What are cryptocurrency trading bots

What Is A Crypto Trading Bot?

The cryptocurrency market is active round the clock and frequently showcases extreme volatility. With prices changing drastically in the span of minutes, manual trading becomes laborious, and the chances of missing out on profitable trades increase manifold. To overcome the shortcomings of manual crypto trading, many investors utilise crypto trading bots. Crypto trading bots or algorithms are a set of computer programs that automate cryptocurrency trading on the user’s behalf.

For example, a crypto trading bot can buy or sell a cryptocurrency token as soon as the price crosses a threshold as set by the user, without any human intervention required at the time of the trade. Moreover, crypto trading bots can also gather market data, analyse it and execute the trading strategies as decided by the user. In simple terms, a crypto trading bot is your personal crypto trading expert that trades round the clock, without any human emotion.


Why Should You Use Crypto Trading Bots?

Cryptocurrency trading bots help make better entry and exit decisions

Optimising Entry And Exit

Imagine a situation where all the technical indicators are giving a buy signal. Such proper buy signals do not occur often and could only be fulfilled once a week. With manual trading, capitalising on such entry points can be humanly impossible with a market that stays open 24*7. With trading bots, this can be achieved effortlessly.

Lighting-Fast Data Processing And Analysis

Cryptocurrency price movements are subject to current and historical data, which makes it imperative that one analyzes this data to make the best trading decisions. Crypto trading bots execute data input and analysis at lightning-fast speeds, ensuring that you do not miss out on key entry/exit points in the market.

Crypto bots process data at lightning-fast speeds
Crypto bots help you invest in multiple strategies

Execute Multiple Strategies With Ease

While manual trading limits the trader on how to execute a set trading strategy, crypto trading bots are limitless. With these bots, you can execute different types of crypto trading strategies and test which one works best for you.

Trade Without Investor Bias And Emotions

Say goodbye to investor bias and emotional trading with crypto trading bots. These bots are emotionless, and trade without any bias, removing greed, panic selling and fear of missing out on a meme coin.

Trade without bias with cryptocurrency trading bots
Execute trades really fast with cryptocurrency bots

Fast Execution Speed

Every second is vital in such a volatile market, and a crypto trading bot can monitor and trade a huge number of pairs at the same time. Moreover, bots can execute trades across exchanges near instantaneously, which is not possible with manual trading.

Comfortable For Autopilot Returns

Crypto trading bots are extremely beneficial for traders looking for consistent returns without actively trading. With crypto trading bots, you can generate returns on autopilot across exchanges, tokens and trading strategies.

Get automated returns with crypto trading bots

How Do Crypto Trading Bots Work

Investors can subscribe to free bot programs to aid in their cryptocurrency trading. On the other hand, many bots have user fees, some of which can be quite steep. Typically, investors seek out the bot or bots that will be most useful for them and then download the code from a developer. Each bot includes different requirements in terms of software and hardware.

Every bot may be different in the cryptocurrency it deals in, the exchange it works on, the strategy it incorporates or how swiftly it can execute a trade. While there are many open-source and free bots available that can be customised by users, many crypto trading platforms offer automated crypto trading bots that use pre-determined trading strategies for a certain fee. Many of these bots need direct access to the user’s exchange wallet for trade execution or use API integration with the wallet.

Before you start using crypto trading bots, you should note that they contain various components that ensure everything goes smoothly. Here are the key components of a crypto trading bot:

Data Analysis is easy with crypto trading bots

Data Analysis

Crypto trading bots take raw data from various sources and analyse them efficiently. Many crypto trading bots allow customisations for users to filter out certain data that may not be useful to them.

Cryptocurrency bots generate efficient trading signals

Signal Generation

Once the data is analysed, it can be used to generate trading signals to start trading. It can also include the strategy added to the bot. Using this thorough analysis, the bot can make better trading decisions.

Crypto bots execute trades at lightning speed

Trade Execution

Once the signals are generated, the crypto trading bot can then start executing trades as per the signals. This can be done through API integrations or direct access to a wallet.


Types of crypto trading bots

Arbitrage crypto trading relies on price differences

Arbitrage Crypto Trading Bots:

Arbitrage trading is a strategy that exploits the tiny differences in the price of the same token across different exchanges. Therefore, arbitrage crypto trading bots compare the prices of cryptocurrencies across various crypto exchanges, and then buy/sell to leverage the small difference.

Market making bots need multiple conditions to be true

Market Making Crypto Trading Bots:

To execute market making strategy, a crypto trading bot will create both buy and sell bids for the same token, and will only execute once both conditions are met. For example, if a trader is selling their BTC at $50,000, the bot may offer a price of $49,500, and simultaneously post a sale bid at $50,500. If both conditions are met, then transactions will take place concurrently, and the trader will profit $1,000.

