no better shape than if you just bought and held cryptocurrency over that same period of time.
The Moving Parts of a Crypto Trading Bot
Looking behind the curtain, there are three parts of a bot that you should be aware of.
Signal Generator: This is what makes the trading bot scream “Buy!” or “Sell!” or “What the heck are you doing trading currency? Have you gone mental?” Okay, it’s not quite that severe. The program takes in price action data and looks for situations that match predetermined market conditions. When it finds one, the signal generator sends out an order to take action.
Risk Allocation: Here’s a question. Once the bot generates a buy signal, should it throw every bit of money in your trading account into the position? That’s a hard no. If your trading bot has an all-or-none risk strategy, your trading career will be short-lived. Risk allocation helps the program decide how to size the position depending on your risk tolerance.
Execution: This is the part of the algorithm that takes the buy or sell signal and converts it into actual market activity. The best idea is to have the bot move into a market position over time. There might be thousands of people running the same bot. If all the orders trigger at the same time, there will be a surge in demand. This drives the price up, and you’ll end up paying more than you have to. It’s better to take a dollar-cost-average approach.There you have it. The internal structure, or guts if you will, of a cryptocurrency trading bot. There’s just one more question to answer. Can a trading bot turn you into the world’s newest billionaire?
Can You Get Rich With a Cryptocurrency Trading Bot?
Once again, we’re back to semantics. There definitely IS a chance you could become a crypto billionaire, but it’s not very high. Rather than spending (almost) pointless energy towards that end, aim lower and think how a bot might be valuable as a testing tool on a demo account. Right now, expert consensus regarding trading with bots skews towards the ugly side.
This Reddit user had this to say:
“If bots worked, everyone would use them. This does not discount the private bots used by BlackRock and other massive trading firms. We will never have access to the data and teams of devs that they do.” — vibrate
Also this:
“It’s a good way to lose all your money….if people here don’t know what they are doing in the market I wouldn’t expect them to be able to […] set [a bot] up so it is useful.” — Person51389
In theory, algorithmic trading can yield huge profits, but it hardly ever does outside the walls and machinations of huge firms. The developers/hackers selling commercial bots to the average day trading hobbyist schlub make their money selling the bot, not using it to trade outside of tightly controlled demonstration conditions. Before throwing away your hard-earned money at the next “great” trading bot, consider the following:
Does the firm selling the bot have a provable track record (i.e. professional experience) for profitably managing at least $100 million? If not, they’re small potatoes and likely don’t have the resources or access to a large enough data pool to draw any sort of worthwhile conclusions.
Is their algorithm widely known, or worse, open-source code that anyone can play with? If so, run far away. Any “edge” the bot might have had early on has long ago been diluted to the point of irrelevancy.
What’s the money angle? Are they simply selling you a product and disappearing? Not a good sign. Your success should be related to their success in some way. Maybe they reduce fees if you suffer losing trades. Follow the money and business motivation.
Final Thoughts
The basic problem with cryptocurrency trading bots is the disconnect between developers and the needs of cryptocurrency traders. Chances are, the team that creates the bot isn’t interested in cryptocurrency further than the extent required to create the algorithms.
This is not a recipe for success. You’d be better off to skip the bot and buckle down to learn fundamental and technical market analysis, risk management, and maybe even a bit of psychology. Emotional trading might be the most common culprit in snatching defeat from the jaws of trading victory.
Good luck out there!
