Crypto trading bots are computer programs that continuously analyze cryptocurrency markets and place buy and sell orders on behalf of a trader. These bots operate based on predefined trading conditions and rules, which are usually developed by using technical analysis indicators.
Crypto and Bitcoin trading bots automatically execute trades whenever predefined conditions are met.
Although Bitcoin trading bots may sound complicated and only useful for the most advanced traders, you can conveniently create automated crypto trading strategies on a trading bot, as long as you have some charting and technical analysis experience.
Crypto and Bitcoin trading bots need to connect to a crypto trading platform to execute the trades. You can connect your trading bots to the CEX.IO exchange by using an application programming interface (API).
CEX.IO APIs allow you to receive real-time price and indicator feeds for over 200 different cryptocurrency trading pairs, access price charts, subscribe to order books, and view your trade history.
In this article, you’ll find a wealth of information about crypto trading bots and how to use them. Here is a table of contents to make it easier for you to navigate:
- What is a crypto trading bot?
- Programming support and resistance levels
- Programming technical indicators
- Programming divergences
- Programming asset correlations
- How does a crypto trading bot work?
- Connecting to CEX.IO via APIs
- User interfaces for crypto trading bots
- What is the best crypto trading bot?
- Best crypto trading bots
- Shrimpy.io – Best for beginners
- HaasOnline – Best for advanced traders
- Alpha Bot – Best for price charts
- CryptoView – Best for portfolio automation
- How to set up a Bitcoin trading bot
- How to use a crypto trading API
What is a crypto trading bot?
A cryptocurrency trading bot is comprised of a set of commands where you input price and/or technical indicator conditions to buy and sell a cryptocurrency on your behalf.
Predefined buy and sell conditions typically include
- support and resistance levels for the price,
- overbought and oversold levels for momentum indicators,
- divergences between the price and the indicators,
- correlations between different assets.
You can program buy and sell conditions for multiple crypto-assets and trading pairs in multiple time frames. The crypto trading bot then continuously monitors your conditions and automatically executes a trade whenever a condition is met.
The most commonly used trading bots are:
- Trend-following bots: Monitor price support and resistance levels, moving averages, and technical analysis indicators to decide when to buy and sell cryptocurrency.
- Arbitrage bots: Arbitrage bots make money by trading price discrepancies across multiple exchanges for the same asset. They buy a cryptocurrency for a cheaper price on one exchange and sell it for a premium on another exchange.
- Portfolio automation bots: These bots manage the allocation of crypto assets in a portfolio based on market outlook e.g., 50% altcoins and 50% bitcoin.
- Market-making bots: The more actively an asset is traded, the wider the spread can be and thus the higher profit a market-maker bot can generate.
Source: Home Banker’s Club
The most notable benefit of using a crypto trading bot is not having to look at price charts the entire day and avoiding the consequent emotional trading that could result from fatigue.
Leaving the execution of trades to crypto trading bots enables you to take a step back from daily price deviations and focus on the bigger picture to understand whether your strategies are on the right path or whether you should update them.
Programming support and resistance levels
To input trade conditions based on support and resistance levels, you can make use of the horizontal and diagonal supports and resistances on a cryptocurrency price chart.
You can also use moving averages as an input for a trading bot to buy cryptocurrency at a major moving average support and sell at resistance.
The specific moving averages you use would depend on the specific cryptocurrency trading pair and the time frame (5 minutes, 15 minutes, 1 hour, 4 hours, daily, etc.) you want to trade. To do that, you need to determine the moving averages that historically hold as significant support and/or resistance for that trading pair in that specific time frame.
You can input as many price levels, moving averages, and time frames as possible to execute automated cryptocurrency trades.
Programming technical indicators
You can also program a trading bot to buy and sell cryptocurrency based on technical indicators. Technical indicators typically used in automated trading include the relative strength index (RSI), the stochastic RSI, and the moving average convergence divergence (MACD).