Algo trading bots use trading signals

Algorithmic Crypto Trading Bots:

Algorithmic trading bots execute transactions only after they receive a trading signal. This signal may be received from external sources, or the bot may generate it itself using technical indicators. These trading bots can help you stay ahead of market fluctuations.

Scalping trading bots use the short-term trading strategy

Scalping Crypto Trading Bots:

Scalping is a short-term crypto trading strategy that aims to profit from minimal price movements. The idea behind scalping crypto trading is to generate minimal but consistent profits that mount in the long run. Scalping crypto trading bots leverage the volatile nature of the crypto market and work to consistently generate small profits.

Coin lending crypto bots use margin trading

Coin Lending Crypto Trading Bots:

Margin trading is an extremely risky yet lucrative crypto trading strategy. To help other traders execute margin trading, coin lending bots can be used. These crypto trading bots lend coins to margin traders, who then return it with a certain interest.


Pros And Cons Of Crypto Trading Bots

Crypto trading bots come with a variety of pros and cons, some of which are:

Pros Of Crypto Trading Bots

Lack Of Emotions:

Humans are prone to emotional trading and bias, which can lead to hefty losses in a volatile market as crypto. Crypto trading bots trade without any emotions and rely only on the data it receives/generates. This removes the chances of any serious consequences that may result from trading bias and emotions.

Trade Crypto Efficiently:

The crypto market is active 24x7 moves fast, making every second count as prices can change drastically without notice. Therefore, traders need to be active round the clock to ensure their holdings are not going in the red, which is not possible with manual trading. Crypto trading bots remove human reliance and execute trades without any intervention required. Moreover, crypto trading bots execute trades extremely fast, ensuring you do not miss out on profits with last-second price changes.

Test Different Strategies With Historical Data:

Many crypto trading bots utilise backtesting to test out different strategies with previous price movements. This helps in curating entry/exit points for the future. With crypto trading bots, traders can execute a wide variety of trading strategies all backtested with different parameters to ensure maximum returns.

Cons Of Crypto Trading Bots

Prone To Mechanical Failures:

Simply, crypto trading bots are computer codes that execute trades on behalf of traders. Therefore, they are prone to mechanical errors and failures. In a market as volatile as crypto, even a few minutes of downtime can prove to be fatal for one’s portfolio.

Scam Crypto Trading Bots:

Even though there are many trusted crypto trading bots and platforms, there exist many bots built to scam users of their hard-earned crypto. Many users tend to look for the cheapest crypto trading bot, and in that search find a free crypto trading bot that offers the best features, which are truly unbelievable. That is because it is designed to just take deposits, and never let the trader withdraw any amount. Therefore, it is necessary to choose a reliable crypto trading bot and not run after incredible and beyond belief features.

Limited Understanding:

While many crypto trading offers a detailed structure of what its strategy is, and how it works in the market, many crypto trading bots leave out the basics about its strategy. However, this results in a limited understanding of the trading bot from the trader’s point of view, which can result in losses as they may not know when to keep the bot running and when to stop it.


How To Create Your Own Crypto Trading Bot

To create a crypto trading bot, you need to follow the following steps:

1. Decide The Programming Language:

Crypto trading bots can be built using multiple programming languages, and you
should choose the one you are most comfortable with.

2. Choose Which Exchanges Your Bot Will Work On:

Crypto trading bots require access to an exchange wallet to execute trades. Therefore, choose which exchanges you want your crypto trading bot to work with, and create an account on those exchanges

3. Pick Your Trading Strategy:

In automated trading, here are a lot of trading strategies available for a crypto trading bot to use. Therefore, before you start coding, ensure you are clear on which trading strategy your bot will use.

4. Create An Architectural Blueprint:

The architecture of the crypto trading bot will determine how successful it can be. Therefore, it is critical to ensure that the architecture has the right data inputs for the crypto trading bot to execute trades

5. Coding The Crypto Trading Bot:

Once all details are ready, it is time to code the crypto trading bot using the language you have selected. The bot should also have an easy to use UI, in case you want to make adjustments.

6. Testing & Deployment:

Once the bot is ready, before deployment, test the bot using historical data or paper trades to ensure it is working correctly. Make sure that your crypto trading bot works as intended and does not falter or encounter any bugs when handling complex data. Once the bugs have been fixed, the bot is ready to be deployed in real markets.


Creating Your Trading Bot On Mudrex

Mudrex makes it easy for strategy builders to create crypto trading bots on its platform by providing a no-code visual builder. Users can drag and drop over 200 technical indicators and signals, and combine them with different logics to create their trading strategies without writing a single line of code! Moreover, you can integrate the world’s top exchanges in just a few clicks, including Binance, OKEx, FTX and more.

