Tips and Tricks to Automated Cryptocurrency Trading

Handy Tips / 03.04.2021

Automated trading is a financial investment strategy where an investor uses algorithms to complete trades and make profits. The idea has been used for decades in financial markets, and the results have been great for most traders. 

Mostly, autonomous trading aids persons with less trading experience to earn in the markets. Moreover, it helps people who want to trade only part-time, say those who do other day jobs. Among the benefits include less time consuming and has higher prospects of making profits.

However, although some traders have benefited from algorithmic trading, some have not seen these benefits. If you are one of those traders, this guide will maximize income by giving you some tips to manage your automated trading. 

It would help if you Did Some Backtesting

Since you want to involve the trading bots on a live account where your money is involved, you need to do some serious backtesting of the tool before using it officially. The backtests aim to help investors understand the trading bot functionally and ensure the safety of their investments. 

When doing a backtest, you have to use your trading history and try out the bot’s functionality. Some investors make the mistake of using data for a short period and concluding that the bot or the platform works for them. It’s advised that you use platforms/bots that will allow you to connect over five-year data. Using long-time data will help you better understand the bot’s functioning and ultimately ensure your trading is efficient. 

If you compare two different bots, understand the total return from each, the number of winning trades, and other relevant data before making your choice. 

Often a backtest procedure will follow the following steps;

  • Select the market to backtest
  • Add the necessary indicators and tools.
  • Mark the entries, i.e., target profits, stop losses, etc.
  • Record your results
  • Repeat the process multiple times with different data until you are sure of the platform. 

Regular Monitoring of The Trades

Generally, the purpose of automated trading and trading bots is to ensure that your trades are made automatically without your physical presence. Some traders leave their cryptocurrency bots unattended for hours, hoping to get great results. However, autonomous trading bots require timely monitoring for utter efficiency. Why is that?

Bots are systems and algorithms that may face technological failures, low bandwidth issues, crashing programs, and mechanical failures. In some cases, these issues may cause failure in sending orders; thus, you may miss opportunities. 

On a more negative note, the bots may open orders and delay closing them due to technical issues, thus leading you to losses. Among other errors may include duplication and missing orders. 

Therefore, your presence to monitor the system will help you reduce the chances of losses and maximize your incomes by fixing technical issues once they arise. 

Start With Small Manageable Trades

Every financial and investment strategy has a learning curve before the trader masters the trading skills. Automated trading is no exception. An investor garners trading experience on autonomous systems by continually using them over time. 

Understanding the learning curve will help you start with small trades as you climb higher the racks. Don’t complicate your strategies, instead create a small, simple, and manageable strategy, then go higher slowly.   

Taking the simple approach will help you understand the strategies before investing even large amounts of money in the trades. Set fewer rules and fewer indicators, then continue adding rules as you grow. As you continue, you can add filters like stop loss, trading hours, trailing stops, take profits, etc. 

Avoid Scamming Bots

Another strong tip for a starter crypto user interested in automated trading bots is to avoid scams. Like no other time, the rate of scams in the financial world is surging, and one of the biggest losers is crypto. Investors in crypto have lost billions since crypto inception. Therefore you need to be vigilant. 

Some Platforms have fake promises of maximizing your profits by providing solid deals. However, in many instances, such platforms may be scammy. Other platforms promise super-profits for low investment. 

Consider the following factors when choosing a platform;

  • Analyzing the platform, understand the fee involved, and ask further questions about costs
  • Do further research on the internet, and see what people say about this platform. Financial websites are a good source of such information.
  • Check if the platform has the option for Demo or trial periods.
  • Read through the terms and conditions of the bot.

Among the best crypto trading, bots include Shrimpy, Cryptohopper, and 3Commas. Using one of these platforms guarantees you enhanced security, simplicity, convenience, and reliability. 

Consider the Impact of News and Announcements 

Many announcements occur daily, weekly, or monthly, which could have severe volatility effects on the market. When trading manually, it’s easy to make decisions when such announcements are made.

However, the bots are supposed to be set to note the market changes that may occur after some autonomous trading announcements. It’s good to program your system to ensure it does not open trades immediately when the announcements are made, but instead, wait some time to note the market changes. 

Final Word

Algorithmic/automated trading is one of the best trading strategies used in the financial market, especially by beginner traders. Although the systems are designed to maximize profits, various tips can help you make even more from these tools. 

One tip is doing a long backtest using historical data. Secondly, you can involve the tool in a demo account to ensure the tools are working efficiently. Moreover, you need to monitor the bots and ensure you work with manageable trades. Other tips include avoiding scams and considering the impact of news on the markets. 

Considering the tips mentioned above and tricks will help increase profits. Don’t forget to check our crypto trading bots page for a curated list of cryptocurrency bots.

Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.