How to use a futures trading bot for crypto trading?



Trading derivatives in the crypto market is a lucrative endeavor associated with elevated gains and amplified risks. If you are interested in working with the futures crypto market, it is a good idea to learn more about automation and how to use it to build efficient automated trading systems (ATS) designed to buy and sell futures contracts.

When it comes to futures spread trading or other techniques involving derivatives, the effectiveness of a finely tuned ATS makes it the best tool for the job. In fact, the vast majority of individual retail traders and financial institutions prefer using robots to acquire assets in the crypto market or engage with various financial products offered by centralized exchanges.

Since we are entering the era of regulated trade in the western world with introduction of Bitcoin ETFs and other ways of interacting with the blockchain industry for less informed populace, understanding how to stay competitive in an overcrowd market often influenced by the scarcity of assets is hugely important. Trading derivatives instead of tokens can be a good alternative for many active investors seeking new ways to make money.

How to use a futures trading bot for beginners

Crypto futures trading is not as old as the industry itself. Some of the earliest offerings came from CME Group, a large financial asset exchange based in the US. It soon became apparent that people were interested in derivatives based on cryptocurrencies despite the latter not having any intrinsic value that comes from real investments. The speculative nature of the underlying asset did not scare away potential buyers. On the contrary, investors flocked to the opportunity to trade tokens.

Futures offer newcomers to the industry a way to interact with trending digital assets without owning them directly. For many speculators, it became an insanely lucrative endeavor to bet on the crypto market. With enough cash flowing in, the market for derivatives turned into a massive financial ecosystem that now allows millions of users to trade various contracts daily.

It is important to note that trading derivatives is not something that newcomers to the industry should do.

Here are several reasons to avoid futures if you do not have any prior exposure to the market for derivatives:

  • Amplified risks. Crypto futures trading can be quite dangerous as you often need to use leverage to participate. Borrowing funds to trade financial instruments is never a good idea if you do not have experience with margin trading. Since risks to your portfolio are greater when you use leverage, it is a wise move to avoid borrowing until you get a better grasp on the market and its quirks.
  • Increased volatility. Derivatives usually follow trends formed in the spot market as current prices greatly affect evaluations of financial assets. However, the strength of volatility can be much greater when you are dealing with futures, options, and CFD contracts. We strongly suggest to avoid trading these instruments during periods of strong volatility or minimize the exposure of your portfolio to the asset class altogether if you lack the experience to manage them under pressure.
  • Economic uncertainty. Futures are contracts that expire at some time in the future. It means that someone must “hold the bag” by the time the contract conditions are fulfilled. Retail traders have to juggle these contracts constantly or have a very good idea about the direction of the price in the foreseeable future. Since it is hard to make a good prognosis for any token, you will face uncertainty all the time.
  • Using a futures trading bot requires expertise. It is not easy for a newcomer to set up good trading bots to buy and sell derivatives. While the process itself is not complicated at all, you will have to spend a significant amount of time and effort on adjusting risk mitigation settings and other parameters to create an automated crypto trading system that works efficiently while not exposing your portfolio to unnecessary risks.

Trading derivatives with robots can be intimidating for beginners. Indeed, you need a good grasp on the financial market, learn more about underlying assets, and have some experience with automation. However, these financial instruments can be quite profitable if you can make them work. A good technical analysis strategy paired with proper risk management techniques will do the trick.

How does a futures trading bot work for crypto trading?

Despite some crucial differences between the markets for derivatives and the spot market, automation works similarly in both scenarios. There are three main components to any automated trading system employed in financial markets:

1.   Signal provider. You can use any type of signals to trigger your bots into action. Robots work equally well with manual inputs, custom signals from highly specialized providers, and analytical websites like TradingView where you can set up a strategy to generate alerts.

2.   Automation platform. Some centralized exchanges and brokerage service providers offer their clients limited functionality to build robots without ever leaving their websites. However, many users prefer to use specialized automation vendors or even run software locally.

3.   CEX platforms. Robots connect to centralized exchanges via API and can quickly place orders and bypass the graphic user interface which always slows down the process of order placement by humans. Many CEX companies offer their clients margin trading accounts.

Let’s talk about how to use a futures trading bot for crypto. The setup process is quite simple and requires just a couple of steps. If you are completely new to the industry, you will need to join several platforms and setup accounts with signal providers and automation vendors. Here are the steps you will need to make:

  • Create an account with an exchange. You will need a place to trade. Many CEX platforms offer their clients access to the market for derivatives. Examples include Binance, Coinbase, Kraken, and many others.
  • Create an account with WunderTrading or any other automation provider that you like. Choose companies that have a deep catalog of products and offer a wide range of complimentary features for added flexibility.
  • Create an account with a signal provider. It is entirely possible to get by with manual inputs or with a technical analysis strategy deployed on TradingView. Use any method you like.
  • Go to the account management page at your CEX platform. Find the API key and copy it. It will be needed to connect your automation vendor with margin trading accounts.
  • Go to the automation vendor website and connect your margin trading account with the previously acquired API key. The process is straightforward. You won’t encounter any difficulties here.

The process of setting up bots themselves differs from one automation vendor to another. Let’s talk about the tools and features of the WunderTrading platform:

  • Go to the dashboard, find the menu block called “Bots” and click “Create a Bot”.
  • You will be redirected to the bot settings page with detailed instructions on how to connect a signal provider.
  • Choose the connected margin trading account to the bot.
  • Deploy a technical analysis strategy that you like on the TradingView chart.
  • Use the Pine Editor on the TradingView platform to insert the code from the WunderTrading’s trading bots.

Note that you can use any type of signal providers including manual inputs (for example, if you follow a successful retail trader or an influencer and trust them), triggers from specialized analytical companies, and even go for copy trading to copy trades created by experienced investors directly.

How to choose a futures trading bot for crypto

While any modern cryptocurrency trading bot can work well when it comes to buying and selling assets, some automation providers are still better than others or have something unique to offer. There are several important qualities that should be considered when searching for a good automation vendor:

  • User interface. You want to work with a company that has a clear and intuitive interface. Unnecessary clutter can be quite overwhelming and confusing. Work with websites that have a good dashboard where you see everything and do not feel lost.
  • Flexible pricing. We are way past the point where an automated trading system costs a fortune upfront and thousands in monthly upkeep. Many automation vendors offer flexible payment options and have a variety of plans to choose from.
  • Versatile products. Building a simple trading robot is not a challenge for anyone who has used an automation platform for at least a couple of days. However, you will need better tools to automate futures trading and make it profitable. Look for platforms with diverse product lineups.
  • Reliability. One of the worst things that can happen to any retail trader working with automation is service disruptions. Work with companies that have reliable providers of cloud computing and bath in positive reviews from customers.

Companies that offer the best futures trading bots for crypto usually have other intriguing products to play with. For example, the automated crypto trading platform WunderTrading offers its clients access to a diverse copy trading marketplace with thousands of experienced investors to choose from and an innovative AI-assisted statistical arbitrage system that can be used to manage your entire portfolio.

If you are interested in making money by automating futures trading, it is crucial to pick the right provider of automation services. Don’t limit yourself to just one type of bots. Deploy DCA buying robots, invest in GRID systems, and allow advanced expert AI systems to manage the whole portfolio for you!


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