All these need a lot of involvement from an investor, which, invariably may result in some human errors.
This is where the automated crypto trading platforms may offer a lot of help.
These trading platforms usually use an automated trading system, commonly called bots.
This type of trading system is also referred to as:
- Mechanical trading systems
- System trading and
- Algorithmic trading.
When it is set up, it only needs a computer for an automatic execution.
This means that these automated trading systems will not only allow the crypto investors and traders to make precise entry and exit but will also help them in setting up better and more precise money management rules.
These automated trading systems will help them in executing and monitoring their trades via the computer.
This simply indicates that there will be no element of emotion in any trade and therefore there will be no errors since all trades will be placed only when the specific criteria is met, and that too automatically.
These criteria for entry and exit rules can be any straightforward conditions such as a Moving Average or MA crossover.
You can set complex trading strategies as well but that will need the proficiency of a qualified programmer if you do not have the desired skill and a comprehensive knowledge of the programming language which is specific to the trading platform.
Can Automated Crypto Trading Platforms Help in Making Millions?
The automated trading platforms or system will ensure you enter and exit a trade just at the right time which will enhance your profit-making chances and generate a lot of money from the crypto space to become a millionaire one day.
The trading rules for entry and exit must be written in the proprietary language of the platform.
Though the use of an automated trading system will ease things a lot, setting it up may need some solid understanding depending on how complex or simple trading rules you want to establish.
For this, you will need to know much more than the basics of these systems.
The most important aspect of using an automated crypto trading system is establishing the trading rules and therefore a clear understanding of it is required.
You may come across a few specific automated crypto trading platforms that will offer you specific wizards to build a strategy.
These platforms are easy to use because you can simply make your choice from the list that includes the most commonly used and available technical indicators to put up a set of rules that will be traded automatically.
In addition to that, you can also set the type of order you want to place such as market order or limit order for example.
You can also set the time when you want your trade to be triggered such as at the opening of the next bar or at the closing of the current one or simply choose to use the default inputs of the platform.
However, if you want to use custom indicators and build your own strategies like most traders do, you will need to develop the system and for that you will need the help of a qualified programmer, as said earlier.
Though this involves costs and some additional effort, the higher degree of flexibility and profit-making chances will balance the additional cost and efforts.
Once the trading rules are set up, leave everything to the computer and the automated trading system.
It will monitor the market closely to determine the most opportune moments to buy and sell based on the strategy that you have set up.
This means that when the system enters a trade, if there are any trailing stops, protective stop losses, and profit targets set, these will be generated automatically.
This type of strategy is extremely helpful in a fast-moving market because the instantaneous execution of order entry will make a significant difference between a small loss and a terrible loss if, in case, the trade moves against your favor.
All these complex setups will seem easy to you once you know the basics and the type of automated trading systems as well as the working process and specific strategies that you need to follow.
As for the basics, the first thing you will need to do is to choose a reliable platform that you want to trade on.
You can choose a system according to your needs. It can be simplistic or sophisticated.
However, going for the sophisticated ones is more feasible and rewarding because it will not just track the price of the crypto coin you want to trade with but will also track several other useful parameters to establish and execute a trade such as:
- The trading volume
- The buying and selling pressure and
- The historical price trends.
These variables are very useful to make a better trading decision just like a human.
If you want to stay on the loop, you can even send a system that will send notifications to you which will help you in case you want to override any of the decisions made by the trading system.
However, this means that you will need to stay involved with the process continually which negates the primary benefit of using an automated crypto trading platform.
There are actually two major categories that you can group these automated trading systems into.
These are decentralized platforms and APIs or Application Programming Interfaces.
The APIs are usually used more than the decentralized platforms typically because these can work seamlessly with the crypto exchange.
Therefore, you will not need to have a lot of technical expertise to execute an automatic trade, provided the API is compatible with the trading platform.
The decentralized platforms, on the other hand, rely heavily on the underlying blockchain technology to execute a trade outside of the usual platforms.
Trading on these decentralized platforms is usually based on blockchain technology which means that these are less vulnerable to hacks.
However, it will need you to put in some effort, time, and research to set up your trades precisely.
All automated trading systems usually undergo three main stages while executing a trade.
These three stages make the core of the entire mechanism. These are signal generation, risk determination, and, finally, execution, in that order.
A specific type of algorithm typically generates the signals to buy or sell using the data available and fed to the signal generator along with the previous trading data that it has access to.
It relies mainly on these two things to generate a signal. Therefore, it is best to avoid using those systems that work only by using the technical indicators.
Risk allocation is the process that happens after a signal is generated.
Assuming that a buy signal is generated, in this specific stage the amount to buy is determined.
Either all your capital or just a portion of it will be used to buy based on the particular signal.
At this stage, it is also determined whether or not to buy everything at once or at a steady rate based on the risk apportion of each trading decision.
Ideally, a lower amount will be invested if the trade involves high risks and alternatively a lower risk trade will have more commitment.
The final stage is execution of the trade. The market activity by the automated trading platform is crucial.
There are several different types of operations that can be performed and each different execution mode will produce different outcomes.
