Pros and Cons of Crypto Trading Bots

The cryptocurrency market is highly volatile. It is constantly evolving, and fluctuating, and so, it needs constant market monitoring and dynamic data analysis to keep up with the current state of each currency.

Any person delving into the crypto world understands that it is quite impossible (no matter how analytical you are as a person) to manage that market without the use of software programs that analyze trading data, and then utilizes that data to perform active buying and selling.

This type of software is often referred to as a Crypto Trading Bot.

So how exactly does a Crypto Trading Bot work?

As you set up your Crypto Trading Bot, you get to choose between multiple features by which you can customize your very own strategy or follow the ones already pre-set into the software.

According to your own direction, you can create a strategy that fits the specific tokens, coins, or currency that you have in mind, or follow criteria that plays within a specific bubble or field, and all of that relies on your own vision.

The Crypto Trading Bot is a tool. A very smart tool that understands your strategy and applies it all the while it conducts dynamic market analysis, follows fluctuations and current crypto values, and placing orders automatically at high speeds.

Pros of Crypto Trading Bots

Now that we know what Crypto Trading Bots are and how they work, let’s discuss some of the benefits that come with using them.

1. Crypto Bots are purely data-centric

Crypto Trading Bots never act on emotion or impulse. They are software that performs actions solely based on the data that they consume and the strategy they are set with. 

This means that the user will no longer have to constantly stress about the decisions he is making but to conduct crypto trading through means of strategy and simple analytics of the successful trade rate of the crypto trading bot, which takes us to our next point.

2. Crypto Bots make it possible to back-test strategies

Back-testing strategies is potentially one of the best features of Crypto Trading Bots as it allows you to evaluate the risk of each strategy and keep constantly optimizing it until you reach a perfect state.

After you keep playing the crypto game, you can hop on the real market and make some real profit.

3. Crypto Bots do not sleep

Unlike you, a human being, crypto trading bots are awake 24/7. Meaning they will never miss out on an opportunity that follows your strategy and they will never fail to consume, and analyze the relevant data no matter what time it is.

4. Crypto Bots are faster than manual trading

Essential to their concept, crypto trading bots are inhumanely fast. It takes our mind at least minutes to consume, analyze data, and then take action. Especially if that data is intricate.

Even if we assume that we could potentially manually do that, that will be only in one specific instance. Crypto Trading Bots can execute orders on multiple fronts at the very same moment across multiple exchanges and through multiple cryptocurrencies.

The speed of reaction and execution of buy and sell orders programmed in trading strategies makes Crypto Trading Bots superior to manual human reactions and trades.

Cons of Crypto Trading Bots

1. Crypto Bots need constant monitoring

Crises happen. Sometimes when they do, the Crypto Trading Bot only follows current data and can barely predict that some things may happen that could affect the market such as potential war between countries or pandemics.

That aside, you can not set a trading bot and then just let it go. You need to constantly be aware of all the orders and actions taken as well as monitor the current progress to evaluate whether your strategy is profitable or needs further optimization.

2. Crypto Bots require knowledge

Before you use and rush into the world of Crypto Trading Bots, you must first have a great understanding of the crypto trading market and to get yourself deep into it from technical and business standpoints. 

3. Crypto Bots present security risks

It is quite possible that your crypto trading bot could be hacked. Due to the fact that it is still software, it constantly communicates through API and can thus be compromised.

It is important to make all major withdrawals completely manual and make small ones provide you with alerts. There are some security protocols you may need to follow in order to make sure your Crypto Trading Bot is secure.

Summary

Crypto Trading Bots have become an essential tool for crypto trading. In today’s age, you can barely get into the market without it. It is, hence, important to understand how they work and know exactly what you are getting into before getting into the market.