Hackernoon logoAlgorithmic Trading is Changing Crypto-trading one Bot at a Time by@rodriguezblock

Algorithmic Trading is Changing Crypto-trading one Bot at a Time

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@rodriguezblockLeon Rodriguez

Computer Systems Analyst and Smart-Contract Developer

Bitcoin and cryptocurrencies in general are gradually making their way into the mainstream markets as more investors are flocking to this new asset class. As such cryptocurrency trading is on the rise with multiple exchanges recording huge surge in volumes over the past few months. Investors are however finding out that trading digital assets is quite a different undertaking as compared to traditional financial products. 

Crypto trading is highly risky

The crazily high returns in cryptocurrency trading have become a great temptation for investors to pass by. But, just as investors are able to multiply their capital within a short duration, so is the possibility to lose it all. 

Simply put, cryptocurrency trading is a roller coaster full of ups and downs riding on the waves of volatility and unpredictability. This makes the exercise a very taxing and highly risky affair that could easily capitulate even those with proper understanding of the market. 

In response, cryptocurrency traders have developed various tools such as fundamental analysis, technical analysis and sentiment analysis to help them figure out the market. But, due to their technical nature and market uncertainty, these tools may not be quite useful to the majority of traders without adequate knowhow.

As the space continues evolving, new and more useful tools are being developed to help investors reap gains from crypto trading irrespective of their technical knowledge. Algorithmic trading is a highly valuable invention that is transforming crypto trading by improving efficiency and helping traders to better manage risks.

Algorithmic trading in a nutshell

Algorithmic trading is an automated trading process that follows pre-set instructions on a computer program. Bots are programmed to execute trades once predetermined conditions for defined variables such as price, time and volume are met. 

Algorithmic trading uses a mixture of mathematical models, complex formulas and human oversight to make decisions according to the preferred strategy. Once activated, the program makes the decision to buy or sell the specific assets on an exchange among other functionalities.

Algorithmic trading has for long been a preserve of elite traders and high volume institutions like hedge funds, helping them make huge returns from the financial market by capitalising on various movements. 

Due to technological advancement, now the bots are available to ordinary investors enabling them to make use of these programs to benefit from the asset price movements. Traders do not necessarily need to invest in complex algorithms as they can automate even simple actions according to their desired strategies.  

Relevance and its impacts on crypto trading

Algorithmic trading is very useful in crypto trading as it helps investors to better navigate the market’s huge volatility and unpredictability. Various projects have developed bots that investors can use on crypto exchanges and benefit from:

Higher trading efficiency- bots have the ability to process infinite amounts of data as compared to humans. By using multiple data points, they are able to analyse and predict the market movements better and faster than the average trader. The bots are, therefore, able to make the right decisions more often thus boosting the trader’s earnings.

Faster trading speeds- bots operate at high speeds that are not comparable to humans. This enables them to make tens of thousands of trades per second in times of high-frequency trading. Also, unlike humans, bots can operate on a 24/7 basis thus expanding the trading limits for the investors. This way traders are able to maximise all the opportunities in the market without breaking a sweat.

Unbiased trading- bots operate strictly according to code with all actions executed once certain set conditions occur. As such, they are not prone to making emotional decisions like humans. Algorithmic trading eliminates feelings from trading, preventing traders from making questionable decisions.

Algorithmic trading in crypto

Quite a number of projects in the crypto space are offering algorithmic trading through bots specifically designed for this market. Of these, there are two platforms that stand out due to their functionality, usability and efficiency.

Upbots is fully focused on algorithmic trading and has developed numerous bots that retail investors can use to execute different trading strategies for higher returns. The bots are available on FTX and Binance crypto exchanges. Users can link their accounts on these exchanges by importing their keys on Upbots then deploy the bots to execute the trades for them. The bots are very easy to use thus granting investors a stress free and highly rewarding crypto trading experience.

AlgoTrader is another useful bot supporting algorithmic trading of cryptocurrencies. The platform supports professional crypto trading by automating the process on multiple exchanges. AlgoTrader has integrated Coinigy, an all-in-one digital currency platform that enables connectivity to more than 45 popular cryptocurrency exchanges. Using the AlgoTrader bots, professional investors are able to trade hundreds of cryptocurrencies effortlessly and with great convenience.

Looking forward

Both Upbots and AlgoTrader are exemplary indicators of the direction that cryptocurrency trading is taking in the not too distant future. Upbots provides tools that were previously not accessible by ordinary investors while AlgoTrader offers institutional-grade tools that add an extra dimension of professionalism to cryptocurrency.

These tools will surely open up the space to more retail investors as they can leverage the bots to effectively manage their risks. Algorithmic trading will also encourage mainstream organisations to venture into crypto trading as they can rely on the bots to lower their exposure to the market’s wild swings and unpredictability.

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