Once you create your strategy, you can backtest it across different time-frames and trading pairs to test its performance with historical data. Mudrex also offers paper trading capabilities, where users can test their strategies in the real world without leveraging their crypto. Only when you feel totally confident with your crypto trading bot should you deploy your trading bot and invest in it. You can also publish the crypto trading bot for other users and monetize your strategies.

Mudrex: No-code crypto trading bot builder

Deciding Which Trading Strategy To Use In Your Crypto Trading Bot

With the rise of cryptocurrency trading, the number of trading strategies used by crypto traders has increased as well. While there are many trading strategies that can be used in automated trading, here are some of the best cryptocurrency trading strategies:

Use multiple trading strategies at Mudrex

Scalping Crypto Trading Strategy:

While many crypto trading offers a detailed structure of what its strategy is, and how it works in the market, many crypto trading bots leave out the basics about its strategy. However, this results in a limited understanding of the trading bot from the trader’s point of view, which can result in losses as they may not know when to keep the bot running and when to stop it.

Reverse Trend Crypto Trading Strategy:

Another short-term strategy, the reverse trend crypto trading strategy aims to profit from the reversal of trends in markets. Therefore, if the market is witnessing an uptrend which soon will become a downtrend, traders using this strategy might short the token before the trend reverses to make returns.

Follow The Trend Crypto Trading Strategy:

In the ‘follow the trend’ trading strategy, traders open positions with the trend rather than the swing or reversal. As the trend is established, traders follow the trend, and when it changes, they exit the trend.

Range Crypto Trading Strategy:

The range trading strategy uses support and resistance levels. The range trading strategy trades between the range, and purchases the token at the support level and sells the same at the resistance level.

Momentum Crypto Trading Strategy:

One of the simplest yet riskiest crypto trading strategies is momentum trading. The strategy requires an understanding of the momentum of the market and open positions for the same.


What Is Copy Trading or Mirror Trading

Copy-trading or mirror trading are trading methods in which a trader can copy/mirror the trading strategy of other traders/trading bots. Traders can choose the strategies that match their trading goals or risk appetite, and the trading platform then sends all trading signals to the trader’s account. This trading method became famous with Forex trading but is now extremely popular in crypto trading as well. Automated trading helps traders copy the trading strategies of expert traders without actually witnessing the layout of the strategy. Therefore, experts can keep the blueprint of their strategy safe while sharing trading signals with other traders. Crypto trading bots also use this mechanism, and when a trader subscribes to a bot, the bot generates the trading signals and ensures the trader’s account also executes those signals. Therefore, no human intervention is required in automated mirror trading.

What Is Mirror Trading

Why Should You Invest In Crypto Trading Bots On Mudrex

Mudrex Security

Complete Security:

Users can trade through their favourite exchanges using API integrations, where Mudrex holds no withdrawal permissions. Therefore, you can trade with complete security.

Explore Different Options:

Mudrex offers a wide variety of crypto trading bots that are spread across exchanges, cryptocurrencies, strategies and trading pairs, giving you the option to choose a bot you believe in.

Mudrex Products
100% Automated Mudrex Solutions

100% Automation:

Mudrex trading bots are 100% automated, and will generate and execute trading signals without any human intervention required.

Low Fees:

Stop paying exorbitant monthly fees, as Mudrex charges a minimal fee only when you invest. Pay as low as $5 per month and generate consistent returns.

Mudrex Fees
Mudrex Performance Score

Performance Score:

To help investors make the right decisions, Mudrex offers a performance score (scale of 1-10) on the basis of a comprehensive risk vs reward analysis.

Mudrex Protect:

If a strategy doesn’t yield profits in a growing market or doesn’t stop you from making losses in a falling market, the Mudrex Protect stamp ensures that you receive your fee refund.

Mudrex Protect

How To Choose The Best Crypto Trading Bot

Here’s what you should look at when looking for the best crypto trading bot:

Reliability:

The reliability of the crypto trading bot is paramount. Your trading bot should be online all the time and should be trusted enough to not engage in malicious withdrawals. Mudrex is backed by Y-Combinator and has over 50,000 users with a total trade value of over $1.5 Billion to date.

Profitability:

In the end, everyone wants to make a profit through automated trading. Therefore, ensure that the crypto trading bot has a history of generating profits before you put in your money. Mudrex offers 100% automated bots that trade across cryptocurrencies, exchanges, and strategies. Users can easily view essential details about these bots on the dashboard, including returns over different time periods, and the total number of investors in a bot.

Security:

A trading bot should be secure so that the user’s funds are safe and secure. To ensure users can invest freely and securely, Mudrex’s security measures include 2FA, extensive support, and API integration with exchanges without any withdrawal permissions.

Ease Of Investment:

A crypto trading bot or platform should be easy to use for users of all skill levels to understand. Mudrex has always pitched to make crypto trading and investments easy for everyone. Users can start investing with Mudrex in just a few clicks.

