What is a digital currency trader robot? How the 2023 trading robot works

By checking the price in the exchanges full-time, the robot trader performs the transactions for the investor and leads to profit.

To be a bit realistic, trading crypto can be really difficult. Even for experienced investors, knowing when to buy or sell is not as easy as it seems. It is also necessary for traders to set aside emotions in order to make smart trades. Fortunately, there is a solution to this issue! It is called a trading robot or digital currency trading robot. When properly set up, crypto trading bots can deliver impressive returns and take less time for the investor. Stay with us in the rest of this article to learn a little more about the mechanism of digital currency robots.

 

What is a trading robot?

Trader robots are tools that perform transactions by checking prices in exchanges and using price differences and lead to profits. Since the price of cryptocurrencies such as Bitcoin varies somewhat between different exchanges, bots that can move fast enough will be able to beat exchanges that are slow to update their prices.

They are generally programs that are implemented to achieve specific results in transactions. However, you can go to a Crypto Robot trading platform and use predefined rules or modify their programming to suit your trading needs. For example, by changing the settings in a robot, buy a certain crypto at a certain time or price depending on your crypto trading strategy.

Another important role of crypto trading bots is to eliminate human emotions in trading decisions. No matter how experienced you are, it is always possible to make a mistake with an emotional decision and it will cost you a lot in trading. Bots execute instructions without modification because they don't have emotions and this can save you from loss. They also do not require high-level technical skills and have become a go-to solution for businesses these days.

How does Trader Bot work?

Crypto trading bots are hosted by platforms like Coinrule, Cryptohopper, etc. These platforms run the crypto trading bot with specific trading rules, although you can modify them to suit your specific purpose.

Perhaps the most impressive thing about them is that they do business 24 hours a day, and no human can handle such a responsibility. You can schedule them to execute trades on specific days, day or night based on how the market is moving.

Some bots have special features that set them apart from their competitors, such as the HODL feature in 3Commas. The function of the robot is not only to trade, but also to help you automatically buy and hold cryptocurrencies by buying at low prices. It is up to you to decide on the currencies you want and choose a bot to help you achieve it.

However, you should know that although trading bots are good for automating trading, they can be very costly if the trade does not go according to plan. This is because they cannot change instructions that have already been given.

How do robots know what to do?

One of the main features of trading bots is that they rely on mathematical algorithms to find a set of trades. To do this, they incorporate various technical indicators that are used to decide whether to buy or sell a currency pair.

Popular technical indicators used in programming trading robots include moving averages, oscillators, and trend following indicators. For example, if a 100-period moving average moves above a 200-period moving average, a very simple cryptocurrency bot might initiate a buy signal.

Differences between digital currency trading robot and human

Despite the fact that trading robots also have weaknesses, the fact must be accepted that they are better than humans and offer various advantages, some of which are as follows:

• Without the involvement of feelings

One of the features that differentiates robots from humans is that robots are free from prejudices and emotions. They analyze and understand data without any bias or emotion.

• Automatically

The bots are trained in such a way that they will make trades automatically. Using various mathematical concepts, probability theory, statistics and forecasting, they tend to use an effective approach that often produces favorable results.

• Massive processing capability

Robots have a huge capacity to process and analyze huge amounts of data in real time. They can monitor multiple stocks and charts simultaneously, something even experienced traders can't do. This enables them to make appropriate decisions based on stock prices, movements and other factors.

• fast

Trading bots can execute transactions faster than humans. Even the most difficult calculations can be solved in less time than humans. Also, immediate reactions to price changes by bots can bring huge benefits, as opposed to human delays that can turn a profitable trade into a loss.

• longevity

Since the cryptocurrency markets are very volatile and can change even in a few seconds, robots can easily manage it because they have the ability to operate 24/7. While humans need to sleep, eat and live.

• Based on artificial intelligence

Artificial intelligence and machine learning have been one of the most talked about topics for many years and many movies and books have been published around it. Both of these technologies have many advances in different sectors.

Examples include self-driving cars and healthcare diagnostics. Different trading bots have artificial intelligence and enable them to learn and improve.

• Self optimization

Robots are smarter and can adapt to any situation compared to humans who are much slower. When things don't go their way, people are easily demotivated and therefore perform even worse.

Thanks to artificial intelligence and its advancements, bots can optimize themselves. For any given task, they try to achieve the best results by finding the best methods.

• Variety of strategies

Robots are scalable and can perform required tasks efficiently and at high speed. They are able to work at different times with different strategies without even linking them together, thus reducing risks.

Can you trust the digital currency trading robot?

