Advantages and disadvantages of trading cryptocurrency using robots

Our brief review will focus on trading on a crypto exchange using bots. We will look at the main advantages and disadvantages of using trading robots, and each of you will be able to decide for yourself whether it is worth using such programs to make a profit.

Trading robots are specialized programs that automatically make transactions for the purchase and sale of exchange assets, taking into account the parameters that are set by the trader in accordance with his trading strategy.   

On the one hand, the more parameters that can be set, the greater the flexibility in trading management. On the other hand, setting up many parameters for profitable trading is a non-trivial task that will require practical skills and trading experience.

In fact, trading with the help of robots has been carried out for a long time on the stock exchange. Bots have become widespread in Forex trading. Robots are now used for trading crypto assets. 

How to get a robot?

There are several ways to purchase a trading robot:

1. Take the free version of the program; 

2. Rent the program;

2. Buy an existing program;

3. Order a program with certain characteristics;

4. Write the program yourself.

The free version has a set of standard functions that issue signals to buy or sell an asset based solely on technical indicators. As a rule, there are a lot of false signals among the signals. You can trade using free bots only by analyzing each signal yourself. This deprives trading with a bot of its main advantage - automatic execution of profitable trades. 

You can rent a good paid program. You must pay for the services of such programs on a monthly basis. Among the software robots, you can choose very good options with guaranteed interest earnings. When using a rented program, you can seek the help of developers and solve technical issues related to setting up operating parameters. This is a good opportunity to use high-quality robots for full-fledged automated trading on a crypto exchange for a reasonable fee, which is spread over the form of rental fees. The disadvantage of this option may be a situation where the monthly fee for using the robot will be comparable to the monthly income that the bot brings.  

It is much more interesting to buy an existing program as your own.. This will require certain initial costs, which may well pay off in the future. A more expensive option involves writing a custom program. In this case, the customer must know what parameters the bot needs to analyze and based on what to form buy or sell orders. Trading with the help of expensive and high-quality programs can be very profitable!

Manufacturers of trading robots claim that their programs make it possible to generate algorithms for trading not only based on complex mathematical calculations, but also through the use of artificial intelligence. The program monitors the trader's actions and adapts to his trading style, and then makes trading decisions in accordance with his trading strategy. 

However, the developers of such robots can “provide” in the program the ability to “share” profits from transactions without the knowledge of the owner. Roughly speaking, programs with access to a trader’s account can quietly steal crypto assets. There are also those who are able to transfer all the trader’s funds to the wallets of scammers.

The best protection against such programs is to create a program yourself that meets all your requirements. There can be only one drawback - insufficient qualifications of the creator of the crypto-bot.  

The bot is connected to the exchange via the API program interface.

API (Application Programming Interface) is a software shell that allows you to connect the robot to exchange standardized information about the progress of trading on the exchange and provides the ability to make transactions to the software bot.

As a rule, trading robots are created specifically for the API of a specific exchange. If some exchange does not have its own API, then you can still connect the robot and the exchange, but the development of the program will include an API module and will cost much more.

Currently, trading robots are a fairly common product, which is offered not only by large IT companies, but also by individuals. Thus, at a reasonable price, you can choose not one, but several programs at once that satisfy the basic needs of traders. 

What advantages do robots provide when trading with their help?

- Information processing speed.. An analysis of the current market situation, taking into account the history of transactions and a forecast of price dynamics takes a matter of seconds, after which a decision is made on the feasibility of a particular transaction. In humans, this process takes a lot of time and requires constant attention. Robots can work without interruption 24/7.

- Comprehensive tracking of price movements across a large number of assets and across several trading platforms at once allows you to identify critical situations at an early stage and exit an open position with minimal losses. And it is almost impossible for a person to analyze such a large amount of information.

- The robot always adheres to a given strategy and is not affected by emotions. Sometimes novice traders, analyzing the situation on the market, panic and close potentially profitable trades or make other mistakes when trading, succumbing to the mood of the market.  

- The accuracy and correctness of the program's calculations is determined only by the user's specified parameters. Mathematical errors are excluded. Whereas a person can make mistakes in calculations or analyze price charts by eye. 

Despite the fact that trading programs have such advantages over ordinary traders, they are rarely used by experienced investors. Beginners are also in no hurry to resort to their help. 

What are the disadvantages of trading robots?

Let's start with the fact that robots are just programs written by people that contain developer errors. They can freeze, crash at the most inopportune moment of trading, and often require updates. 

Setting up a robot for profitable trading is a complex process of finding compromises between program parameters. Sometimes the selection of optimal parameters is made according to the subjective opinion of the trader. The result of a bot's trading will indirectly reflect the qualifications of the person who set up the program.

One of the main disadvantages of robots is the frequency of transactions. The speed of analysis allows you to quickly make a decision on opening a profitable transaction. In conditions of high volatility, a trend change often occurs. This entails closing unprofitable positions.. As a result, the exchange commission for opening/closing positions may exceed the income from transactions. Of course, in good robots this parameter must be adjusted, but the regularity of transactions is one of the important indicators that must be selected in practice for each strategy separately.

The most complex, customizable program is capable of generating profit, as a rule, only in typical situations that are amenable to technical analysis. Sometimes large players enter the market and manipulate the market. Standard robot trading in abnormal situations can bring large losses.

Currently, there are a lot of offers of programs for trading on the exchange online. But not all of them are reliable. There are robots capable of transferring the assets of the “owner” to the wallets of the creators of “fraudulent bots.”

Even the most advanced artificial intelligence program is not capable of analyzing fundamental news and assessing their impact on the crypto market. In this case, only an experienced trader is able to make decisions. 

Thus we can conclude that trading with a robot can make the work of an experienced trader easier by generating “hints” that a person might not pay attention to. The bot can take on part of the routine work of algorithmic calculations and analysis of a large amount of information. But a bot cannot completely replace a person in trading. 

To develop abilities, a novice trader must constantly acquire new knowledge and apply it in practice. A robot can help a beginner earn profit, but robots are not yet able to teach him how to trade correctly.