As a very basic example, a trading bot could buy a crypto trading pair when its stochastic RSI drops to zero (on your time frame of interest) and sell when the indicator hits 100, as those are the minimum and maximum values that the stochastic RSI indicator can get.
Other than that, you can input critical support levels for the regular RSI indicator as buy signals, such as the 30 and 70 levels, or use MACD crosses (bullish and bearish crosses) as buy and sell signals for your trading bots.
You can combine as many technical indicators as you like while including support and resistance price levels to add confluence to the set of conditions that your trading bot will monitor. This could substantially increase the success rate of crypto trading bots.
Monitoring divergences between the asset price and indicator values can be a powerful tool in determining successful entry and exit points in cryptocurrency trades.
A divergence occurs when the value of a technical indicator drops while the price is rising (bearish divergence) or when the value of an indicator increases while the price drops (bullish divergence).
To enable a trading bot to identify divergences, you can input formulas that continuously calculate the price changes as well as the changes in indicator values. If one ends a given time period with a positive sign while the other is negative, it could be executed as a trade signal.
You can also add another formula that calculates the difference between how fast the price moves relative to the indicators. If either one rises or drops with a substantially higher velocity, it could be treated as a trade signal.
You can define a certain threshold for this delta parameter; when it exceeds that threshold, it could be a buy signal for the trading bot and when it drops below that value, it could be a sell signal for the bot.
Programming asset correlations
Almost all asset classes are correlated with each other, which is a critical factor to consider when designing trading strategies. For example, altcoins are usually correlated with Bitcoin’s price action while Bitcoin is correlated to U.S. stock indices (S&P and Nasdaq) and inversely correlated to the U.S. Dollar Index (DXY).
Considering this, you could devise trading strategies that would reduce the size of your altcoin trades when Bitcoin’s price makes a decisively bearish close during a given time frame. Or, could consider simply converting BTC to USD when the dollar index is surging.
You can also program your crypto trading bots to look for price divergences among different assets. For example, as the price of Bitcoin drops, an altcoin may have its Bitcoin parity rise (i.e. its dollar value drops less than Bitcoin). Such a divergence during strong Bitcoin moves is often followed by a surge in that altcoin’s price as soon as Bitcoin’s volatility drops in the shorter term.
Scanning as many indicators as possible while combining them with divergence and correlation formulas can help you create successfully trading crypto bots. However, you should note that developing complex trading strategies will likely require advanced programming skills.
If you can succeed in automating your cryptocurrency trades, you will save significant time and effort, and gain flexibility in your daily life, as automated crypto trading bots can trade multiple trading pairs simultaneously and dramatically increase the speed of trading. This would in return eliminate emotional trading which is historically known to be a profit-killer in financial markets.
How does a crypto trading bot work?
To execute your conditions and formulas, a crypto trading bot needs to be constantly fed with both real-time and historical data as input. This can be accomplished by interacting directly with a cryptocurrency exchange.
Connecting to CEX.IO via APIs
Connection with a cryptocurrency exchange is established via a crypto trading API.
CEX.IO provides the two most commonly used APIs in the industry – WebSocket API and REST API. Using these two APIs, you can connect crypto trading bots to the CEX.IO exchange and let them simultaneously execute trades on multiple markets and trading pairs.
With the WebSocket API, you can directly subscribe to order books on the exchange, receive live market data about outstanding buy and sell orders, and place market and limit trade orders.
With the REST API, you can receive real-time price and indicator feeds for over 200 different cryptocurrency trading pairs, access price charts, and view your trade history.
CEX.IO offers over 200 cryptocurrency trading pairs with a 0% maker fee if you can manage to generate a volume of $10 million per month.
For a complete and detailed breakdown of the trading fee schedule at CEX.IO, including deposit and withdrawal fees, please visit this link – https://cex.io/fee-schedule
After a trading bot successfully connects to a crypto exchange, it starts watching the market based on your input conditions. Once a condition is met, the bot can either inform you to take action or take the required buy or sell action directly by itself.