Despite much speculation about the legal status of crypto trading bots, the fact is that they are used all over the world and are completely legal. The extent of automated trading in traditional financial markets has been growing, and there is no reason to believe that cryptocurrency markets will behave any differently.

However, being legal is not the same as being safe. This is especially true for traders who are accustomed to trading in high volume in the hope of making significant profits from the final price changes in the underlying cryptocurrency.

While a crypto trading bot will undoubtedly help you make large trades within milliseconds, the potential for huge losses is huge if the trading strategy is not tested enough. One of the critical components of developing a successful trading system, testing involves reproducing results using historical data and resulting statistics to measure the success of the trading strategy.

Additionally, cryptocurrency markets do not operate solely on technical analysis, and traders are required to pay attention to fundamental changes or updates to the underlying protocol of a particular cryptocurrency. This is impossible for crypto trading bots, as they rely on mathematical calculations based on pricing behaviors to identify and execute trades. Therefore, it is imperative that traders perfect their trading strategies by using crypto trading bots with sound cryptocurrencies to generate consistent profits.

Advantages of using a trading robot

Well, now that you know what a trading bot is, let's take a look at the pros and cons of trading bots.

• They make decisions without emotional involvement

Since cryptocurrencies are highly volatile, it is easy for traders to panic and panic in their trades and become overwhelmed by emotions with losses on these trades. Emotions influence your decision-making and can lead to errors in judgment and poor choices that can ultimately lead to closing losses, stop losses, or liquidation. One of the main advantages of using a crypto trading bot is that they have no sentiment or trade attachment and enter and exit based on the market, not gut feeling.

• More efficient business

Crypto trading bots are designed to multitask. By running and monitoring many sources of analytical data, bots can generate multiple trades at the same time. They don't have a limited focus like humans, and they don't miss a potentially profitable business because of distractions.

• 24/7 operation

Remember, you are human and you need to sleep at certain times, but cryptocurrency trading bots work 24/7 making potentially profitable decisions for you while you sleep. They will never miss a valuable opportunity. Think of robots as an employee who never complains, never sleeps, never asks for time off or raises.

Disadvantages of robot traders

So far, everything looks great and you're probably excited and ready to get started, but before you start building a trading bot, let's take a quick look at the disadvantages of using a trading bot.

 

• Still needs monitoring

Although cryptocurrency trading bots do most of the routine work automatically, you should check them regularly to make sure everything is working and your bots are profitable. You cannot leave the robot unattended to operate independently forever. You need a thorough understanding of crypto trading to set up effective rules and ensure smooth robot operation.

• Security weaknesses

Trader bots execute trades via API keys, allowing them to connect to a crypto exchange and trade automatically without your manual input.

Cybercriminals or hackers tend to stay away from blockchains because they are generally safe. It's not that they won't try to hack exchanges at all, but most crypto exchanges in 2021 have military-grade security to protect their traders' capital. Although there is always a chance that they are monitoring a trading bot platform. You can mitigate the risks by disabling withdrawal authorization and further obfuscation with your API keys. Do not share private keys with anyone!

• Some trading robots are not profitable

There are now 100's of crypto trading platforms for cryptocurrency trading and some platforms even offer a marketplace where you can buy other trading bots from users. Be careful, do enough research and test the bot with small amounts at first to make sure the crypto trading bot is profitable for you.

Types of trading robots

Trading robots are not as automatic as they seem, but they can make it much easier for traders to profit from the market. There are different types of trading bots depending on what you use them for. In the rest of this article, we will examine the types of trading robots and explain the function of each one.

Arbitrage bots

As mentioned, there are different types of cryptocurrency bots. One of the most popular of them is the arbitrage robot. Arbitrage bots are tools that check prices on exchanges and make trades using price differences. Since the price of cryptocurrencies such as Bitcoin varies somewhat between different exchanges, bots that can move fast enough can beat exchanges that are slow to update their prices.

Trading robots based on market trends

A trend-based trading robot is a colloquial term for a software program that signals traders to buy or sell a currency pair at a given time based on price movements in the currency market. These systems can be automated or integrated with online brokers or exchange platforms.

Lending robots

The lender bot integrates with Lending Club's peer-to-peer lending platform to allow users to offer credit and buy and sell passbooks on the secondary market. Previously, users had to compete to execute seconds transactions on the most popular and quality loans. Users also had to fill out a series of often inaccessible profile questions to initiate a transaction on the platform. While this more detailed framework is still there for advanced users, the interface has been removed for casual investors.

Market making robots

A market maker robot is an automated investment strategy that is used by filling the order book with buy and sell orders to provide liquidity so that other market participants, buyers and sellers, can execute their orders whenever they need. Therefore, the crypto market maker plays a special role in the financial ecosystem by creating trust in the market.

