I have been recently searching for Crypto Trading Bots and came across a wonderful guide. Therefore, I thought, I must share it with you guys. Here is the link to it.
Here is some of the part of the article.
What is a Trading Bot?
In this article, we’re going to give you the lowdown on trading bots, specifically crypto trading bots. Simply put a trading bot is a computer program that trades for you based on a set of instructions. Simple enough right? Trading bots and algorithmic trading are very prevalent in the traditional stock market and perform around 70% of all trades conducted in the United States.
In the world of crypto, bots have been present since the days of Mt. Gox. They are getting more and more advanced as time goes on. Some exchanges are even advertising faster connection speeds for so-called “high frequency” traders (crypto bots), for whom fractions of a millisecond in speed advantage can be turned into millions of dollars. Eric Wall, who formerly worked as a specialist in cryptocurrency and blockchain at Cinnober, a financial technology company which was acquired by Nasdaq, was quoted saying that “[trading bots are] big business, everyone I’ve been speaking to that runs an exchange mentioned being approached by Wall Street types [with requests for fast lanes for trading bots].”
Crypto bots aren’t just for large institutional investors with millions of dollars, they can also be used by day traders and small scale investors to profit off the same strategies used by the big whales. In summary, crypto trading bots are used by different types of investors looking to gain an edge in the volatile crypto markets.
The Nitty Gritty on How Trading Bots Work
Most crypto trading bots can be broken down into three main parts:
- Signal Generator
- Risk Allocation
Let’s dive deep so we can get to understand these three components.
This is where the bot makes predictions and identifies potential trades or arbitrage opportunities. Data is fed into the signal generator it uses technical analysis, fundamental analysis, or other methods to churn out buy or sell recommendations. The signal generator is really about automating the method of analysis or opportunity vetting that a trader would normally do manually, so it can be done at scale.
Read the complete article here.