User interfaces for crypto trading bots
Crypto trading bots have different user interface types. Some come in the form of web browser plug-ins, while others consist of a downloadable application. There are also trading bots that directly operate on cryptocurrency exchanges.
Although some bots are free to use, others require a substantial fee to subscribe and deploy.
What is the best crypto trading bot?
The best trading bot platforms should allow as much customization as possible to be able to fully integrate your trade strategies and conditions. This means they need to offer all the important and commonly used technical indicators while providing charting capabilities.
Crypto trading bots also need to ensure fast, uninterrupted, and secure connectivity to crypto exchanges as well as other data sourcing platforms that they connect to.
Another functionality commonly demanded by traders is the availability of social trading. Social trading refers to observing the trades of other people who choose to share their trading activities on the platform. This allows you to copy the trading strategies of traders whom you find to be successful.
What to look for when choosing a bot
Since crypto markets are open around the clock, it could cost you lucrative trading opportunities if your trading bot keeps losing connection. Due to this, it is critical to pick a crypto or Bitcoin trading bot that is developed by a tried and trusted software company.
As your bot has access to the funds on your exchange account, picking a shady trading bot could easily result in losing your funds when some malignant party breaks into the bot. Again, picking a product that is offered by a reputable company is critical here.
If you are a less experienced trader, you may opt for a trading bot that is known for its simple user interface. You can try to find a bot with an intuitive interface and simple controls.
Making profits is the whole point of using trading bots. The best crypto trading bots in the industry generate the best profits for their users. Do some research into the profitability of a bot before using it. Reliable companies usually provide information on the track record of their trading bots.
Source: Home Banker’s Club
Best crypto trading bots
Some of the best crypto trading bots in the market include Shrimpy.io, HaasOnline, Trailingcrypto, Alpha Bot, and CryptoView.
Shrimpy.io – Best for beginners
Shrimpy offers an automated trading tool as well as a portfolio management platform. Using Shrimpy.io, you can trade and track portfolios across multiple exchanges from a single platform including the CEX.IO exchange.
There are many indicators and formulas on Shrimpy to incorporate into your trading strategies.
Shrimpy is known to be the best trading bot for beginners because of its backtesting capabilities. Backtesting tests the performance of your trading strategies based on historical data.
On the other hand, Shrimpy lets you social trade by following the trades of other users, which is another welcoming feature for novice traders. This also helps experienced traders to earn commissions by sharing their trades.
In terms of fees, Shrimpy.io offers three different plans – Starter ($15 per month), Professional ($63 per month), and Enterprise ($299 per month).
The main difference among these pricing plans consists of the refreshing interval for live data and the number of exchange accounts you can connect.
Please note that to connect to the CEX.IO API, you need to purchase the Professional plan.
For more information about the trading bot plans, you can visit Shrimpy’s pricing page.
HaasOnline – Best for advanced traders
HaasOnline is one of the oldest and most reputable crypto trading bots. It is widely preferred by leveraged Bitcoin traders which makes it a more advanced bot compared to Shrimpy.io.
HaasOnline provides API connectivity for 24 different exchanges including CEX.IO.
Unlike Shrimpy, HaasOnline keeps your data and codes private. It also offers the necessary tools for arbitrage trading.
In addition to the commonly used technical indicators, you can create your own indicators on HaasOnline while using custom dashboards to monitor your trading bots and market movements.
Trailingcrypto – Best for different order types
Trailingcrypto offers the largest array of order types across all supported exchanges including CEX.IO.
Additional order types on Trailingcrypto in addition to the standard limit and market orders include trailing stop and take profit orders, OSO (Order Sends Order) and OCO (Order Cancels Order) orders, and bracket orders.
Paid plans are cheap on Trailingcrypto compared to its competition. There is only a $5 monthly fee for the paid plan.
Alpha Bot – Best for price charts
Alpha is best known for its charting capabilities as it deploys Tradingview charts. Additionally, it is the most commonly used trading bot on Discord.