All these stages – signal, risk, and execution – need a unique set of algorithms as well as optimization processes.
If there is fudging or ignoring of any of these aspects, the desired profitability will not be achieved.
Finally, you should know about the trading strategies to follow in order to make the best use of the automated crypto trading platforms and make a lot of money from the crypto space.
Implementing a clearly defined and more proven trading strategy is very important in algorithmic trading because it is not done by the algorithms.
The algorithms in fact are responsible for expediting and automating the entire trading process with the use of several complex mathematical formulas.
Ideally, you will have a better chance to make more profits in automated trading if you have good experience and skills.
Add to that you will also have to follow some of the most common and proven strategies.
Trend following strategy is one of the simplest strategies to follow in automated crypto trading.
In this process, the automated trading system responds to the changes in the prices in the market directly.
In this specific strategy there is no need to use any complex algorithms, or to do any predictive analysis or use any complicated AI.
Arbitrage is another good strategy to follow in automated crypto trading that can help you gain huge profits.
In this process you can exploit the differences in the prices of a crypto asset across all exchanges in the global market.
The automated trading system will help you to trigger a trade when a particular price differential meets up. However, this is not a sure win method.
Finally, market making is another good strategy to follow which will allow you to make profits from the spread when you buy or sell in large volumes.
If you deal with foreign currency, this trading method that relies heavily on the trading bots will help you to handle large volumes very easily.
Now that you know about the automated trading system and how they work, it is time to get started.
However, before you press the start button, here are a few things that you ought to know. Such knowledge will make your task even simpler.
First, you should know whether or not you really need to use such an automated crypto trading system.
It will surely make things simple and will definitely allow you to make more money but it will take a much longer time than you may have expected.
In fact, you may be able to make money quicker if you trade manually.
Also, be very clear about your goals and objectives so that you can design your trading strategies accordingly.
Along with that, make sure that you do not start with the more complicated trading strategies while using the automated trading systems.
Start with the simpler ones initially and then gradually move on to the more complicated ones as and when you gain some experience.
Talking about trading strategies, there is no one-size-fits-all approach.
Do not follow what others do but figure out the best strategy according to your needs, style, and personal situation with respect to your end goals.
This will ensure that you know what you are getting into and what you really need to do in order to be successful.
Then, you should have the necessary skills and expertise to use these trading systems because they are outright complex.
If you are not right in your approach, you may lose out on large sums of money.
Therefore, you should know the ins and outs of the automated trading system before you choose one.
When it comes to choosing an automated crypto trading platform, you should avoid scams.
Anything that makes tall promises that seems to be too good to be true should be avoided because they really are.
The best ways to avoid scams and choose a reliable system are:
- Looking for promises of exceptionally high profits at too low a price
- Scrutinizing thoroughly any payments that you are asked to make
- Asking a lot of questions
- Doing your own research and due diligence
- Knowing everything about the trading system
- Reading the terms and conditions carefully before making any commitments
- Checking for any testimonials and reading them
- Checking the reviews in the third-party review sites and even in the financial regulatory websites and
- Looking for trial periods and using them.
You may even use automated trading systems that are typically run through a trading platform based on the server.
These server-based trading systems will offer you commercial strategies for selling, designing your own systems and even hosting existing systems on the platform.
These special automated trading systems also allow scanning, monitoring, and executing trades with all of those orders available on the server but for a fee.
This will however result in much faster and potentially much more reliable order entries.
Fortunately, you will come across several of these automated crypto trading systems on the web but all of them are not created equal and therefore may not be right for you.
Therefore, before finalizing on an automated crypto trading system, you should check the features of it as well and then sign up.
It is very important to have a reliable team as support to prevent the hackers from taking advantage of the existing vulnerabilities.
When you assess a team, look out for these specific attributes in them because all of these indicate reliability and trustworthiness:
- Educational as well as professional background of the heads
- The track record and the number of years of attachment with the specific system
- Reputation of the members of the advisory board
- Location of the company and its funding sources
- The procedural skill of the founders and
- Whether or not the code is open source so that it can be optimized by the community.
A reliable team will be transparent with their information. Anything dicey should raise the red flag.
Then, check whether or not the trading system implements different types of strategies, especially the one that you want to automate.
It is no use selecting an automated trading platform that only supports strategies that use Moving Average crossovers while you are looking to rebalance your portfolio.
Also, check the configuration options, level of involvement that is needed from your end and the time taken to achieve the goal.
Once again, there is no point selecting a system that needs a lot of your involvement and takes a lot of time to deliver results.
You may very well go for manual trading in that case.
Check the level of customer service and support provided by the team behind the system.
There may be some occasions when you need to deal with a bug in the system.
In such situations, the development team should be easy to reach and accessible for the necessary assistance.
This is important because if the bug is left there for days and weeks, it will increase the amount of losses accumulated.
In order to check their customer service, consider factors such as:
- Presence of an active Discord or Telegram channel
- Availability of an active and knowledgeable community that can answer your questions
- Promptness in answering to calls and resolving any issues and
- Availability of frequent updates.
In addition to that, you should also make sure that the monthly costs or subscription to use the trading system is pretty low and fits in your budget, it is easy to use in spite of having a variety of options, levers, settings, and configurations, and allows backtesting to evaluate a trading strategy before implementing it.
