How do trading bots perform digital currency transactions automatically?

Cryptocurrency trading robots are automatic and automated programs that have made cryptocurrency trading very easy by simplifying the investment process. One of the advantages of robot trading is providing better performance and fewer errors. These softwares are also free of human emotions and feelings due to the extreme price fluctuations in the market, which causes sudden actions. , stocks and goods were used. With the emergence of the digital currency market and the expansion of this market, trading tools available in traditional markets entered this new market. One of these tools is Trading Bot. With the help of this trading assistant, traders can easily find out about buying and selling opportunities at any moment and earn a lot of profit by buying them. Of course, having a trading robot does not mean profitability. To have a successful trading robot, many factors and elements must be observed. To introduce this trading tool, we must first know how the trading robot obtains the data and price information of digital currencies? So, in the first step, we will introduce API.

BingMag.com How do trading bots perform digital currency transactions automatically?

Cryptocurrency trading robots are automatic and automated programs that have made cryptocurrency trading very easy by simplifying the investment process. One of the advantages of robot trading is providing better performance and fewer errors. These softwares are also free of human emotions and feelings due to the extreme price fluctuations in the market, which causes sudden actions. , stocks and goods were used. With the emergence of the digital currency market and the expansion of this market, trading tools available in traditional markets entered this new market. One of these tools is Trading Bot. With the help of this trading assistant, traders can easily find out about buying and selling opportunities at any moment and earn a lot of profit by buying them. Of course, having a trading robot does not mean profitability. To have a successful trading robot, many factors and elements must be observed. To introduce this trading tool, we must first know how the trading robot obtains the data and price information of digital currencies? So, in the first step, we will introduce API.

What is API?

Actually, API for a software is an interface for receiving and sending information. For example, a robot trader registers a bitcoin purchase order in the exchange through the API, and when bitcoin reaches a certain price, it registers a sell order. In short, the API will be the interface between the trading robot and your exchange.

How does the trading robot work?

BingMag.com How do trading bots perform digital currency transactions automatically?

Almost all cryptocurrency exchanges allow their users to use API. Thanks to that, you are able to receive the information you need (price, volume of transactions, etc.) from the exchange and, in return, buy and sell through your trading account and by the robot trader.

Robot The trader works according to the algorithms that its manufacturer puts in the software configuration. These robots are far from human emotions and proceed strictly based on technical analysis, unlike traders who sometimes trade emotionally. Robots succeed or lose in the digital currency market according to the understanding and vision of their creators. If the indicators are not set correctly for the bot, the bot will not stop the error process. Therefore, the accuracy of determining the index in these software is very important.

In addition to the ability to buy and sell, some robots can predict prices and market trends (which is called fundamental analysis). Developers write code for these robots so that they have the ability to analyze the market and predict the price. They provide this possibility to the software by adding an indicator algorithm. In this situation, the robot buys and sells like a human according to the daily news and market fluctuations.

Some versions of these softwares also support the ability to copy the trading style of professional traders (copy trading) and act like them. So that the amount of profit is high and the amount of loss is low in transactions. The robot trader automatically sells the designated cryptocurrencies when the target profit is reached and when the stop loss point is reached.

Types of digital currency trader robot

Automated software Crypto trading is highly customizable and you can determine their algorithm depending on your long-term or short-term investment plans. In this section, we introduce some types of popular trading bots:

Arbitrage Bot: One of the most popular types of these systems are arbitrage bots that measure currency prices in Different exchanges compare each other and make a transaction to make a profit from the price difference. Due to the high volatility of the crypto market, arbitrage robots automatically execute a buy or sell order when a profitable opportunity arrives. However, this type of profitability is partial.

Grid Bot: Grid type software provides investors with the possibility of buying at the floor and selling at the ceiling.

Trend Trading Bots: In trend trading, before executing the buy or sell order of a specific asset, its momentum is considered. Therefore, if the trend indicates an increase in price, the robot will activate a "Long" position (in this trading position, you will gain profit as prices rise in the long term). On the other hand, if the price falls, the "Short" position is activated (in this trading position, you will make a profit when prices fall).

Coin Lending Bot : These types of programs allow you to lend cryptocurrency to margin traders and get it back with profit, automating this process. So you also spend less time to calculate the interest rate You do.

Differences between digital currency robot and human

BingMag.com How do trading bots perform digital currency transactions automatically?

Speed: Robots, like the human brain, do not have a limited capacity to process information and can process a large amount of data in a short time.

Emotion: Digital currency robot involved in excitement, fear Or it is not greedy. This is despite the fact that most of the time people trade based on emotion. But robots perform transactions according to specified algorithms and artificial intelligence.

Processing capacity: A robot can easily process several gigabytes of information in a fraction of a second. But no human's brain will be able to process this amount of information in a short time.

Trading time: The crypto market does not shut down and is active around the clock. Dealing 24 hours a day is far from logic and reason for humans. But the digital currency robot can easily buy and sell all day and night without interruption.

Can using a trader robot be profitable?

Success in using a trader robot depends on several factors. It depends a lot, precision in software programming (bot, API, etc.) is very important. If there is a flaw in your programming, it will have disastrous results. The robot trades based on the strategy defined for it. So the success of a robot directly depends on the correctness of your trading strategy. A trading robot is successful if a successful trader has planned a correct strategy for it.

Market factors are also a very important point, if rapid movements of price growth and decline are observed in the market or the market has little depth. Even if you follow the right strategy, the possibility of losses increases.

How safe are trading robots?

BingMag.com How do trading bots perform digital currency transactions automatically?

Digital currency trader robots are only tools for automating transactions and are not suitable for everyone. So do a thorough research before using these programs. On the other hand, bots are prone to fraud. Errors in programming can also affect the performance of these software. Remember that bots are executed based on the conditions and orders set by you. Therefore, you must have a good understanding of how the digital currency market works and choose the right investment strategy.

Is it legal to use trading robots?

Using a legal trading robot and many exchanges welcome these robots. Because the most important job of robots is to prevent loss of capital when the market is bearish, and loss of capital is one of the most important reasons for traders to leave the market and, as a result, exchanges, and the trader robot prevents this exit.

Low depth of the market for nothing Trading is not convenient, that's why it is an advantage to make many trades in such markets. One of the features of the robot trader is to make many transactions per day. In the case of the digital currency market, these transactions generally take place in the Bitcoin market. The strong dependence of altcoins on the fluctuations of the price of Bitcoin has caused most of the robots to be active in the Bitcoin market.

Risks of using trader robots

One of the main challenges for many traders is that robots They can manipulate the market. Because if most traders use robots, a new threat may arise, because robots can make a market appear unrealistically inactive by stimulating trading activities, which can somehow be considered money laundering. On the other hand, it is possible for institutions to use the leverage of automation trading and thus achieve unreasonable profits.

Summary

Different trading robots There are many in the market that can be connected to digital currency exchanges such as Binance, Hubei, Coinbase, Kraken and more. The trader robot is used to automate transactions and prevent the interference of influential human emotions and feelings. Remember that a successful trading robot is the result of years of effort and experience of a successful trader.

There are many trading robots in the digital currency market. Be very careful in choosing these robots because experience has shown that most trading robots bring nothing but losses to their owners in the long run.

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Source:makeuseof / blog.liquid / investopedia

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