Algorithmic trading robots

An algorithmic trading robot is a computer code capable of generating and executing buy and sell signals in financial markets. The main components of such a robot include "entry rules" that indicate when to buy or sell, "exit rules" that indicate when to close the current position, and "position size rules" that determine buy or sell amounts.

Portfolio automation robots

These bots are specifically focused on building and maintaining user portfolios rather than active trading. Users use such bots to automate common and boring processes. For example, imagine that the portfolio automation bot has an index that should form a basket of the top 20 coins by market cap. When the cryptocurrency price fluctuates, the robot automatically rebalances the investor's portfolio by selling underperforming assets.

Technical analysis robots

Technical analysis robots are among the most popular and widely used market robots and are suitable for conservative traders. These robots use indicators and signals to predict future price changes and earn profits.

Connecting the trading robot to digital currency exchanges

Surely now you are thinking how to use a trading bot on exchanges like Binance. If you fear this process is too technical, don't worry! The process is not as complicated as you might think. We will use the bot created by Coinrule as an example. The team behind this robot has made the process very simple. Here's how to get started:

• Generate your API key

First, log into your Binance account. Then, select Manage API from the drop-down menu at the top right of the page. On the next page, give your new bot a name and click Create.

This will enable your 2-step authentication. After entering the code, Binance will send you an email to confirm that you want to create a new bot. After clicking on the posted link, you will be directed to the API management page.

Here you will find your API key and secret key. There are also checkboxes. Leave the default selections as they are. Make sure you store your secret key in a safe place.

To ensure that your funds remain safe on the exchange, do not give the bot withdrawal rights.

• Connect your bot

Log into your Coinrule account and select Exchanges from the sidebar menu. On the next page, select Binance as the exchange and copy and paste your API key and secret key into the respective boxes. By clicking on Connect, your bot will be connected.

• Create your own rules

Now that your bot has access to your exchange account, you need to set parameters for how your bot trades. These parameters are called rules. For now, we want to use Coinrule templates to simplify the process. If you feel up to it, you can design your own rules and customize them to your liking.

Click on Rules in the sidebar. Then in the upper right corner, click on Create Rule. This will bring you to the rules page. Click on Templates at the top of the page.

An extensive list of Coinrule templates that the team has created for you will be displayed. Each has a descriptive name and a short introduction to the main strategy of the rule. If you click on one, you will get a more detailed description. When you have one you're happy with, click Select.

Next, you can customize the template. All you have to do is define the coin rule for Bitcoin (BTC), Ethereum (ETH) or Dogecoin (DOGE) and then set the amount you want to trade. You can also allow the bot to trade any coin on the exchange if you wish, but you must select this option first. Select your coin from the drop down menu next to If. You can customize more from here, but you don't have to.

• Go live

Give your rule a name and choose how many times you want it to run. Click Launch at the bottom right of the screen. You will get a pop-up window with a summary of your rule. If it looks right, click Launch Live.

Introducing some famous digital currency trader bots

Before you start working with a cryptocurrency trading bot, you need to understand which trading bot is best for you. There are many options on the market now, so you can find a trading robot that suits your needs. It is important to get the best crypto trading bot for yourself, because you should never invest in a bad trading bot. It's also not bad if you start a free trial before signing up for a trading robot if possible. In this way, you will find out whether the automatic trading software is suitable for you or not. Without wasting time, let's dive into the best cryptocurrency trading robots.

 

• 3Commas

Crypto trading is difficult. Becoming a successful active trader can take hours of learning and trial and error. Crypto trading bot platforms like 3Commas simplify the process dramatically. 3Commas is surprisingly easy to use because of its incredible functionality. Logging in will be very easy even for beginners. All you have to do is connect your cryptocurrency account (or accounts) and customize your 3Commas trading bot. You can trade from anywhere using the 3Commas mobile app on iOS and Android.

• Haas online

Trading based on emotions can lead to the downfall of thousands of traders, especially in the digital currency space. The market can remain more volatile than your liquidity, especially the growing crypto market. This is why trading robots are so useful. They use cold data and targeted strategies to trade. HaasOnline is one of the best trading robot platforms on the market right now that has a huge variety of functionality.

There are several different ways to use a trading robot. You can train a bot to trade, which is a difficult task, but HaasOnline's Trade Server software makes it easier than ever. You don't even need to know how to code.