Finally, it is time to get started. Set up your account with the automated trading platform, make a few small test investments, and check whether the whole thing is running smoothly.
The list of advantages of using an automatic trading platform is pretty long but one of the most significant ones among them is that there will be no delay in the process.
This is significant because your trades will be able to keep up with the fast pace of the crypto space and will be able to respond to the changing market conditions promptly, which is essential.
The trading system will execute your trades in real-time based on the incidents in the market.
In addition to that, another advantage of using this system is that there will be no emotional involvement in making any trading decisions all through the trading process.
This means that it will be much easier for you to stick to your plan.
There will be no chance of any hesitation or questioning a trade since everything will happen automatically and only when the set conditions are met.
This will, in turn, minimize, if not eliminate, the chances of overtrading.
The order entry speed will be improved in accordance with the changing market conditions immediately which can make a huge difference in the results of the trade.
You will be able to backtest your strategies before you implement them in the real world.
Only the successful, viable and potential trading rules will be applied, based on the historical market data.
The precise set of rules will be absolute and will leave no chance for interpretation since the computer will be told what it needs to do exactly.
With your trading ideas fine-tuned, you will be able to evaluate the average amount you can win or lose depending on the expectancy of the system.
The trader’s discipline will also be preserved by the automated trading systems at the same time which is essential to make big in this volatile market.
You will follow the right approach to trade successfully and will not act based on fear or greed.
The automated trading systems will help in maintaining your trading discipline and follow your exact plan with no ‘pilot error’ or typos.
Another significant advantage of using an automated trading platform is that it will allow you to achieve consistency in trading.
Ideally, one of the major issues in crypto trading is to trade a plan and plan the trade.
If a trading plan truly has the potential to offer profits, you will not be able to ignore the rules and, in turn, alter the expectancy the trading system may have had.
This means that you will not be able to skip a subsequent trade that may have produced profits even after you have made a couple of losing trades.
You will also be able to diversify your trades when you use the automated trading systems.
You will be allowed to use multiple accounts while trading as well as different trading strategies.
This will minimize the risk when you want to create a hedge against the losing positions since trades will be executed more efficiently in milliseconds.
Within such a short time the system will be able to scan every available trading opportunity across all the markets, monitor different trades and generate orders.
When you use the automated trading platforms it will save you a lot of time as it will do all the hard work for you.
It will work all around the clock and will not get bored doing the same task over and over again as a human would.
However, just as every coin has two faces, using an automated trading system also has a few downsides.
There are chances of technical failures in the system.
This means that sometimes the system may perform poorly.
The entire process depends on setting up the software, programming the rules, and watching the trades.
The system is sophisticated but not infallible because trade orders reside in the computer which can experience technical glitches, system crashes, power losses, or the internet connection may be lost.
In such situations the trade orders will not be sent to the market.
There is also a high chance of discrepancy between the real trade and theoretical trades that are generated by the trading strategy due to the inefficiency of the component of the order entry platform.
Therefore, you will need to learn about such discrepancies and start by making smaller trade sizes so that the trading system can refine the process.
You will also need to devote some time and put in some effort to monitor the functionality of the system.
Once again, it is the chances of the system failing will call for constant monitoring of the system to ensure proper functionality.
Also, you will need to monitor the process to ensure that there are no anomalies in the orders, missing orders, errant orders, or duplicate orders.
Constant monitoring will ensure that such issues are identified as quickly as it happens and resolved fast.
There is also a chance of over optimization because a trade that may look great while backtesting may perform miserably when it is used in a live market.
In such a situation, too much curve fitting may produce a trading plan that may be unreliable in the real world.
This happens primarily because the traders often assume incorrectly and expect their trading plan never to experience any drawdown and offer 100% profitable trades or close to it.
As a result, the parameters are adjusted by them to design a near-perfect plan.
Such a trading plan usually fails miserably as soon as it is implemented in the real market.
You will also need to understand how exactly the automated trading platform works because these systems often rely on several market indicators to carry out a trade.
When it comes to storing the crypto assets and ensuring it is safe, it should be done in wallets rather than on an exchange.
However, if you do not use a trading system that is not based on the blockchain technology it is highly likely that your coins will be stored on an exchange which raises the risks of being hacked.
Therefore, you should research well to find such a trading system.
There is also another significant risk of using these automated trading systems which is related to the ways these systems communicate with the exchanges that use Application Programming Interfaces.
These APIs are usually software intermediaries which help the apps to communicate with each other.
This is where the problem lies. The centralized nature of the automated trading systems and most of the exchanges make these APIs pretty vulnerable to hacks.
Therefore, you will need to take proper steps to hide your API key and not automate withdrawals and, most importantly, check the security record of the automated trading system before using it.
Now with all the things known to you, you can clearly understand that the automated crypto trading platforms can surely help you to make millions but with a little caution and strategic approach.
The automated trading systems are quite tempting to use for a variety of reasons as mentioned above in this article.
However, it should not be the substitute but just as assistance for trading crypto carefully because technical failures may happen.