The cryptocurrency space has never seen so much excitement before. With new coins popping up every day, it’s only natural to want to get your hands on them. However, as with any industry, there are a wealth of ways you can lose money and not just make it. One of the ways in which you can lose money is trading. Now, while it’s still not as popular as investing, trading is a big part of the cryptocurrency industry and something that needs to be looked at carefully. We’re going to look at everything you should know before creating a cryptocurrency trading bot, some of which might surprise you because most people are under the wrong impression about them.
A cryptocurrency trading bot is a computer program or script that is made to automatically trade cryptocurrencies for you. Basically, it acts as an automated trading assistant which evaluates the prices across different exchanges and buys or sells the cryptocurrency you want as per your choice. Though bots can be used by investors, they are mostly used by traders who want their trades to occur automatically.
How Does It Work?
Before we dive into the different types of cryptocurrency trading bots, there are some things we need to talk about. First and foremost, the cheapest investment method for a beginner is not cryptocurrency trading. As mentioned before, cryptocurrencies are volatile, and that’s what makes them risky. Cryptocurrency trading is not an investment method but rather a proficiency in technology in which you enter into contracts with other people to exchange money and other forms of value later on.
Now, trading cryptocurrencies is not actually a skill but rather an automated process. The reason why it is hard to do is that there are many things that can go wrong with the trading system. You can’t control the market, and you don’t know what will happen when you buy or sell. That’s why people who have started trading think it would be easier if they used a cryptocurrency trading bot.
Benefits Of Crypto Trading Bots:
1. Ethical Trading:
Trading is a tough game, and making it profitable is no easy feat. However, the first step to creating a successful trading system is to set ethical guidelines and methods that you can follow. If you’re not good at understanding the financial markets, it might be a good idea to look for someone who can help you. That’s where most cryptocurrency trading bots come into play. A bot gives you an automated trading assistant who will do everything for you, including keeping track of market conditions and making trades based on them.
2. Trading Aggressiveness:
One of the most difficult things to do in cryptocurrency trading is managing risk. This is where a bot comes in handy. The bot can help you keep track of your customized risk factor and make trades based on it. You just have to tell the bot how aggressive or passive you want the trading to be, and it will do everything for you. If you want something that’s more market-specific, then you’ll need something custom-made for that purpose as well.
3. Capital Management:
Everyone who has ever traded has probably made the same mistake of investing way too much money. The only way you can trade cryptocurrency is to invest in it. However, it’s not wise to invest all your life savings into a cryptocurrency that you’ve just heard about. That’s why you should take into account factors like price fluctuations and risk as well.
A cryptocurrency trading bot will help you keep track of how much money you have invested in each coin. It will also let you know how much money you can allocate for each one, and it will help you decide if a trade is profitable or not. This way, your capital is properly managed so that you don’t go bankrupt quickly. Many Bitcoin users are trading Bitcoin through Bitcoin trading platforms like Quantum AI.
How To Build A Cryptocurrency Trading Bot: A Step-by-Step Guide
1. Choose A Programming Language:
There are over a hundred programming languages that you can use to create a cryptocurrency trading bot. However, the most important thing is to choose one that matches your standards, is easy to learn, and is supported by an existing platform. When it comes to creating a cryptocurrency trading bot, you’ll need to understand the nuances of programming so you can build your own custom-made system.
2. Hold The APIs:
Once you’ve chosen a programming language and the platform you want to build your trading system, the next thing is to hold the APIs. This is where you get access to details about the exchanges that you want to work with, as well as their prices. If there are any APIs out there that are free, then it’s best to grab them before building your own.
3. Step Up Accounts On The Exchanges Listed:
Now that you have the APIs, you’ll need to make accounts on the exchanges that are listed. There are two kinds of accounts a trading account and a funding account. The trading account is where you’ll be putting in your money so that you can trade with it, while the funding account is where your profit will go after each trade. If there is any exchange out there that doesn’t require you to make an account, then it’s best to use them.
4. Pick a Trading Model:
When it comes to the actual cryptocurrency trading bot, you’ll need to pick one. The only way you can do that is by considering your own goals and preferences. If you want to become a real trader, then an arbitrage model is what you should choose. It has the highest returns, but it also has the highest risk and is not easy to build. If you want something that’s more beginner-friendly, then you should try a technical trading model or a high-frequency trading bot.
5. Build The Architecture:
Now that you have the APIs and the trading model, it’s time to build the architecture. For this purpose, you’ll need to pick your language and create a web server. This will help you decide how much money to put into each trade and when to buy or sell. If you want something more complex, then it would be best if you added an order book system as well.
6. Encoding:
Once you have your architecture created, you’ll need to encode your trading strategy. This is the most difficult step in the cryptocurrency trading bot. You’ll have to go through hundreds of thousands of lines of code and try to figure out what each line does by studying it carefully. The most important thing is to make sure that everything makes sense and that it’s easy to follow.
7. Testing:
Once you have your trading bot ready, it’s time to test it. You need to make sure that the software is actually working and that nothing is broken. This can be a long process, and it’ll involve thousands of simulations too. You’ll want to test the bot on different market conditions and in different situations as well. This way, you’ll know exactly how your bot reacts when things go wrong or right.
8. Live Deployment:
Once you have tested your trading bot, it’s time to deploy it into the real world. You’ll need to create an API key in each exchange and write up a deployment script that can do everything for you. To do this, you’ll also need to learn how the API works, but once you know how it works, the rest is pretty simple.
Conclusion:
If you want to become a cryptocurrency trader, then there’s no better way than by building a cryptocurrency trading bot. Building one will not only help you learn the intricacies of cryptocurrency trading, but it’ll also give you a solid foundation in order to thrive in the market. The other thing is that once you’ve built your bot and started using it, you’ll love it and naturally want to keep using it more so that your profits keep increasing.
