Source: Twenty20

Bitcoin and cryptocurrency trading, similar to stock trading, is a mode of earning income from the financial markets. However, many bitcoin traders continue to view bitcoin trading as a side business rather than their main vocation. This may be largely due to the fact that bitcoin exchanges are not yet ready for the big time. Crypto-enthusiasts hope that the big and bulge-bracket financial firms will soon buy and sell bitcoin like any other asset such as stocks, bonds, gold, or currency. However, such trading would entail large volumes, scale, and scrutiny that crypto asset exchanges are not equipped to handle today. Many cryptocurrency exchanges are coming under strain due to home-grown technologies and they face costly technology upgrades or an ugly meltdown. Market shifts happen so fast that you could end up losing money if you don’t act fast. The explosion of trading bots has to be viewed against this background.

Bots are perhaps the answer to some of the issues and they could lend stability to the cryptocurrency markets. Bitcoin trading bots are software that follow pre-programmed algorithms that help investors to analyze activity on the cryptocurrency markets and trade profitably in a given scenario. Bots are a unique form of Artificial Intelligence. Bots can provide traders with all the necessary resources to be successful. They are tools that help you to define specific parameters to execute trades on your behalf by setting up automated transactions. For instance, you can mitigate risks by using strategies such as setting stop-limit orders to buy and sell bitcoin once it reaches a certain price. Here’s a stop limit sell order example that tells you how you can use bots to control risks. Let’s assume bitcoin is trading close to $2,000 for several sessions, and you want to cap your losses should the digital currency fall in value. You will set up a sell limit order that will execute a limit order should bitcoin fall to $1,900, but only sell the asset for $1,800 or more.

Crypto trading bots are not a one-stop solution

Source: Pexels
You have seen how trading bots can help you to devise strategies to buy and sell bitcoins by successfully mitigating risks. This is because bots eliminate emotions such as euphoria and fear that could make an investor vulnerable. However, it is important to understand that bots are tools and not passive income generators that could make money for you even when you are sleeping.

The cryptocurrency market is growing and evolving rapidly. Hence, investors should keep abreast with the market movements and adjust and update trading strategies to suit the changing market conditions. Investors can possibly generate a trading income using bitcoin trading bots. If you deploy the right strategy and regularly adjust the settings for your bots, it can be a great tool to help you with cryptocurrency trading decisions. You should remember that bots are not a fix-it-and-forget-it solution and they need constant tweaking, based on your investment strategy. Overall, at the market level, the rise of bots should bring stability to the cryptocurrency markets by ironing out arbitrage opportunities and flattening prices across exchanges. At the individual level, they should enable investors to execute strategies to minimize risks and make a profit. Further, they can act to stop flash crashes in cryptocurrency markets, although some fear that they might cause such flash crashes. As the markets evolve and the technologies establish a track record, bots could perhaps be the factor that will rapidly bring the cryptocurrency market on par with the other financial markets.