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Crypto trading bots are automated computer programs that enable buying and selling of cryptocurrencies at the right time. The main aim of these bots is to help users generate as much profit as possible through crypto trading. Crypto trading bots keep a constant eye on the market and take decisions accordingly. You can customize these bots according to your preferences, and you can choose the parameters on which they are supposed to analyze the market, like orders, volume, time, and price.

If you want to learn more about crypto trading bots, we are going to help you with that. Right from the features of crypto trading bots to the popular strategies for programming them, we have discussed all the bits and pieces you need to know about crypto bots. Also, we'll provide you with a list of the best crypto trading bots that can offer you a great crypto trading experience.

Background of Crypto Trading Bots

The concept of an automated trading system was first put forward by Richard Donchian in 1949 when he introduced a set of rules for buying and selling funds. After this, many well-known traders started adopting this approach of "rule-based trading," which made trading bots gain popularity in the market in one form or another. A point to note about trading bots is that an average investor cannot use them because of their immensely high prices; the Bloomberg terminal can cost more than $10,000.

You should use trading bots for mainly two reasons. First, you can use them to make the entire trading process a lot simpler and easier for you as they take the responsibility of handling things like index construction, portfolio diversification, portfolio rebalancing, and more.

The second reason to use trading bots is that your bot will constantly try to make profits for you, which is also the key reason why people get involved in trading. However, it is important to consider that you will be required to do a lot of research to fully utilize this aspect of trading bots.

Since the inception of cryptocurrency trading, the trading world has changed a lot as the crypto market is open 24 hours and is subjected to high volatility. Due to these reasons, trading bots are required by investors now more than ever. Many investors get involved in trading cryptos without wanting to invest a lot of their time or effort into it, and thus, for them, getting the help of crypto trading bots is the ideal option. Crypto trading bots save your time and effort and enable efficient crypto trading, which means that they are more likely to reap benefits for you.

Features of Crypto Trading Bots That You Must Know About

There are numerous crypto trading bots available in the market, and they differ from each other in terms of certain features. However, there are some common features across all the crypto trading bots that you need to check out before you actually start using one. Have a look below

Backtesting Ability

Before you initiate any trades with the trading bots, you must utilize the backtest feature with respect to historical market data and make sure that your backtesting is as practical as possible. You have to carefully consider factors such as trading fees, latency, and slippage. Investors can also have access to high-quality market data by using exchange APIs, and libraries like CCXT. When it comes to using a crypto trading bots backtesting ability plays a crucial role. Thus, check out the feature before you actually start investing.

Strategy Implementation

Once you have got the right strategy through backtesting the next big thing is to implement that. Most of the trading bots allow the users to implement individual strategy while trading.

For most of the trading bots during this stage, the investor needs to state the logic and calculations so that the bot can properly decide when and what to trade, and do not forget to backtest it after creating the strategy to ensure that it is the right strategy for you.

On-point Execution

After creating the whole strategy now it is time to execute it in real-time. What happens in this stage is that the logic and calculation that you specified to the bot in the previous stage will be converted into API requests so that they could be comprehended by the exchange. There are certain trading bots that allow you to simulate the strategy in real-time but use fake money so that you do not face a big loss. Hence, while choosing the crypto bots look for one that may suit your need.

State-of-the-art Job Scheduler

After you have created the strategies and executed them in real-time, you can finally start the whole process's automation. That is why the job scheduling feature is also an essential feature that your crypto trading bot should offer. By setting up a job scheduler your trading bot can execute the trading strategies automatically.

The Perfect Time to Use Crypto Trading Bots

A crypto trading bot can perform a multitude of functions such as data collection, rebalancing, smart order routing, and portfolio management for you and enable effective crypto trading. It is essential that investors follow the basic rules of automation for choosing and coding the crypto trading bots. These rules are as follows:

Investors need to do efforts on their end as well, such as doing research on the feasibility of investing in a particular cryptocurrency. Automation does not mean that investors can earn from crypto trading by just sitting and doing nothing.

Usually, only those tasks can be automated that take up a lot of your time, and are mostly repetitive.

Benefits of Crypto trading bots

We have outlined some of the benefits that you get when using crypto trading bots for trading cryptocurrencies. Now, let's take a look at all of the key benefits of crypto trading bots in detail:

When getting involved in crypto trading, there are plenty of repetitive admin tasks that demand both your time and effort. However, with the help of trading bots, you can stop worrying about such tasks as the bots can possibly do them for you efficiently. While bots can automate numerous tasks, one specific task for which you should definitely rely on the trading bots is periodic rebalances. Periodic rebalances require you to rebalance your portfolio in regular intervals of time, which can obviously take up a lot of your time and effort.

