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Bitcoin Trading Bots: What Are They?

15 min read
Picking the Right Trading Bot

Bitcoins are like stocks that can be traded or invested in. But unlike stocks, Bitcoin and other cryptocurrency trading do not have a time limit or schedule. You can trade Bitcoin and other cryptocurrencies 24/7 without any opening and closing times on the market.

Since the crypto market operates all day and all night, you can expect volatile changes in Bitcoin prices. In an hour or two, you can either lose or gain. Day and night Bitcoin trading requires full-time monitoring of your screen so that you can buy the lowest price and sell it for a higher price. However, there are times when you need to stay away from your monitor, especially when you have a job. That’s where Bitcoin bots come into the picture.

What Are Bitcoin Trading Bots?

As your counterpart, Bitcoin trading bots are software programs that trade on your behalf. Depending on how they interpret the data on the market, these bots will either sell or buy Bitcoins.

Trading bots work through interpreting information obtained from their application programming interface (API), which monitors the movement of Bitcoin’s price on the market. Afterwhich, they react to the rules that are already programmed and defined according to your preferences.

Some trading bots are free, while other high-end bots are costly. The hardware and software of there bots require codes from the developer.

To maximize the tool, you must have cryptocurrency holdings stocks in their digital currency exchanges account. Although bots can help you trade your Bitcoins, you must not rely on it as a get-rich-quick instrument because of these reasons:

  • Bots should only be used to assist you. You should have a plan regarding your Bitcoin investment and a thorough understanding of the crypto market.
  • The crypto world is unregulated and so are bots; therefore, you should not rely too much on bots as they are not designed perfectly.
  • Even when they are operating correctly, these bots can only give you a marginal return.

Benefits of Using Bitcoin Trading Bots

There are trading bots known for wash trading, which distorts the market’s activity by placing orders simultaneously. These, in turn, are noneconomic and seems to be fake. As a result, traders who are not keen enough may be put in harm’s way.

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But not all bots are the same because a popular trading bot, for instance, can help you through the following:

  • Bots can reduce mistakes that are made out of rushed decisions. Since bots only act based on your instructions, they won’t rely on emotions as they have none. Whatever the market is doing, they can’t feel fear or over-excitement, so going overboard is avoided.
  • Uses a predetermined algorithm to plan an effective strategy.
  • Execute predetermined trades in a couple of seconds, especially when prices in the market are fast-moving.
  • Avoids costly errors brought about by conflicting and complicated interfaces.
  • Access multiple crypto platforms in one place, thus decreasing the tedious logins and trades.
  • Bots work even when you are asleep, but they are dependent on the strategy you use so you can either gain or lose money from it. Moreover, with the instructions you have given a bot, you’ll wake up with a trade that’s already executed.

Picking the Right Trading Bot

With the existence of many trading bots around, choosing the right ones may be hard. But with the following bots and their principles, you will know what to use:

  1. DCA Bot

The DCA bot works by buying bitcoins when prices are dropping and will, later on, sell the coins after prices are going up.

  1. Signal Bot

As it implies, it uses a paid signaller that lets the bot know when to buy and sell Bitcoins. The signals are based on news, rumors, volume, and technical indicators. 

  1. Arbitrage Bot

One of the known strategies in trading Bitcoins is to buy low and sell it high in another market. With a Bitcoin trading arbitrage bot, it will help you find the differentials from various exchanges so you can earn bigger profits.

  1. Market Making Bot

This bot allows the traders to set a buy and sell price, which means they can continuously trade. Thus, you can earn more profits from such spread. However, this bot is only effective in environments with high liquidity.

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When choosing a bitcoin trading bot, you must check these factors:

  • Reliability – Bots should not stop or go offline for a long time. To know if the trading bot is reliable, you must ask around and consider the reviews of previous users.
  • Security – Trading bots will have access to your funds, so hacking is a risk. Therefore, you must check the reputation of a bot, especially when it comes to its security.
  • Ease of Use – Choose bots with an easy interface unless you’re a techie, or choose the ones you can easily control with a few clicks.

But no matter how beneficial bots are. They still have downsides as follows:

  • Some free bots may be a scam. It will only be beneficial at first but some will gather your crypto funds as they can access your crypto wallet. Others may be free of charge, but they have minimal features that don’t help much.
  • Since bots depend on your instructions, you should also update yourself about the market’s changes. This way, you’ll give the bot you’re using the correct and updated instructions so that you will gain more. But if you rely on the bot and let your instructions be the same for a long time, you might lose money big time.
  • Most bots can only perform an arbitrage, which means lesser profits. Therefore, finding the right bot to maximize your profit can take time.

Also Read: Is Bitcoin Future a Good Place to Trade Cryptocurrency?


A trading bot is already an investment since you are paying for it. This is why choosing the best one is a must before using it. Understanding the risks and how a trading bot works can help secure your Bitcoin investments.

A trading bot can be profitable as long as you know how to optimize it. Moreover, if you accompany it with the right strategy, you’ll surely earn profits or even grow your Bitcoin.

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