How to create a crypto trading bot
- December 7, 2021
- Reading time: 9 minutes
A Crypto trading bot is a hot item at this moment. Everybody is looking for this “Holy Grail” trading bot to gain wealth in a short period of time. Why are these trading bots so popular and how are they created? In this article we describe the steps that it takes to create a crypto trading bot.
What exactly is a crypto trading bot
A crypto trading bot is automated software designed to monitor, analyze and execute trades across cryptocurrency exchanges using predetermined inputs.
Cryptocurrency trading bots often use artificial intelligence and machine learning to observe the market and automatically execute cryptocurrency trades in line with rule based algorithms.
Ideally, the bot generates a larger profit that is greater than if you would use a buy hold strategy. Since day trading any asset class is time consuming, people prefer to use bots to do their heavy lifting. It’s not all about huge profits, but more about good risk reward trade entries with proper risk management at mind.
Advantages of using a crypto bot
Advantages
1. It trades 24 hours per day.
2. Is saves loads of time and agony. No more screen time all day.
3. It trades without emotions such as fear and greed.
4. Robots are easy to configure.
5. Robots can anyalise data or prices much faster than humans.
6. To trade with a crypt trading robot you don’t need any experience.
7. All trading is rule based sort of like a professional trading plan.
8. With a robot it is very easy to trade multiple crypto currencies simultaneously.
Disadvantages
1. To trade a robot your trading terminal needs to be ON constantly. For this its recommended to you a Virtual Private Sever (VPS) which will cost around $10 monthly.
2. Robots do not have an eternal life span. Software is coded based on historical data. This means that if market conditions change so does the sript. Unfortunately if this happens you most likely will be too late.
3. A robot does not read the news. Therefore its always recommended to keep an eye on the market and not getting exposed in high volatile markets
4. In crypto it’s very hard to use economical indicators that might give you an edge whilst trading. For example; how does a FED rate hike influence the price. In Forex or Stocks it’s rather predictable, but not in Crypto. Thereofore we strongly recommend to either use a buy hold strategy or an intraday trading strategy.
What steps to take
Although it sounds tempting to create a trading bot, make no mistake, since its definitely not an easy task. You need at least a good knowledge of trading and indicators in order to come up with a trading plan that can be profitable.
Therefore it’s recommended for newbies to not even think about this route and opt for an existing trading bot. There are many out there you can test to see if you like the concept of automated trading.
Create a trading idea/plan where you write down all trading rules.
Pick you programming language such as Pearl, C , Python or Javascript.
Select your preferred crypto platform where you wish to run your trading bot. For example bybit.com
Collect the API from your selected platform. For examply: Bybit API
Code your trading script ( you can use a professional programmer for this).
Debug your strategy. This part is most likely the most important part. Many trading bots are buggy and therefore you need to be absolutely sure your bot is bug free. Best to first back test it and then run the trading bot in a paper account. If this all works according to your preset rules, you are good to go and try it in a real account.
What is an API
API stands for Application Programming Interface. Generally, a trading API is an interface that allows two unrelated systems to interact with each other, to allow a third party API platform to connect with Bybit’s to execute trading orders.
On the other hand, the importance of having API documentation specifies the way that each of the two systems interacts with the API itself, to function.
Understanding and using a trading API can allow traders to execute trades on their behalf, at the pre-set price and conditions. On Bybit, our API enables users to interact with our exchange programmatically, allowing you to check onto market data, process automated trading orders, manage accounts, and more.
Conclusion
Do robots work? Absolutely! But, one needs to understand that Holy Grails only do not exist in trading. Creating your own piece of trading software is definitely a good idea, however the learning curve is steep. We like crypto bots a lot, but as experienced traders we dislike the lack of economical indicators. For that reason we like to trade with a crypto futures robot, that has more pivot points for entries. For example, these futers are traded on one exchange and that makes it all a lot easier.
Best to simply test a crypto trading bot first. There are numerous bots available in a demo environment to trade and this is the safest way of finding out if robot trading is for you.
Test a strategy risk free!
Every week we start with new algorithmic trading strategies that you can copy in a demo account
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.