You can easily add technical indicators, change timeframes and candle types, and draw both horizontal and diagonal support and resistance on Alpha charts. These charts can then be integrated into rules and conditions for the trading bots.
You can connect Alpha bots to CEX.IO by using the WebSocket API.
CryptoView – Best for portfolio automation
The primary purpose of CryptoView is to provide its users with an all-in-one interface that provides accurate portfolio allocation in response to changing market conditions.
Some unique features of CryptoView include a multi-source news aggregator and a crypto event schedule, which can be incorporated into your cryptocurrency trading strategies. With the news aggregator and the event schedule, you can program trading bots to scan news and monitor the dates of various crypto events to add to their buy and sell decision-making processes.
CryptoView has one of the simplest registration processes where you can create and register an account with just a few clicks. CryptoView offers a free 30-day trial upon registering.
How to set up a Bitcoin trading bot
To set up a cryptocurrency or Bitcoin trading bot, you can follow the steps below as a general guideline:
2. List the crypto exchanges: List all of the cryptocurrency exchanges that you would like your trading bots to trade on.
3. Create accounts on exchanges: Create an account on the exchanges that your bots will trade. To use CEX.IO, you must register for an account either on the browser website or via the mobile app. You can download the app from the Google Play Store or the Apple Store.
4. Choose your trading bot: Before starting the coding process, you need to decide what type of trading you would like your bot(s) to conduct – trend trading, arbitrage trading, market making, etc.
5. Create your algorithms: Convert all your trading formulas and conditions into algorithms written in the trading bot’s language. If you do not have any previous coding experience, you may want to find and work with software developers that have the necessary experience.
6. Test your code: When coding is finished, it is time to test your trading strategies and make sure that your bot is working seamlessly, not crashing, or giving errors. You should also check if the bot can handle complex data by backtesting the code with historical data.
7. Connect your bot to exchanges: Sign in to your trading bot account (Shrimpy, HaasOnline, Alpha Bot, etc.) and select the crypto exchange you want to connect to. To establish a connection with the exchange, you need an API key and a secret key that you generate on your exchange account.
How to use a crypto trading API
To use a crypto trading API, you need to generate an API key on your cryptocurrency exchange account. It is very simple to generate API keys on CEX.IO. Just follow these four simple steps to get your key and activate your API:
- Scroll to the Profile symbol on the top right corner of your CEX.IO account homepage and click on API in the dropdown menu.
2. On the next page, select the functions and data streams you want to import – place order, cancel order, account balance, open orders. Once you are done selecting, click on the Generate Key button.
3. Clicking the Generate Key button generates your API key. You will see on the table below the button, a Key and a Secret. You need those codes to connect your trading bot to the CEX.IO exchange.
4. Finally, click on the Activate button on the right side and finish the API setup process for your account.
The specific algorithms you need to connect to the CEX.IO REST API and WebSocket API channels can be found at this link – cex.io/cex-api
You can either copy and paste the relevant algorithms directly to your bot application, if you have NodeJS, or adapt them accordingly to your programming language.
Additionally, CEX.IO has a Github repository, where you can access all the API instructions developed in different programming languages to date. These include integrations to your trading bot in Python, Node.js, Java, and C# languages.
Use trading bots to automate your trades
Cryptocurrency markets are open around the clock and have some of the highest volatility among all asset classes. To tackle crypto volatility effectively, you need to have a high level of accuracy and speed.
Using trading bots enables you to continuously monitor thousands of cryptocurrency assets and trading pairs over multiple time frames, which would be impossible with manual screening.
If you have the expertise to develop algorithms and conditions that can automatically catch high-probability trade setups, you might then achieve the accuracy and speed required to profit consistently. This includes trend trading and arbitrage trading.
Using trading bots will also eliminate emotional trading, which is a natural consequence of manual trading. In return, you will save significant time and effort, and gain flexibility in your daily life.