• HAL from CoinShares

HAL is a leading algorithmic crypto trading platform with a wide variety of strategy types. HAL offers fifteen different crypto trading strategies and more will be added soon. These strategies are carefully designed by the experienced experts of the CoinShares Quant team and built for long-term success. They are divided into 3 general categories: wise, with artificial intelligence and pulse. A fourth category of managed profiles will be added soon, intelligently grouping specific cryptocurrencies together.

• Pionics

Payonex is a digital currency exchange with built-in trading bots. Payonex can be considered one of the most powerful cryptographic platforms available today with many features. You can access more than 15 unique trading bots and it's free to sign up. These robots allow you to automate your investment strategy so that you don't need to constantly monitor the market.

• Coinrule

When it comes to offering the widest range of pre-set trading strategies, few competitors can match Coinrule and its wide selection. The crypto trading bot currently allows users to customize investments with more than 150 trading patterns. From aggregators to long-term holding strategies and stop-loss settings, Coinrule is constantly adding new formats to its platform.

• Shrimpy.io

When you use Shrimpy.io, you can connect to any of 20 exchanges to manage your portfolio. Connecting to multiple exchanges is possible and you have the option to add as many wallets as you need.

• Cryptohopper

The cryptocurrency market is constantly moving, even short periods of time when you rely on a cryptocurrency trading robot can result in lost profits. Experience fast automated trading and portfolio management for Bitcoin, Ethereum, Cardano and over 100 other cryptocurrencies on the world's top crypto exchanges.

Cryptohopper is a full-time trading bot that hosts its services entirely using cloud storage. This means that the bot will not experience any crashes and updates will be provided without interrupting your transactions or suspending your account. Even when the network is offline, your Cryptohopper account will continue to work.

• EndoTech

EndoTech is one of the top crypto algorithmic trading platforms on the market, and since its launch in 2012, it has been perfecting its services. This is not an exchange. Instead, it connects to your exchange accounts (safe and secure, EndoTech is never able to withdraw funds) and executes algorithmic trading strategies for you. The setup process is quick and hassle-free, especially if you already have an account on one of the supported crypto exchanges.

Download the digital currency trader robot

As mentioned earlier, there are many cryptocurrency trading bots available for trading. Users can download them for desktop or Android systems depending on their needs. You can access a number of trader robots through this link .

Is it legal to use a trading robot in a digital currency exchange?

Yes, it is legal to use a trading robot. Although some people disagree with how automated trading affects the markets, there are no laws that prevent retail traders from using trading bots.

Automated trading is a well-known activity in most financial markets. Half of the stock market transactions in the US are automated and this process is 100% legal. Likewise, in most countries and most cryptocurrency exchanges, there are no laws prohibiting the use of crypto trading bots.

Risks of using trading robots

In the real world, new opportunities for higher income come with greater risk. Algorithmic trading has its own challenges that must be considered. For example, the risk of bot account being hacked and API keys being stolen, wrong bot settings, error in algorithm causing loss instead of profit, sudden movements of crypto market, etc. Traders may end up losing capital or buying a large position in a token with low liquidity. In the following, we will discuss some other problems of using the trading robot in a summary form.

1. You are ignorant of everything

For a trader, being unaware of the flow is the worst possible situation. Not understanding why the bot made a trade can be very harmful and deceptive! When things are going well, business may look good. But as soon as your bot hits a bit of a bump and goes into a drawdown, you're bound to start meddling with it. Or worse, it refuses to follow the trading robot strategy at the worst possible time. Without understanding how the bot trades or the reasons why it made a particular trade, you will never trade successfully in the long run.

2. You don't learn anything

If you don't participate in a robot's trading decision-making process, you won't learn anything. In general, you are out of the pit. Some traders may say that it is better to stay out of the loop if it interferes with the strategy. This is where your discipline as a trader should come in. If you prefer not to know anything about trading processes and want to sit back and watch, then you are not a real trader. It is much better to hire a financial manager to do the trading for you. Robots are executives, not managers!

3. You will not get any better

If you don't learn something, you can't progress. One of the skills needed to be a million dollar trader is self-improvement. How do you expect to improve your trading and other skills necessary for successful trading when you are not trading yourself.

4. You will not receive a timeline

One of the best ways for beginners to develop the market knowledge and trading skills needed for successful trading is to learn from charts. Automatically trade with bots if they follow algorithms you don't understand. You won't get a time chart and you won't learn. At best, you will be left with a series of transaction records that you will not even know about. This is like betting without knowing anything about betting rules.

5. Robot trading signals are not a strategy

To understand one of the risks of trading with trading robots, we must first define what a "strategy" is. A trading strategy is not just a set of trading rules, but a long-term plan to achieve an overall goal.

A "trading strategy" is a war, while a "trading signal" can be considered an individual struggle. It's good to win a fight, but you're aiming to win a war.

