Before moving on to automated trading systems, you should understand what is a trading system. In the world of crypto, it is a set of rules that determine when to enter and exit the market as well as the choice of financial instruments.
Automated currency trading is trading with the help of software, thereby increasing investors' income. The essence of its work is to implement a certain trading strategy. For example, the analysis of historical prices makes it easier to find profitable positions for entering and exiting the market. Almost every strategy can be automated and applied by such software. For example, automated futures trading systems will help you automate all your deals in futures contracts.
Advantages of automatic trading systems
Many traders like the various benefits of crypto trading automation. Let's look at what else an automated trading system can offer.
Crypto automated trading systems can help you manage your emotions during trading. It will help you to follow your trading plan with ease. You will not hesitate or have doubts when opening a position, as the order is instantly executed by the trading robot strictly according to the rules. Automated systems not only help traders who are not in control of themselves, but also those who do not know how to stop in time.
People can often make risky deals, such as entering into a gamble. The algorithm, according to which the trading robot works, will never allow it to put more than the specified amount. The bot will not experiment and risk money.
Since the computer reacts lightning-fast to changes in market conditions, automated systems will make a deal as soon as the appropriate signals are received. Your trading results can change significantly if you enter or exit the market a few seconds earlier. That is why automated day trading is so popular.
Automated trading systems allow trading on different strategies at the same time. It helps balance the risk across many instruments. What seems to be difficult for you is easily and efficiently executed by a computer in a few milliseconds. Automated systems can track several markets at the same time, trade different instruments and control many positions.
Of course, trading robots have many advantages, but you should also learn about their disadvantages.
- Technological complexity - theoretically automated systems work simply: you install the software, set up the rules and watch the trade. In reality, however, it is a complex method of trading that relies on multiple layers of technology. For example, there may be a mismatch between the trading strategy you created on paper and the platform's ability to implement it.
- Monitoring - automated trading systems require constant monitoring, as technical problems can occur, such as connection problems, loss of power or computer breakdowns. There can also be problems with the robot itself: unintentionally making an order, executing a double order, or missing a trade. If the system is controlled, such failures can be easily and quickly eliminated.
- Over-optimization - traders who are too keen on testing and optimizing their trading systems on historical data often fall into the net of over-optimization. A strategy that looks good on paper and on historical data can work terribly on the real market.
- Lack of Human Factors. Oddly enough, this can be equally attributed to both advantages and disadvantages. Automated trading eliminates emotions and impulse orders opening, but excludes the possibility of a sharp strategy change when interesting situations on the market arise. That is, there is no real adaptation to changing conditions. To eliminate this drawback, there is an opportunity to combine automatic and manual trading.
Before you use any automatic system, make sure you understand all its details. This will help you keep the situation under control and avoid disappointing losses. Remember that even the best-automated futures trading system can work with mistakes if you set it up incorrectly.
Types of automatic trading systems
The main types of automatic trading systems can be divided into three broad categories.
Copy-trading is one of the automating trading strategies, which allows beginners to copy the trading strategies of experienced traders. For instance, you register on an automated trading platform and choose a trader with a high success rate. You can click the copy button and watch as the platform automatically executes the deals of the chosen trader. The main reason for copy trading is that a novice trader can make as much profit as an expert. It is an investment option with fewer mistakes.
Copying schemes differ from platform to platform, but the principle is the same: the investor trusts the management of money to another person. The amount of income depends on whose deals are copied and how much money is invested.
Copy trading can be used by those who have no skills in technical analysis or who have no time to monitor the market.
How to start copy trading?
Choose a trader who matches your goals best and subscribe to him using the tools provided by the trading platforms.
- After that, the copy trading platform will automatically copy all positions of the selected trader on your trading account. Remember that you can always stop copy-trading and close the deals yourself.
- Invest extra money if you like the trading results of a trader. You can change your chosen trader or traders at any time but remember: to copy the deals of each individual trader you need a separate investment account.
- Maybe, for you, the most important thing is the number of subscribers, profitability, risk level, the total amount of funds managed by the trader, or return on investment. You can choose a trader based on a combination of any of these factors.
- Determine an investment amount you are comfortable with. Act carefully and do not invest all of your capital in one trader - select the amount you are ready to allocate to each selected trader (if you have decided to copy trades of several traders).
You probably still have a question - what is the benefit to the trader, who allows you to copy his trades? The answer is very simple - after each trading session, the copy trader pays a certain commission to the trader, regardless of the result of the trade. For many traders, making their deals for copying is one of the main sources of their earnings. For this reason, they pay a lot of attention to their trading history, rating and reputation on cryptocurrency exchanges.
Copy trading is ideal for beginners who do not have enough experience in trading but want to try their hand at it. Copy trading is also good for those who do not have free time and are not ready to devote several hours a day to trading.
A trade signal is a trigger to take some action on an exchange based on a technical analysis. This automated trading method determines the good time to sell or buy a coin and gives you a signal.
Trading signals require different inputs. Technical analysis is usually the main component. The purpose of trading signals is to give the investor an unemotional way to buy or sell an asset.
