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Author: Admin | 2025-04-28
A dream many people have would be to find a money printing machine and never have to work again. However, we all know that’s not possible. Still, driven by our desire to make the amount of money to never have to work again we look for high yield investments.Crypto is one of these and many who enter the space are looking for a quick way to get rich. This results in people actively trying to trade the markets and while some may be profitable the majority lose money. But despite that more and more people want to do it. However, a problem for many is the lack of time to sit staring at price charts. This is where cryptocurrency trading bots come in.What are Crypto Trading Bots?Simply put, crypto trading bots are algorithms programmed to follow certain crypto trading strategies. The simplest follow rules like “buy 1 bitcoin if the price hits $40,000”. The most complex search for different patterns and signals and then trade if all the criteria are met. To use crypto trading bots, you connect the trading bot to your exchange with something called an application program interface (API).This means that the program has access to make trades on your behalf depending on what the code says. This is a reason you must be careful with trading bots and only use trusted ones. You don’t want a trading bot to withdraw all your funds due to a malicious code hidden within the bot. However, you can put API restrictions like limiting it to only be able to buy or sell, and not withdraw. You can also limit by IP address, this means that you can set it so that only orders coming from your IP address are put through.No, there's not really a robot sitting behind a laptop. I know, I was disappointed too. Image via Shutterstock A common misinterpretation that I also fell for is that crypto trading bots are only for short-term trading. This is completely wrong since the strategies you can use with bots are completely up to you. A common use case for long-term hodlers is a bot that automatically rebalances your portfolio. cryptocurrency trading bots can also be categorized based on the underlying crypto trading strategies they use. There are three categories.First, we have signal bots. These are created by so-called experts and are based on their trading strategies and patterns. Another possibility is a signal bot created by a computer that has gone through mountains of data to distinguish different buy signals. The next feature of these bots is risk allocation, the trading bot analysis the risk and then decides how much to allocate to various positions. If you use signal bots you need to be careful since certain signals can basically be based on thin air, and it just happens that it has worked several times in the past.Signal bots are often used in momentum trading strategies, where traders aim to capitalize on the continuation of existing market trends. They
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