Understanding Crypto Bots and their Role in Automated Trading
Crypto bots are way more flexible and diverse than what you might think even if you have some experience with them. While their job is quite simple at first glance, the ways a retail trader can utilize them within a portfolio can differ wildly. Contemporary algorithmic trading is not just following a set of rules by placing orders manually. You can make dramatic improvements to any technical analysis strategy by running it as an automated trading system (ATS).
There are many benefits of automated trading that are quite obvious. For example, you can stay active in the market around the clock which is extremely useful in the crypto industry as centralized exchanges often have global reach and trading volumes may peak at multiple times during any given trading day. However, some advantages of crypto bots are less apparent.
Here are some upsides to running an ATS:
- Improved consistency. If you have a good technical analysis strategy that produces a sufficient number of true positives to generate profits in the long run, you should stick to it as closely as possible. Unfortunately, many retail traders lack the discipline and determination to follow through with every trading opportunity. Sometimes, traders feel doubtful or simply fear to lose money. The indecisiveness makes your trading system inconsistent. Bots do not have human weaknesses and always follow up on triggers from your technical analysis strategy.
- Faster reaction time. The crypto market is quite volatile. While price action changes may benefit some retail traders who thrive in chaotic environments due to using very specific scalping techniques, other investors may avoid trading during such periods. When you have limited opportunities to make a high-probability trade, timing plays a critical role in making it as profitable as possible. Bots interact with centralized exchanges directly and react to alerts instantly. It means that you reduce the average reaction time by several magnitudes!
- Affordable pricing. Contemporary retail traders can launch an automated trading system for a fraction of the price that huge financial institutions had to pay just a couple of decades ago. Automation in trading became affordable and accessible. Many companies offer their services on a subscription basis allowing retail traders to use a plan that suits their preferences and budget limitations.
The advantages of automation over manual trading are too numerous to talk about them at length, but we can focus our attention on several distinct benefits mentioned above.
Increased Speed and Efficiency
When you use a WunderTrading crypto bot, you will be able to outpace the market and make moves ahead of the competition. Since prices are dictated by the behavior of the masses, being even a little bit faster than your average retail trader is a huge advantage. Thanks to instant analysis done on analytical platforms like TradingView and quick execution of orders by bots, you can create an excellent automated trading system that will be faster and better than human traders!
High-speed trading is also a great way of elevating some strategies to the next level. For example, complex statistical arbitrage systems are usually managed by multiple people since you need to place dozens of orders simultaneously. Bots can perform an asset shift faster and without any involvement from a human. With the benefit of real-time data analysis, this approach allows all retail traders to use complex systems like pairs trading and statistical arbitrage.
Rapid Trade Execution
One of the biggest WunderTrading bot advantages is fast execution time. It is achieved by connecting directly to a centralized exchange via API and receiving triggers directly from a TradingView chart thanks to the integration of code into the Pine Editor. The WunderTrading platform cuts down the time required to place an order by processing all the data as quickly as possible.
Instant trade placement is a good thing for all types of strategies, but will specifically improve scalping, swing, and spread trading systems!
Immediate Market Analysis
The TradingView platform allows retail traders to run sophisticated technical analysis strategies thanks to real-time market data interpretation. You can choose the source of information to make analysis tailored for specific exchanges and marketplaces. Automated market analysis is excellent when you need to produce alerts systematically to trigger your bots. To top it all off, quick decision-making is imperative in the cryptocurrency market.
Elimination of Emotional Bias and Human Error
The biggest problem that a retail trader faces when engaging in trading is a mental issue. Having the right mindset is hugely important for the long-term success in financial markets. Avoiding preexisting cognitive biases in trading can be challenging and requires time, effort, and dedication to overcome.
Emotional decision-making pitfalls in manual trading include the infamous FUD (fear, uncertainty, and doubt), inability to comprehend the statistics, clouded judgment due to stress or fatigue, and many other issues. One of the advantages of automated trading systems is that you can eliminate some of them to a certain degree.
Removing Emotional Decision-making
As mentioned previously, a retail trader must adhere to a preconceived trading plan if it has a high rate of true positives and provides an appropriate level of profitability in the long run. Arriving at said level of profits is associated with lengthy series of losses if luck is not on your side. However, hitting an unlucky strike should not affect your judgment.
