What is a trade bot for Kraken?
The first automated trading systems started appearing at the end of the 1980s. Early iterations looked like very simple scripts that ran on custom-made software and allowed trust funds and bankers to outperform retail traders. Fast-forward 30 years and we have a wide range of automation tools available to all retail traders to level the playing field.
Here are some advantages of using a trade bot on Kraken:
- 24/7 work cycle. The crypto market never sleeps. When traders from the US go to sleep, the Asian market becomes awake and continues the never-ending battle between bulls and bears. Humans have to take breaks. A robot will continue performing its tasks as long as servers are running.
- Emotionless decision-making. One of the reasons why many beginner retail traders fail to make money using scalping or day trading techniques is that doubt, fear, and uncertainty make them hesitate and miss out on opportunities to enter the market. Machines do not make such mistakes.
- Low price. Contemporary retail traders do not have to overpay for powerful tools like automation. For example, the WunderTrading platform offers its clients a variety of preset bots and other instruments like copy trading for free if you do not plan to expand your investment endeavors. Paid plans are quite affordable too.
If you are working with a centralized exchange that has a strong spot market and offers margin accounts, you should use automation. Period. Choosing the right tool for the job is a different story. We decided to talk about some of the best trading bots for Kraken.
DCA bots
Distributed Cost Average is an old-school technique that was first conceived in the 1930s. It is an approach to buying assets in multiple batches instead of buying in bulk. Since prices tend to retrace and correct during periods of volatility, this approach allows investors to reduce the average price by making a series of small purchases during a downtrend.
DCA bots use this strategy to place multiple buy orders on a spot market. They will act only when conditions are right and immediately place stop losses as instructed by their programming. You can use DCA with take profits to create a consistently performing day trading strategy or completely remove take profit commands to slowly accumulate resources.
The vast majority of Bitcoin enthusiasts use DCA buying as their main way to amass sizeable portfolios of BTCs and other flagship tokens like Ethereum or Litecoin.
Advantages of DCA bots:
- They can be easily launched without any additional tinkering. The WunderTrading platform has preset options for DCA that can be activated with a single click.
- Distributed Cost Average is a solid investment technique that has been tested throughout history in multiple markets to great results!
- DCA bots are easy to manage. You will be in full control of risks. It is a great way to create a source of passive income.
GRID bots
It is, possibly, the best Kraken trading bot that you can run without too much risk. GRID is a system based on DCA buying. GRID bots create a series of market orders with strategically placed take profit and stop loss orders. Together, they look like a grid on a price chart giving them this nice-sounding name.
GRID bots proved their efficiency in the past and became one of the staples in the product lineup of industry-leading automation vendors like WunderTrading. If you are interested in using automated traded systems that come with risk management options, this particular bot will be right up your alley.
Advantages of GRID bots:
- You can run multiple iterations of the bot and allow each to manage a certain portion of your portfolio. It is a great way to diversify!
- Preset solutions are already quite reliable and can be used to generate small profits consistently.
Copy trading bots
If you do not know much about cryptocurrencies, but desperately want to start investing, copy trading is a great solution. Many experts believe that it is the best trade bot for Kraken.
How to get started?
- Go to WunderTrading and log in.
- Choose Kraken as your main exchange platform.
- Go to “Marketplace” in the dashboard.
- Use the filter to view traders that exclusively work on Kraken.
- Choose top performers and start following them.
- Launch the bot from the “My Bots” tab.
Newly created bots will start monitoring the market activities of followed retail traders and automatically place copies of their market positions on your behalf. Note that this approach has its advantages and disadvantages.
Upsides of using copy trading:
- You don’t need to learn the intricacies of crypto investing and can start right away.
- You can control risks by dedicating only a portion of your portfolio to copy trading.
- Additional risk management options include custom stop loss commands.
Downsides:
- Past performance does not guarantee that selected managers will continue to generate profits.
- Copy trading prevents you from making mistakes naturally and learning more about the industry.
Arbitrage bots
Kraken has an active spot market with enough liquidity to support instant order execution which is excellent for strategies like arbitrage. This approach focuses on making money on price discrepancies between multiple exchanges. You can monitor multiple spot markets simultaneously.
For example, Bitcoin can be priced at $20K on Binance while having a $20,010 price on Kraken. The $10 difference is free to profit if you can buy on Binance and sell on Kraken at the same time.
Another approach is triangular arbitrage which is slightly more complicated. It is done on the same market but between three different currency pairs. For example, Bitcoin can be worth $20K in USDT yet have a parity with ETH at an equivalent of $20,010 in USDT. By using Tether as your exchange medium, you can make a profit.
Arbitrage bots are extremely safe and usually do not expose your portfolio to the same level of risk as many other automation tools. On the other hand, situations that are perfect for arbitrage execution occur rarely. You need to run multiple bots to monitor several currency pairs and different spot markets.
Advantages of using arbitrage:
- This strategy is quite safe and can be performed to achieve small gains consistently.
- Use it across multiple platforms or on Kraken’s spot market section and run it around the clock.
One of the disadvantages of using arbitrage is price convergence which is a phenomenon when different markets quickly find the right price for the asset. It happens quite quickly in a world connected with optic fiber. Another problem is that you need to run multiple robots at the same time. WunderTrading gives you a free Kraken trading bot (up to five), but it will not be enough to successfully perform arbitrage.
Companies that deserve a mention
Automation is something that you can get for a very low price. Quality-wise many automation vendors offer similar products with high uptime and enough flexibility to warrant paying for an upgraded plan. However, some are more versatile than others.
- BitsGap. This company offers a good selection of bots that can be used on Kraken and many other exchanges. However, the trial is only 7 days which is not enough to test every feature. Preset bots are lacking in variety.
- 3Commas. This platform specializes in copy trading and can be a good choice for investors interested in the social components of investment activities. They have a free trial and offer a good selection of complimentary tools for trading.
- CoinRule. If you are interested in writing complex scripts capable of following a myriad of rules and conditions, this platform is a good choice. It is integrated with TradingView and offers a nice selection of preset bots.
- WunderTrading is a Jack of all trades. When you need to run a custom-made bot following alerts from TradingView, you can do it here. If you are interested in copy trading, WunderTrading offers a marketplace with hundreds of great managers. The free plan allows users to run up to five bots without paying a dime.
- CryptoHopper. This brand is well-known in the crypto industry. The variety of trading bots is impressive and you can have a good free trial. However, the lack of social trading features is something that may push away beginners.
Should you use bots on Kraken?
Many experts believe that it is impossible to be successful in the cryptocurrency market without using advanced tools. While it is true that your performance can be better than using an automated trading system, the value that you can extract from automating a good technical analysis strategy is immeasurable.
Kraken has a functional API that allows power users to outperform other retail traders who work on this CEX platform manually. Having access to a “cheat code” that can make you faster than any human and not using it is not a solid plan.
The main takeaway
It is important to choose the right bot for the job. When it comes to trading on Kraken, you will have a rich selection of automation tools fully compatible with the exchange. Whether you pick DCA, GRID, Arbitrage, or all of them together, your results will be much better than if you did not use any of these tools.