Trading cryptocurrency requires timing and achieving a high degree of accuracy in your trading because every single trade is likely to affect your potential profits. For instance, let's say that the price of Bitcoin is dropping, and you are planning to sell your position exactly when Bitcoin hits the $8,750 mark. If you were doing this manually, you will need to continuously observe the price chart for a good amount of time before making your move. This is where a trading bot can ease your troubles as it can track and observe the market and pull the trigger exactly at the moment you want.

Generally, the regime of an individual does not allow for spending their entire day watching the crypto price charts on their computer screens. Suppose you want to have a diversified crypto portfolio. In that case, it will require a lot of research and effort from your side, and not to mention the number of repetitive tasks that are bound to make you feel tiresome. A trading bot ought to help you with all of these tasks, making your trading experience much better.

As you already know, the cryptocurrency market is constantly awake, and there are thousands of exchanges worldwide that provide their services 24*7. This is said to be one of the coolest aspects of the cryptocurrency market, and in reality, it is a troublesome thing because investors are required to keep track of the market all day and night if they want to reap good profits from their investments. This is obviously not possible for most investors, and that is why they need a crypto trading bot to do certain tasks. Crypto trading bots can automate your trading strategies while you are busy doing something else.

Best Strategies to Program in the Bots

You may be wondering about what are the best strategies that you can program in a crypto trading bot to ensure effective crypto trading. Well, here are some of the best strategies that you can employ in your bots:

1. Mean Reversion

This strategy is based on a theory that if the price of a coin changes from its average, then it will be soon reverting back to it, and this theory holds true for both traditional and cryptocurrency markets. The overall market psychology supports this theory because, let's say, we have a cryptocurrency called 'X' with an average price of $1.

If the price of X on the cryptocurrency market increases up to $1.25, the investors will sell off the asset as soon as possible, resulting in the price of X going down again to $1. On a similar note, if the price of X decreases to $0.75, the investors will buy as many assets as possible, resulting in the price of X going back to $1.

2. Momentum Trading

There are certain investors who assess the fluctuations in the crypto market by its momentum, and such investors are called momentum investors. These investors ride a positive momentum wave with their assets, and once the momentum of the market is reversed, they sell off their assets as quickly as possible. This strategy's reasoning is that the prices of an asset will inflate above its average and then suddenly lose its momentum and dropdown. It is important to note that this strategy requires acting on the exact right timing of the buy-in and sell-off.

3. Arbitrage

Different exchanges can have different prices of assets, and this occurs because the price is fragmented across marketplaces. With the use of the Arbitrage strategy, you will be able to earn good profits if you buy and sell assets on different exchanges at the same time. For instance, you can buy and sell an asset X almost at the same time on two different exchanges, and in this way, you can earn profits by exploiting the price differences of the assets.

4. Naive Bayes

The Naive Bayes algorithm tells the probability of an event occurring with machine learning, and by entering relevant data in your trading bot, you can help it identify the right time to enter and exit the market.

5. Natural Language Processing (NLP)

As it has been mentioned a couple of times, the crypto market is highly volatile, which means the price of an asset can change drastically in a short amount of time according to fundamental news like tweets, articles, and other such content. With the help of Natural Language Processing, you can program your bots so that they can interpret words and phrases in tweets and articles and analyze them to determine if they are going to affect the crypto market in any manner.

Types of Crypto Trading Bots

There are five major types of crypto trading bots, and they are mentioned below:

1. Arbitrage Bots

Arbitrage bots are the trading bots that have been hardcoded with the arbitrage strategy. An example of arbitrage bots is Blackbird.

2. Market-Making Bots

These crypto trading bots place numerous buy and sell orders in order to obtain a quick profit; for instance, if X is trading for $1, your bot will put a buy order for $0.99 and a sell order for $1.01 and so if both of these orders get filled, you will obtain a profit of $0.02. One example of market-making bots is HaasBot which was developed in 2015 in Rotterdam.

3. Algorithmic Trading Bots

Algorithmic trading bots are programs that are driven by code and are capable of generating and executing buy and sell signals in the cryptocurrency market, and Trailty is one such bot. The major components of such bots are rules that give a signal about when you should buy or sell crypto and rules that indicate when you should close the position. Also, there are rules that determine portfolio allocation and order size.

4. Portfolio Automation Bots

Portfolio automation bots are designed to build, obtain, and maintain the investors' portfolio in the way they want, and these bots do not engage in active trading. Investors mainly use these bots for automating repetitive tasks and an example of such a bot is HoldBot.

5. Technical Trading Bots

One of the most popular crypto trading bots is the technical trading bots, as they are ideal for a traditional trader. They forecast the price fluctuations with the help of indicators and signals so that you can earn good profits. A popular example of such trading bots is 3Commas, which is widely used by investors worldwide.