You can trade on the signals in automatic and manual modes. Automatic mode means the installation of special software which receives signals from the selected provider and opens or closes the corresponding positions without your participation. You may be required only to initially configure the program for an acceptable level of risk. For example, you will need to determine the size of the open positions in accordance with your money management strategy.
The manual mode assumes that you receive a signal in person and then decide whether or not to make a deal. The manual mode may involve a certain analysis of trading signals.
The most well-known and popular signal provider in the world of cryptocurrency trading is the TradingView platform.
Trading robots are automated programs that execute trades on behalf of the trader. The program may be equipped with artificial intelligence to ensure that all factors necessary to select the best trade in the market are taken into account. What is AI trading? Simply put, it is the next generation of trading robots that can make decisions for traders based on the current market situation.
Automated trading software development is very difficult to work, which can be done by professionals who have knowledge of stock trading, cryptocurrency, and programming. Therefore, such specialists are always in demand in the employment market and that is why the best auto trading software is often very expensive.
An automated trading bot scans the market for likely trading opportunities, looks at historical data and compares it to current prices before placing an order. Its speed is not comparable to that of a trader. For example, the best day trading bots are capable of opening dozens of trades in one second, which is very important for day trading or scalping.
The robot also calculates the ideal exit point using the collected data. Most of the time, traders do not need to actively participate in the trading process, but it is important for them to know something about the market in order to keep track of their trades.
A modern trading robot is a powerful artificial intelligence that is able to conduct technical analysis, take into account the data of dozens of indicators and variables, instantly perform complex mathematical calculations, give orders to open or close transactions, and fix profits. For example, if you want futures automated trading, a robot can easily help you with that.
Automated robots differ from each other in many characteristics:
- strategies of work;
- level of automation;
- compatibility with stock exchanges and instruments;
- requirements to the deposit size;
- customization capabilities.
When evaluating and analyzing trading robots for the crypto market, you should consider the following factors:
- The simplicity of setting up, installation and proper use, as well as the ability to quickly make changes.
- The variety of trading strategies - arbitrage, market making, copy trading, shorting, scalping, etc. The rule does not work here - the more strategies, the better. It is preferable to find a robot with one well-implemented strategy, such as automated futures trading strategies, than with ten ones that do not work as well.
- Exchange integrations - Binance, Coinbase, Bittrex, Bitfinex, Bitstamp, Poloniex, KuCoin, Huobi. The more exchanges your robot will support, the better. However, if you use only one particular exchange, this is not so important.
- Pricing and flexibility of costs - find out if the developers provide free trials, as well as the cost of monthly, yearly or lifetime subscriptions for support and updates.
- Type of software - find out if your robot will run in a browser, or on one of the operating systems - Windows, macOS or Linux.
- Availability of using external signals.
- The number of active positions - the allowed number of open trades at any given time.
- The diversity of assets - find out how many coins and trading pairs are available for trading.
- Be sure to ask about the developer's reputation, sometimes this may be the most important.
- Support - if something happens to your robot, the support is irreplaceable. Therefore, find out how well it helps to solve the problems of its customers.
All of these characteristics should be fully evaluated before you start using the program. It is important to determine which features of the strategy's implementation are a priority.
Automated Trading Platforms
Technically speaking, an automated trading platform is a set of technical and software tools that provide traders with access to information about the state of financial markets, allow them to perform trading operations, and automate it.
To put it in simple words - it is the software that facilitates the work of every trader. Best automated trading platforms have many tools that allow you to implement best-automated trading strategies. For example, you can be engaged in copy trading, trading by signals or using trading bots within one trading platform.
There are also trading platforms, which implement one or more trading strategies. For example, an automated futures trading platform allows you to automate only the work with futures contracts.
In addition to automation, platforms have the ability to integrate with various cryptocurrency exchanges. Let's explain how it works. For example, you want to trade on Binance using your preferred trading platform. All you need to do is create an account on the trading platform, connect your Binance account to it via API and start trading. You can trade on multiple exchanges at the same time without having to switch between windows.
What is an API? It is an application programming interface that provides communication between different software. Simply put, it is a technical solution for applications to quickly communicate with each other. An API can define the functionality to be performed in a program.
API is used when working with the file system, data storage, and social network integration with third-party sites and applications. Thanks to the API, crypto traders are able to trade on exchanges through trading platforms, as well as to run trading bots.
According to many users, the best platform for automated trading is Wundertrading. In addition to all of the above, it provides cryptocurrency exchanger capabilities and also has a large knowledge base where you can find answers to many questions on cryptocurrencies, trading strategies, and everything related to digital assets.
Wundertrading trading robots allow you to use a variety of trading strategies. In addition, you do not need to have knowledge in programming to configure the robot yourself. Any beginner can do it in a few clicks. Connecting to the exchange is also not difficult - all you need is a Wundertrading account and an account of the exchange on which you are going to trade. Further setup is done in several simple steps, which are described in detail on the platform website.
The main advantage of Wundertrading is that you can enjoy all of its benefits even on the free basic plan. This is especially important for new traders who are just starting to try their hand at it.
To sum up the above, it is fair to say that Wundertrading service is a great choice for any user who is interested in trading on the crypto market. The platform is suitable for both beginners and experienced traders.