Manual trading can be inefficient if you are incapable of removing emotions from trades and place them irrationally or avoid trading when circumstances seem to be unfavorable. The ability to stay on the course regardless of what is happening in the market is one of the biggest crypto bot advantages.
Minimizing Human Errors
When you are using a WunderTrading crypto bot, the human factor goes out of the window. As a trader, you are still responsible for the performance of your automated trading system since you need to come up with a reliable technical analysis strategy and adjustments of the bots. However, issues related to emotional instability are largely solved by the use of automation. A crypto trading bot has many features that reduce human errors.
Enhanced Precision through Advanced Algorithms and Strategies
Many financial experts believe in math and statistics. In many successful trading strategies, the ability to closely stick to the plan is highly desired. Most cryptocurrency algorithms are created to be as precise and efficient as possible. They often have small profit margins and require excellent execution to make money consistently.
WunderTrading bots are great at reducing idle time and making trading as efficient as possible. Once you set them up, they will follow instructions to the letter and place orders instantly. If you have a good technical strategy that can analyze market trends accurately, a bot will greatly increase its overall performance.
Algorithmic Trading Strategies
You can use a wide range of WunderTrading algorithmic strategies that will be triggered by changes in the market or specific alerts from TradingView. DCA buying is a great approach to acquiring digital assets. Distributed Cost Average (DCA) is a time-tested method of buying commodities and stocks at a lower price (on average) compared to the market median. The algorithm involves splitting up a single trade into multiple purchases to reduce the total price of purchased assets. WunderTrading also offers GRID bots and other types of preset automation solutions.
When it comes to running an automated trading system, one of the most important things is iterating as much as possible. To test strategies that you come up with, use the corresponding features on the TradingView website and the backtesting feature on the WunderTrading platform. It allows you to verify a strategy and check whether it works against the price history. It is a good idea to adjust your technical analysis strategy many times and find a working combination of settings before executing real trades.
24/7 Trading and Monitoring
The crypto market does not have any downtime and operates around the clock. Even when trading stops in one part of the world, another picks up the pace. An automation vendor that provides many monitoring and trading opportunities will always give you an edge and supply the necessary information to keep the performance level as high as possible.
One of the WunderTrading bot advantages is the portfolio analytics in the dashboard. You can compare bot results, see the breakdown of investments managed by automation, and analyze statistics.
As we discussed previously, bots do not need to sleep, rest, or eat. They work 24/7 without any interruptions. Thanks to the use of industry-leading cloud services by WunderTrading crypto bots, you will never experience any downtime. Your crypto trading bots will be ready to capitalize on all types of trading opportunities at any moment.
One of the best trading features of a WunderTrading bot is that you will be able to receive notifications about important market events in the dashboard. Staying informed about price changes in real-time is also a huge benefit. Both WunderTrading and TradingView provide the necessary functionality to receive notifications about various types of events that happen in the crypto market.
Better overall performance compared to manual trading
While many experts still argue about the practicality and rationality of using automated trading systems, one thing is undeniable — bots are much better at producing consistent results than humans. Yes, a retail trader with enough experience and good intuition can outperform a bot. Yes, many educated financiers are still doing better in the long run. However, an average retail trader will not be nearly as efficient as a bot.
The key word here is “consistency”. An automated trading system is designed to follow a strict set of rules imposed by a technical analysis strategy. If it can produce reliable forecasts more often than not, the long-term results will be positive. Many strategies based on seeking short-term reversals, price retracements, or strong trends can produce good predictions reliably. The only thing required from a retail trader is to follow through and place an order.
The problem is that humans have to use the user interface provided by a centralized exchange. Regardless of how well it translates your intentions to actions, you will never be faster and more precise than a bot that interacts with the exchange directly via API. It means that an automated trading system is always ahead of human traders in regard to speed and the precision of order execution.
All in all, bots are better than human traders in some cases and may perform worse in others. If you do not have experience in crypto or want to build a system that will produce consistent results without your direct involvement, using bots is an excellent idea. People who want to just buy and hold can do so manually or use algorithmic trading techniques like DCA which can also be automated.