How Crypto Investors Can Improve Their Trading with Automation

Nowadays, everyone is looking for ways to earn extra income. Even in countries with rising unemployment rates, more and more people want to build an independent financial foothold.

Due to the greater knowledge in the financial field, everyone now knows that the available money should be invested profitably. That is why investing is currently more popular than ever before. 

Everyone is looking for ways to generate positive returns. In this regard, many investors invest in real estate, stocks, ETFs, cryptocurrencies, and other forms of investments. 

Investments in cryptocurrencies are currently the hottest form of investment. This trend clearly shows that technology has now permeated all areas of life. In this article, you will learn more about trading with cryptocurrencies and how automation can help traders trade more efficiently and intelligently. We’ll also take a look at the different crypto bots and their benefits.

What is Crypto Trading?

Cryptocurrencies are digitized currencies developed for transactions between users. In this context, cryptocurrencies are operated on the blockchain. In this decentralized database, the various transactions of the respective users are stored, verified and can be traced at any time. 

In recent years, many cryptocurrencies have been developed for transactions between users. Some of these cryptocurrencies are Bitcoin, Ethereum, BHC, Litecoin, and many more “altcoins”. Crypto trading is about making transactions with crypto assets and predicting the developments of the market to make a profit.

In this regard, it is always advisable to conduct trading and transactions through a broker. Therefore, cryptocurrency trading usually works in such a way that the broker helps the trader to buy and sell cryptos by matching him with other traders who also want to trade cryptocurrencies.  

Investing or buying cryptocurrencies is not difficult; it is simply a matter of downloading a wallet, usually via downloading an app and creating an account for that crypto wallet. Most investors resort to a broker for trading to minimize their risks. Among investors, there are various reasons for investing or trading cryptocurrencies. 

Cryptocurrencies are very volatile, which means that the value is constantly changing. As a result, traders can make high profits. Nevertheless, everyone should be aware that extensive losses are also possible due to the fluctuations. 

What is Automation?

As the name suggests, automation is about letting a software or computerized system perform actions that would normally be done by a human. In the fields of trading and cryptocurrencies, the term automation refers to trading for example with Binance bot crypto that can help you immediately.

In this case, the automated platform or software takes care of trading on the crypto markets for you. To use this software, you need to create an online account and select a trading strategy that you want the bot to implement. 

There are several types of automated crypto trading software, with most operating as application programming interfaces (APIs). In this case, the automated crypto platform only executes trades that have been programmed in advance. 

It should be noted that the computerized systems use software to connect directly to the broker. Before using the automated system, specific rules for trading are also entered into the system.

What Are the Two Main Types of Crypto Automation Software?

The two main types of crypto bots are the crypto trading APIs and the decentralized crypto trading platforms. The crypto trading APIs connect to a third-party crypto exchange to transact crypto investments. 

This type is the most popular and well-known form of crypto automation software or trading bots. To realize the full potential of a crypto trading API, it is worth opening a trading account with a broker. 

The decentralized crypto trading platforms represent a safe way of trading. Here, blockchain technology is used to execute the transactions. The transactions are carried out anonymously and independently of third-party providers. 

Follow the Trend

The most common algorithmic trading strategies are based on following moving average trends, breakouts from trend channels, price level movements and similar technical analysis indicators. 

These are the simplest and most convenient strategies that can be used for trading bots, as there is no need to make predictions or price forecasts with these strategies. 

Trades are initiated based on the occurrence of desirable trends, which can be easily implemented by algorithms without having to deal with the complexity of predictive analysis. For example, the use of 50- and 200-day moving averages is a popular trend-following strategy.

How Can Investors Trade Smarter with Automation?

Automation makes life easier for traders in the crypto space. There are many ways in which an automated crypto trading platform or crypto bot can help investors trade. Let’s take a closer look at some of these ways below:

• The time required for independent trading is reduced. With the automated trading program, investors have more time to do other things while the trading bot observes the market and independently executes trades based on the pre-determined data. 
• Due to the fact that it is already programmed software, there are no time constraints. The crypto bots can trade 24/7, which helps the trader to take advantage of the movements in the market. Therefore, the bot is able to detect trading gaps in the market and trade in the interests of the crypto investor. 
• The use of crypto automation software also helps in reducing errors. Since it is a computerized and pre-programmed system, errors during trading are very unlikely. In contrast, analog trading by humans brings with it a high level of error-proneness.
• Once a crypto trade is automated, it is difficult to affect it without reprogramming. The trading software is not influenced by external factors. It only executes the previously programmed commands. This approach can ensure that transactions are executed safely and reliably. 
• Automation provides more discipline for the trader. Investors often tend to invest even more money at the wrong time.  Traders are often influenced by emotions, which can lead to worse decisions. A bot, on the other hand, only does what it was programmed to do. So the bot can make more logical and clear decisions than the trader himself. 
• With some automated trading platforms, you can even apply your strategy to past data to ensure that it is efficient and profitable. 

Although automation is very helpful, there are also negative aspects. Some of these disadvantages are:

• No matter how much effort you put into adding all your strategies into the trading software; the crypto market remains highly volatile. That’s why your strategy may be worthless in no time, as cryptocurrency prices and market capitalizations are constantly changing. 
• We have already described in this article that using a bot can, to some extent, lead to increased security in transactions. However, cryptocurrencies are still held on a trading venue. Therefore, the risk of a hacker attack is high at any time. 
• A bot is a machine that can break at any time. It can also experience delays and network outages that can lead to mistiming the execution of the trade. 
• Traders may suffer losses due to the inflexibility of the bot. The automated software might execute a transaction that does not match the current market conditions. 

Conclusion

According to the discussion in this article, we can conclude that automation can help investors in trading to a great extent. Investors can trade smarter and more efficiently with the help of technology. 

The bots can continuously monitor the market and execute orders for which they have been programmed in advance. Although this technology is obviously an advancement in the crypto space, it also comes with some drawbacks.