What’s a Crypto Trading Bot?

Let’s dive right in, starting with a definition of crypto bots. A trading bot is a computer-based algorithm that analyzes the market using technical indicators such as moving averages and trends’ strengths. Based on these indicators, it generates buy/sell signals on underlying assets. To put it in a nutshell: a crypto trading bot is an automated strategy that buys or sells crypto or derivatives on your behalf.

Why use a trading bot? Besides the fact that it saves you time (you don’t have to monitor your exchange continuously and place the orders yourself), trading with bots means that you stick to a predefined strategy. The bots have been designed with rigorous algorithmic rules, back tested on real historical data. A bot will not make rushed decisions based on emotions the way humans are prone to.

However, bots are not perfect investors either. The crypto market is very volatile, and this can lead to false signals. This happens when bots calculate that the market is moving in a given direction, only for the opposite to actually happen. In addition, past results are not a guarantee of future profits.

Your capital is always at risk when you are trading, whether independently or with bots. It’s important to keep that in mind when you are taking your first steps in the world of crypto.