Best Crypto Trading Bots

We have provided you with all the information regarding crypto trading bots and now you must have gained enough knowledge to start using a crypto trading bot. We have curated a list of the top 10 crypto trading bots that will work wonders for you when it comes to making profits off crypto trading:

Pionex is an exchange that has twelve trading bots on its platform, which allows its users to automate their trading continuously without having to monitor the market frequently. The platform is mainly used for trading bitcoins.
Features
Price: Free

Exchanges: Huobi global, Pionex, Binance

Bitsgap has an automated trading bot that works amazingly to maximize the returns of its traders. The algorithm of Bitsgap is based on a technique known as GRID that distributes investment proportionally within a trading range specified by the user.
Features
Price: 14-day free trial and after 14 days, $19 per month

Exchanges: Binance, Bithumb, Bipox, Kucoin, CEX.io, Poloniex, CoinBene, Coinex, Gate.io, Gemini, Liquid, Bitstamp, OKEx, HitBTC, Bitfinex, Huobi, Bittrex, Exmo, BigOne, Bibox, DDEX, Yobit, Livecoin

Quadency comes with a very intuitive interface and allows its users to trade on top-tier exchanges such as Binance and Coinbase Pro. The sophisticated trading bots available on Quadency offer proven strategies to crypto traders. The best part is that you can customize the pre-built strategies as per your requirements and go live within minutes.
Features:

Easily customizable bots

A wide array of automated tools, including advanced TradingView (social network) charting, are provided on the platform

Supports automated trading on the application

Availability of good customer support

Price: Free

Exchanges: Gemini, OKEx Liquid, Bittrex, Bitfinex, Binance, Coinbase, Kraken, Poloniex, KuCoin.

Cryptohopper is a world-class automated crypto trading bot that is known worldwide for its market-making bot. The market-making bot of Cryptohopper is quite similar to the Grid Bot of Pionex, but it puts much more emphasis on making profits.
Features:
Price: Free

Exchanges: Binance.us, Bittrex, HitBC, Bitvavo, Kraken, OKEx, Coinbase Pro, Huobi, Bitfinex, Poloniex, KuCoin

Mudrex is another popular trading bot that comes with an intelligent algo trading system to ensure maximum ROI for you. If you are a trader who likes to build strategies on your own and test them, Mudrex is the best option for you. The platform comes with one of the world's best trading strategy builders along with a fast back-testing engine through which you can create, test, and deploy your trading strategies.

Mudrex has one of the most user-friendly and intuitive interfaces. With over 7000 users and over 400 mn USD traded, Mudrex boasts of a very active and interactive community of investors.
Features:

Strategies can be tested through back-testing tools

Intelligent trading system for maximum return of investment (ROI)

Consists of a curated marketplace of bots created by expert investors

Price: Free

Exchanges: OKEx, BitMEX, Coinbase Pro, Deribit, Binance, By bit

Coinrule offers custom automated trading opportunities through effective market indicators. The platform comes with crypto bots that let you choose from 150+ rules and also allows you to create new rules. Coinrule is dedicatedly made for beginner crypto investors. With Coinrule, you can trade through several leading crypto exchanges such as Coinbase Pro, Binance, Kraken, etc.
Features:

Intuitive user interface

Real-time customer support

Strategy performance can be tested using historical data

Allows customization of trading rules from 150+ options

Comes with a market indicator helping you with the allocation of funds

Encryption employed is of military-grade security standards

Price: Free

Exchanges: Liquid, Binance.us, Binance, Bitpanda Pro, Coinbase Pro, Kraken, Bittrex, Bitfinex, Poloniex, Bitstamp, HitBTC

3Commas offers GRID Bot and Dollar Cost Averaging Trading Bots (DCA) to ensure minimum loss and maximum return of investment for its users. The user interface of the platform is suitable for advanced traders.
Features:
Price: Two subscription levels - Basic and Pro. While Basic costs $25 per month, the Pro plan is available for $84 per month

Exchanges: Binance, Bitfinex, Bittrex, By bit, HitBTC, Poloniex, OKEx, Exam, Gate.io, Binance.us, Binance DEX, Bilance Futures, Cex.io, BitMEX, YoBit, Bitstamp, Huobi Global, Coinbase Pro, Kraken, KuCoin.

