Lucas Wyland


5 Reasons Why You Should Automate Your Crypto Trading Strategy

Want to make money in your sleep? Automated trading may be the perfect fit for you! This discipline of trading involves breaking your strategy down into a series of entry and exit rules using technical indicators and live market data. Once this is done, a program will monitor live price data from crypto exchanges and make trades based off your defined rules. Fortunately, there are many professional tools that make this entire process much easier than it sounds!

In this article, we explore the top 5 reasons why you should consider automating your crypto trading strategy.

1. Crypto Trading Bots Remove The Emotion From Your Trading

Whether you realize it or not, your emotions play a huge role in your trading decisions. How many times have you decided to lower a stop-loss because you “knew” the asset would bounce back. Or how many times have you held onto a position past your profit target and ended up with less?

With an automated trading system, you define your buy signals, your stop losses, and your profit targets all beforehand. The trading bot will execute these set of rules for you, taking your emotions completely out of the picture. Doing this will prevent you from getting too cocky on a win streak and from trying to overcompensate your trades while on a losing streak . Over time, this consistency can go a very long way to increasing your bottom line.

2. You Can Test A Strategy’s Profitability Against Historical Data

Almost all trading bots and automated trading systems are built with a backtester. A backtester is a tool that will simulate the performance of a strategy against years of historical data to determine its profitability and risk. After running a backtest, the program will output helpful statistics to determine the profitability and effectiveness of your strategy.

Some of the most important metrics to consider for your trading strategies:

  • Number of Trades
  • Profit vs Benchmark (Such as buying and holding Bitcoin)
  • Win / Loss Ratio
  • Max Consecutive Losses
  • Max Drawdown (Single largest drop in portfolio value)

When backtesting your strategy, it is always best to minimize risk and drawdown as much as possible before you trade it live. Failing to do this, can result in unexpected losses even if your backtesting results determined it to be a profitable trading strategy.

3. Trading Bots Can Run Non-Stop Across Many Markets

One of the most obvious benefits of using a crypto trading bot is its ability to run 24/7/365. Since crypto exchanges don’t shut down, your potential to make profit increases greatly! In addition to this, most trading bots allow you to configure and execute your strategies across multiple trading pairs.

4. Improved Trading Speed & Order Execution

Using a crypto trading bot will allow you to time and execute your entry/exit points much more efficiently than trading by hand. Without the need to be constantly logged in across multiple exchanges, your can place orders much faster and get more profit out of each and every trade.

5. Detailed Trade Reports & Live Notifications

Keeping track of trades and calculating your gains can be a huge pain when doing it by hand. Almost all crypto trading bots come with a helpful trading dashboard that summarizes profits/losess for each of your strategies. Most tools also integrate very well with popular messaging platforms (like Telegram) and will ping updates whenever your trading bot decides to put in an order.

Crypto trading bots can be very profitable when they are configured properly and backtested by the trader. Before jumping in, it is important that you know how a strategy is expected to behave in a bull, bear, and sideways market. Backtesting your strategy is one of the best way to do this and should be done before taking it live. If you would like to start automating your trading strategies, take a look at some of the professional trading bots built specifically for crypto traders.

Easily report your cryptocurrency capital gains with CryptoTrader.Tax.

Originally published at on April 23, 2018.

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