Drawdown:

One of the most important features to consider while picking a trading bot is the drawdown. A low drawdown is a better choice than a bot with a higher drawdown.


Who Should Use Mudrex

The Mudrex crypto trading bot platform is ideal for traders

Mudrex for traders

Traders:

If a strategy doesn’t yield profits in a growing market or doesn’t stop you from making losses in a falling market, the Mudrex Protect stamp ensures that you receive your fee refund.

Mudrex for wealth managers

Wealth Managers:

Add crypto to your client’s portfolio for added diversification.

Mudrex for strategy builders

Strategy Builders:

Strategy builders can utilize the visual no-code builder by Mudrex to create trading strategies without writing a single line of code.

Mudrex for exchanges

Exchanges:

Offer your users the option to invest in automated trading bots using API integration.


How To Invest In Crypto Trading Bots With Mudrex?

Mudrex makes it easy for users to create their own crypto trading bots or invest in bots created by expert traders in just a few clicks. Here’s how you can start investing in crypto trading bots with Mudrex:

1. Create/ Login to your Mudrex account.

2. Connect the desired exchange with API keys or deposit your crypto in the Mudrex wallet.

3. Create your own crypto trading bot or choose one from the marketplace, and select the amount to invest.

4. Pay the platform fee, and you are all done.


Crypto Trading Bots vs Cryptocurrency Tokens: Which Is The Right Investment?

While investing directly in cryptocurrency tokens is a valid trading strategy, it comes with certain risks that crypto trading bots eliminate. Here are certain advantages that crypto trading bots have over cryptocurrencies:

Crypto Trading Bots vs Cryptocurrency Tokens

Reduced Volatility:

The crypto market is volatile, and investing directly in cryptocurrencies puts your portfolio at risk of that volatility. Crypto trading bots reduce volatility by continuously trading and exchanging pairs and generating returns.

Diversified Portfolio:

Instead of purchasing individual tokens, you can invest in a crypto trading bot that trades in various cryptocurrencies, thus diversifying your portfolio.

Better Returns:

While returns depend on the crypto trading bot’s strategy, many crypto trading bots beat the market returns in a bull market, and ensure minimal losses in a bear market.

Superior Risk vs Reward Opportunities:

Crypto trading bots offer a better risk vs reward opportunity when compared with traditional crypto investments.


How crypto trading bots are utilised in quantitative trading

Crypto trading bots rely on algorithmic trading in order to input and process complex mathematical formulas to automate and accelerate the trading process. At Mudrex, you can use 200+ technical indicators to analyse the price behaviour of assets with future price movements as well as historical data.


History and Evolution Of Trading Bots

Automated trading systems have been in place since the 1950s. First introduced by Richard Donchian in 1949, he used rules to buy and sell funds. As the markets grew, the need for automated trading and rules made its way to many financial markets. In the 1990s, paid rules were available to purchase, paving the way for automated trading platforms. While earlier models required human intervention to manage clients’ portfolios, the 100% automated system that worked without any supervision was first launched in 2008. In 2014, more than 75% of the stock shares traded on United States exchanges were from automated trading systems.

Since then, trading bots have witnessed a significant rise in major financial markets, including cryptocurrencies. Nowadays, algorithmic trading is paramount in crypto markets, as they are trading round the clock. With manual trading extremely difficult in such a volatile market, crypto trading bots are ensuring traders do not lose out on profits even when they are not actively trading.

History of crypto trading bots

Frequently asked questions

Trading bots work on a variety of technical parameters. These bots can be designed to implement simple buy or sell strategies depending on an indicator, say the Relative Strength Index or RSI. A bot could be set to sell when the RSI falls below 30, and buy when the RSI crosses 70. Seasoned traders and institutions design complex bots involving multiple different parameters.

Trading bots are designed to capture the market movements that might not be possible with human intervention. However, like all financial instruments, while trading bots do not guarantee profits they would mostly be less risky as compared to other markets.

The returns generated by different bots depend on the strategy used. Always check for the historical performance and look for the strategy behind the bot.

Yes, trading bots can be used to trade in either futures or spot markets.

Trading bots can be used by anyone, starting from new traders to experienced traders. Trading Bots can be a good source of passive income for all types of investors too.

At Mudrex, all trading bots come with a performance rating allotted by Mudrex. This rating ranges from 1-10, with 10 being the best and 1 being the lowest score. The rating is given on the basis of multiple parameters such as drawdown, sharpe ratio, and other technical parameters

The fees charged by all the trading bots are mentioned on the description of the bot.


Disclaimer

The information contained in this site is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness. The trading of Bitcoins, alternative cryptocurrencies has potential rewards, and it also has potential risks involved. Trading may not be suitable for all people. Mudrex is not a licensed financial advisor, and any information on this page should not be absorbed as financial advice. Anyone wishing to invest should seek his or her own independent financial or professional advice.