Trading bots are programmed to trade market signals (individual battles). In quant terms, this system is called "alpha" (a certain edge that exists in the markets). This edge can be a specific pattern or market anomaly that brings (high) returns over time.

But bots can't trade strategies (warfare) because they have no way of knowing what's important to you. Only humans can develop strategies. Only humans have goals that they want to achieve.

Introducing the free digital currency trader robot

Getting started with a cryptocurrency bot can be a bit confusing and overwhelming. So we have selected the best and easiest trading robots for you. Some of the best trading bots for crypto listed below are free and open source software.

 

• Pionex: One of the best free trading bots for cryptocurrencies
• KuCoin: Crypto Trading Bots for Beginners
• 3commas: Crypto trading bot and crypto signals
• Bitsgap
• HAL: Pre-built trading strategies
• Cryptohopper: Strategies and Markets Trading Robot
• Coinrule: You can build your own Coinbase trading bot
• Cornix: Automated Crypto Signals Bot based on Telegram
• Shrimpy: Social Trading Platform for Bitcoin
• Quadency
• Botcrypto: Simple Bitcoin Trading Bot
• TradeSanta: Automated Crypto Trading Software
• HaasOnline: The most advanced Algo trading software
• of
• Wunderbit: Automated Bitcoin Bot
• Superalgos: Free and Open Source Crypto Trading Robot
• finance: crypto trading platform without code

Introducing the coinx digital currency trader robot

The Coinx cryptocurrency trading robot is called Tafabot and it enables traders to plan and execute smarter trades for both bullish and bearish markets. This platform is packed with options that make you a profitable trader in spot trading, futures and arbitrage. Using the Tafabot interface and your API key from CoinEx, you can build various algorithms for automated cryptocurrency trading strategies, including Dca, Grid, Smart Invest, Martingale and arbitrate. You can also copy the method of other traders on CoinEx exchange.

Download Android digital currency trader robot

Trading Robot for Android is a mobile application for the Android mobile operating system. Most robots are built with Metatrader and using the MQL language. Simple bots may be available for free to use, but more complex bots are usually sold on the market and depend on the platform traders wish to use.

Some of the best free trading bots for Android are: 

• RoboForex
• Flex
• EA Pros
• BinBotPro

Should we use a digital currency robot?

Cryptocurrency trading using a robot is always more efficient. You don't have to worry about delays or human errors. As long as the bot receives the correct data and has the right algorithms, it can trade assets with a higher chance of profit. It should also be noted that these robots can work full time.

Trading bots are profitable as long as you can configure them correctly. Obviously, the best crypto trading bots will make a profit, but you need to test them or have some sort of guarantee before you buy. Then try to learn to work with them.

Is the robot trader scam real?

Many people ask themselves: "Is it possible to become rich with a trading robot?". While trading in cryptocurrency bots seems profitable, it cannot be taken for granted. Having a proper trading education, a properly funded trading account and an understanding of risk management techniques is essential.

Unfortunately, many people try to scam through trading bots. As schemes evolve, so do scammers and try to steal your money. But is there a solution to this problem?

Investment scams come in many forms. Some scams are even named after their creators (such as the Ponzi scheme named after Charles Ponzi). Scammers with fake software and platforms tend to target novice or uneducated traders. The best way to avoid becoming a victim of these scams is to get a good trading education before entering the market.

Scammers often pitch "too good investment opportunities" as a way to convince you to part with your money. When you have no trading experience, scammers try to take advantage of your optimism, fears, and lack of awareness. Learning the markets and how the robot trader works means you will no longer be an easy target.

Free Trader Robot FAQ

In the following, we will review some frequently asked questions about robot traders.

What is a robot trader?

A robot trader is a colloquial term for a software program that signals traders to buy or sell a currency pair at a given time based on price movements in the forex market.

Is the robot trader scam real?

Wherever there is profit, fraud will emerge sooner or later. In some types of trading systems developed by robot traders, there are also different methods of fraud. These scammers advertise their system's ability to create automated trades that will make you rich even while you sleep.

Introducing the free digital currency trader robot

Gecko, Pionex, Enigma Catalyst can be mentioned among the digital currency trading robots that are available for free.

last word

If you're still not sure if cryptocurrency trading is right for you, you might want to take some time to learn more about the market by monitoring how prices change. Tracking how some of the biggest cryptocurrencies move and practicing different strategies with a paper trading account can help you trade more effectively. Once you know the market better, you can probably do better with the trading robot. In general, a trading robot allows you to dip your toe into the turbulent flow of the market to learn how to do it better, rather than diving straight into it.

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