A Guide on the Limitations of Cryptocurrency Bots Trading

Handy Tips / 19.04.2021

Unlike other currencies, cryptocurrency is famous for its excessive volatility due to new developments, uncertainties, and speculation. This inhibits the efficiency of traders in several ways. Fortunately, we have automated tools such as trading bots that execute transactions and trades on your behalf.

The cryptocurrency market never sleeps. It continually presents various opportunities for trade and profit. This contributed to the development of automated bots that make trading easier because we cannot always be glued to the screen. Thus, in this guide, we focus on precisely the hindrances of using trading bots.

How Bots Work

To understand the challenges that come with trading bots, we need to understand how they work. The two main types of bots are free and subscribable programs. Most bots have standard charges for their services.

Investors seek out bots that suit their needs and are most profitable to them. Bots work with an API (Application Programming Interface) by communicating with exchanges to implement or generate commands on behalf of a buyer or seller. They apply to custom or traditional indicators, and often, a platform will either present predetermined settings or trading tactics used by other traders.

Bots can be beneficial, but different traders still argue whether they should be allowed in crypto trading. However, investors ought to have substantial background knowledge on trading to maximize the output of a bot. However helpful they may be, these bots should not be used as a solid alternative for good investment strategies.

A common misunderstanding about bots is that they are artificial intelligence. On the contrary, they cannot figure out the best trading approaches nor organize to provide the most gainful trades. Nonetheless, they are preferable because they eliminate common flaws related to human trading, such as emotional trading and transaction speed.

Disadvantages of Using Trading Bots

Some are Unprofitable

One of the main issues facing trading bots is that they only give marginal returns. In the past, some bots showed promise of high returns only to end up being scams. Always bear in mind that most trading bots are unprofitable.

Ideally, bots are meant to generate profit that is higher in risk-adjusted terms. There are many crypto trading platforms, with some even offering a market where traders can purchase bots from different users. Users should be careful to do their research and ensure that a bot is tested first with an amount one can afford to lose.

Algorithmic transactions can be very profitable. Nonetheless, the issue is the massive disconnect between the knowledge level of profit-making investors and hackers who code these sorts of trading bots and sell them to the public.

Similarly, we find traders who assume that using someone else’s tactic will provide the best results. Unfortunately, this is not advisable. A trading tactic that works for one person may not work for the other. Thus each person should find their approach to find what works best for them.


Most bots have charges for their services. Even if a bot is worth, the price, not every trader can afford it, especially if they are beginners or simply an average user. Getting one at an affordable price can earn you an expensive monthly or annual subscription.

Some of the most reliable bots are difficult to get. It is important to consider all options before paying for an expensive subscription. After all, some trading bots are just after your hard-earned money and not to generate profits.

Requires Experience and Knowledge

Most importantly, for a user to benefit from a bot, they need to have in-depth knowledge of the cryptocurrency market and a great backup investment strategy. Some investors only use bots not as an alternative but as an aid to trading. A basic understanding of coding is necessary with bots because it allows you to tailor your preferences.

Traders should bear in mind that bots space is not regulated like the cryptocurrency world. However, even those with little information can use bots for profitable trading, but they tend to rely on sheer luck most of the time to succeed. These bots still require to be checked often to ensure that they are working optimally and generating profits.

Security Weaknesses

Online hackers or cybercriminals stay away from blockchains as they are highly secure. Most crypto trades in the modern day are safer thanks to crypto mixing services and the decentralized nature of transactions. However, there is a chance that hackers could decide to try out a trading bot’s platform.

The unfortunate danger of identity theft, phishing, loss of funds, and sensitive data such as passwords and location. Users can reduce such inherent risks by deactivating withdrawal permission and also guarding their API passwords with determination.

Mechanical Failures

The principle behind trading bots’ operation may seem straightforward: download and set up the software, pre-set the rules, and watch it execute trades. In the real sense, bots are complicated to use. Depending on the type of bot, a trade could reside on a server or computer.

The main cause related to a bots mechanical failure is loss of Internet. Losing connection may cause some orders not to be sent to the servers. There may also be an inconsistency between theoretical trades created by strategies and order entry platforms that varieties them into actual trades.


The world of cryptocurrency can be confusing for many people. Researching to find the best bots while fully equipped with knowledge and experience in trading will see you succeed in bot trading.

Moreover, it is important to choose a trading bot that will deliver a service customized to your preferences. Not all bots are the same, and not all are real! Be careful not to get scammed.

Adam is an outgoing young lad who likes adventures and discovering new things. Despite his boring life, he loves writing about cryptocurrencies and exploring what blockchain technology can do for the coming digital world where all adventures will be virtual.