HaasOnline is a unique and advanced crypto trading bot platform with its own scripting language called HaasScript. Along with this, it offers all basic strategies like market-making, arbitrage, and more.
Features:

Backtesting with Discord (VoIP) and Telegram application can be integrated

The dashboard can be customized by the trader

A tutorial is available for new users

Comes with programmable script bots

Price: Discounted 14-day trial available and after 14 days, 0.017 bitcoins for three months

Exchanges: Bitstamp, CCEx, Bittrex, Deribit, Gemini, Huobi, Binance, BitMEX, Kraken, CEX.io, ionomy, HitBTC, Bitfinex, Coinbase Pro

Shrimpy is a trading bot service used majorly for rebalancing, and this sets it apart from all other trading bot services. It is a great trading bot but it is meant specifically for portfolio management, rebalancing, indexing, and strategic backtesting.
Features:

Enables simplified portfolio management

Live market place can be viewed and observed

A dashboard is offered that displays stats regarding each asset along with the performance metrics of a portfolio

Includes a securely encrypted API key that is stored through FIPS (Federal Information Processing Standards)

Price: Free

Exchanges: Kraken, Bittrex, Coinbase, Binance, KuCoin, OKEx Liquid, Poloniex, Gemini, Bitfinex

NapBots comes with easy-to-use features for traders who are new to the crypto market. NapBots offers 15+ trading bots that scan the market in real-time and automates the trading process for you. With NapBots you can participate in crypto trading within minutes by simply following a three-step process. All you need to do is to select an exchange, choose a bot whose strategy you want to copy, and activate it.
Features:

15+ trading bots are provided to the investors

Savings can be easily managed on this cloud-based platform

High security provided with the help of API key

Enables diversification between multiple strategies

Price: $8.51

Exchanges: Bitmex, Binance, OKEx, Bitstamp, Bitpanda, Kraken

How to Choose the Best Crypto Trading Bot for Yourself?

To choose a crypto trading bot that is most suitable for you, you need to ask yourself some questions:

Before going for a trading bot, you need to check first how credible and qualified is the team behind the bot and here is how you can do that:

Check the experiences level and qualifications of the team members

Analyze the user reviews for the team, and check if they have ever successfully managed a respectable portfolio

Look for the documented functionality of the bot

Search for organizations that are financially backing the bot

Is the bot capable of implementing the strategies that you want to use?

You must have observed that different bots have the capability of implementing different strategies. Therefore, it is important for you to think about the strategies that you want to use for trading on the cryptocurrency market, and then you have to find the bot that aligns with your strategy requirements. Also, you need to be aware of the automation capabilities of the bot so that you can assess whether it can work for you or not.

How good is the customer support of the trading bot?

This may seem a trivial thing and many people do not even consider it before choosing a bot. However, this factor affects your experience with the trading bot in the long run. You need to make sure that the customer support team of the trading bot is easily reachable and addresses your queries quickly. Look for the following things:

Is there an active community of the company on Reddit, Telegram, or Discord?

Is the team behind the bot actively involved in these communities?

Does the team provide regular updates and solutions to eliminate persisting issues?

The crypto trading bots greatly vary in terms of pricing. The pricing can range from $0 to $1000 per month. So, you should keep in mind the bots' pricing plans before you pick one. You should consider your budget quite seriously. Also, remember that nine times out of ten, a paid bot will provide you with better services than a free one.

As we know that the cryptocurrency market is highly unstable and so, your bot should be able to deal with the constantly fluctuating market. It should be able to implement your chosen strategy whatever may be the conditions of the market. Hence, the adaptability of the bot to the changing market conditions is a big factor to consider.

For the traders who have just started out with crypto trading, it is very much essential to choose a bot that is able to perform most of the tasks by itself and is easily manageable. Trading is a complex activity, and as a beginner, it is important to make use of tools that make it easier for you rather than making it even more complicated. So, you should choose a trading bot according to your level of crypto trading expertise. Keep in mind that a trading bot with lesser features but an easy-to-use interface is a better option for someone who is not so well-acquainted with the technical aspects of trading.

Conclusion

This detailed guide must have helped you in understanding crypto trading bots. Now that you know the various types of crypto trading bots and their usage, you can choose one for yourself among the bots mentioned above. If you are a beginner, a crypto trading bot can prove to be extremely helpful for you in maximizing your profits and reducing the risks. In addition to this, a bot is capable of reducing your workload by automatically performing certain tasks that are complex and/or repetitive.

Frequently Asked Questions

Question: Do crypto trading bots actually work?

Answer: This depends on the bot that you have chosen. Each bot has varying levels of success rate, thus, you need to choose your bot carefully.

Question: Are crypto trading bots legal?

Answer: Yes! Crypto market does not have any specific restrictions for trading bots. In fact, no matter if one is a layman just starting his journey or a veteran who has been in the industry for a long time, everyone uses trading bots to complete their due diligence, analyse the market and to make investment decisions.

The trading bot works more like a driver for you. No matter what trading practices it follows you always remain responsible for its activities. Thus, use of a pump and dump bot or a spoof bot is a big no.

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Crypto Trading Bots - A Complete Beginner's Guide

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Crypto trading bots are automated computer programs that enable buying and selling of cryptocurrencies at the right time. The main aim of these bots is to help users generate as much profit as possible through crypto trading. Crypto trading bots keep a constant eye on the market and take decisions accordingly.