The Role of Bots in Cryptocurrency Trading: Are Bots Effective Enough?

Ruchi Gupta

Cryptocurrency bots play an important role in the crypto markets and there is a wide variety of types and quality. Generally, cryptocurrency bots are promoted as an easy way to make a profit as the bot will run on autopilot. But, if they are so effective why is everyone not adopting them? Is there a correct way to use a cryptocurrency bot in order to enhance our profits and if so how?

What are Crypto Bots?

In simple terms, a crypto bot is a tool that can execute trading decisions on your behalf, according to a tailored algorithm. Hence, the ability of a bot to make profits depends on the algorithm, the more advanced the algorithm the more likely you are to turn a profit. Bitcoin, being the most popular cryptocurrency, has a number of bots associated with it and these bitcoin trading bots.

Taking into account the big picture, cryptocurrency bots can be classified as off-the-shelf cryptocurrency bots and custom-built cryptocurrency bots. Off-the-shelf cryptocurrency bots are preferred by traders who don’t program and they have an inbuilt algorithm and a trading strategy implemented by the developer. On the other hand, if a trader possesses the knowledge of programming, they can custom build cryptocurrency bots which they can modify as and when required.

Do Cryptocurrency Bots Really Work?

We all know that the cryptocurrency market never sleeps, which can become highly nerve-wracking for professional as well as casual traders. The scenario becomes much more irritating when, due to the highly volatile nature of the crypto market, traders wake up to witness high losses in their profile. It is because of this reason, the popularity of cryptocurrency trading bots is increasing tremendously as the trader can concentrate on other tasks and sleep peacefully, knowing that the bot is taking care of things. Moreover, a bot can trade rapidly and the same speed is impossible to achieve when trading manually. This enables the trader to take considerable advantage of profit windows with a smaller duration.

Cryptocurrency bots definitely have their advantages, however, new traders looking to make big profits by relying on bots may struggle. A trading bot with a rigid algorithm will only assist the trader for a limited duration as the cryptocurrency market is dynamic so no permanent trading strategy can be established. That’s why off-the-shelf cryptocurrency bots stop providing the expected results after some time.

If a trader is going to use a custom-built cryptocurrency trading robot then they must be prepared to analyze the market and re-program the trading strategy accordingly. Thus, the ultimate success of a cryptocurrency trading bot depends on the talent of the trader. If a trader understands the cryptocurrency market well and has the required technical fitness to re-program the bot as and when the market conditions change, then profits can become sustainable.

What about Crypto Bots with Artificial Intelligence?

In recent robot reviews, cryptocurrency trading bots, which are powered with Artificial Intelligence have caught the attention of traders who don’t possess the knowledge of the cryptocurrency market and are looking to completely rely on the robot to place trades for them. According to developers, crypto bots with artificial intelligence are a hybrid between off-the-shelf and custom-built trading robots. Since they have Artificial Intelligence in-built, they are capable to modify and alter the present trading strategies to match the conditions of the cryptocurrency market. This means that the robot will re-program itself and the trader doesn’t need to alter the in-built algorithm.

This may seem like the ultimate solution but it is still not possible for a cryptocurrency trading bot to take into account all the variables that can affect the price and volume. Despite custom-built trading robots can have a deep scan of news and social media plus have the ability to look for keywords.

Technicians may try but it is impossible to construct a robot that has the intuitive understanding of all facets of the market. If we talk about social media and news scanning ability; a robot cannot distinguish as to which news is real and which one is fake. This highly limits the capability of the cryptocurrency robot to make a significant amount of profits as fake news is pretty common to revolve around in the cryptocurrency market.

Robot or Human?

A robot cannot develop the intuitive capabilities of a human. They may have speed but in the end, these robots are running on the algorithms devised by the humans. So, if you really want to use the services of a crypto trading robot it is best that you go with a custom-built cryptocurrency bot as you can modify the trading strategies according to the market, though you need to have technical capabilities for that.

As a novice trader, instead of jumping into the trading segment immediately by relying completely on a robot, you must learn, practice and develop the trading as well as programming skills first and use the robot later. It definitely looks like a lot of effort but your hard work will undoubtedly pay off in the long run.