Trading is one of those things where we beat ourselves up for losing and then beat ourselves up again for not remaining long enough in a lucrative market before the downturn phase because we allow our emotions to get in the way.
Cryptocurrency markets are quite volatile. Traders can use algorithmic trading to control their risk and resources while taking advantage of changes that algorithms can exploit. Most algorithmic trading approaches try to make money by using an efficient and dependable trading algorithm.
“Algorithmic trading” also refers to a computer program that executes transactions according to rules or instructions rather than a human trader. With the emergence of simple trading bot programs, algorithmic trading has become the most profitable trading strategy. You can visit our article about top 10 crypto currency platforms that pays to learn about the best crypto platforms.
Because algorithmic trading systems are designed to maximize profit while minimizing human error. Automated trading algorithms can instantly assess market circumstances and take action without human bias. See top 10 cryptocurrencies that you can trade in.
Algorithmic trading uses computer programs to forecast market direction. This type of trading automation is commonly used in forex, stocks, cryptocurrencies, and other financial markets. Regardless of the assets you trade, understanding Algorithmic Trading principles can be quite beneficial. Investing can be made easier using automated trading software. You can read about the top 10 NFT crypto coin in our article
The Pros of Crypto Algorithm Trading
With automated trading, there is no need for human emotions, tension or doubt (meaning that you get to beat yourself up fewer times). You can also test the methods using historical data and a virtual account before putting your money at risk.
These techniques can be programmed into a trading bot that will trade for you 24 hours a day, 7 days a week. Finally, to maximize your strategy’s effectiveness and profit, you can experiment with the parameters. Learn about crypto mining for beginners in our article
The Cons of Crypto Algorithm Trading
Proficiency in a certain programming language: Complex algorithms necessitate substantial knowledge of coding software such as C+, C++, Java, Python, R, and others. Technical information may be unfamiliar to finance professionals.
It is also not a viable option to have the code done by a third party because it may require regular changes to reflect current market conditions. A solid programming foundation is required.
Reliance on technology: Faulty algorithms can cause the trader overwhelming losses.
Short life span: In diverse market conditions, not all algorithms perform well. Because of the inherent volatility of crypto markets, it is vital to quickly adapt to the shifting landscape. The development of algorithms and strategies is a continuous process that includes regular monitoring, improvement, and re-invention in response to market conditions.
Lots of resources are required: A trader must plan for significant high-end resources as well as low-latency infrastructure.
The dangers of over-optimization: Even if a strategy has been fully backtested, it may fail to perform in real trading. Back-tested data may represent a certain market era or environment that is completely unrelated to the current scenario. There is always the risk that the program will be over-trained to meet particular trends, which is known as the risk of over-optimization.
The Fundamentals of Crypto Algorithm Trading
Automated trading begins with acquiring essential trading tools. Without a registered account on a cryptocurrency exchange, you can only test hypothetical trades. You must have an exchange account to earn money.
Most major cryptocurrency exchanges, such as Binance, Coinbase, ByBit, and FTX, have APIs that enable third-party applications to use their trading functions. An API, or application programming interface, is a technique for allowing other programs to access the functionality of your software.
For example, the majority of large exchanges have an API that enables programmers to create code that opens and closes trades via your account. You’ll need a one-of-a-kind API key to connect your account to a bot platform. The next step is to obtain your bot, which can be developed from scratch or purchased pre-built.
Numerous platforms exist for developing algorithmic crypto trading. The platform’s features, cost, technical complexity, and exchange access vary. The following are some of the characteristics to look for in a bot platform:
When choosing an algorithmic crypto trading platform, consider accessibility. Connectivity is number two. Many algorithmic crypto trading platforms operate trading bots on their cloud servers. These servers allow you to construct, manage, and trade bots.
After ensuring enough access and connectivity to your trading account, you should consider speed. Because even the most advanced trading strategy is worthless without timely execution.
Another core characteristic is platform functionality; that is, the more features an application has, the greater its potential. Some of such features include scripting, backtesting, custom indicators, and trading strategy customisation.
After deciding on a platform, pricing will be the deciding factor. Some systems are free to use but charge for advanced functionality or a strategy marketplace. The most expensive systems offer advanced trading bot building features.
Some of the Most Popular Algorithmic Crypto Trading Platforms:
Cryptohopper is the simplest automated trading platform on our list. It is free to use and comes loaded with strategies. Additionally, it has social media features for discussing automated trading and a marketplace for trading strategies.
It’s a bit more sophisticated than Cryptohopper, but with more customization and optimization options. Coinrule uses a graphical programming interface that requires no coding knowledge. Drag and drop blocks to create a strategy that works. You can also learn from pre-built strategies.
GimmerBot is perhaps the least known trading platform on this list, yet it is proving to be profitable. GimmerBot has more advanced graphical tools for designing strategies and a hidden marketplace for renting trading algorithms from other users.
3Commas is another popular choice for automatic trading with cheap monthly fees. This platform can be used for manual or automatic trading, and it can be integrated with TradingView. 3Commas is a popular platform since it allows users to customize bots and browse other users’ strategies.
Enigma Catalyst is a programming library. It allows developers to readily access live trading, backtesting, detailed data, and the security of constructing their trading bot on their system. This is a good platform for advanced programmers, statisticians, and traders.
This is the most advanced, powerful, and secure choice. Nobody else can see your code or data if you build your crypto trading algorithm from the start. A popular option is to build an application in Visual Studio with C++ or C#. Use any language or IDE you choose as long as you can access the cryptocurrency exchange’s API.
You can learn a lot by developing your bot from scratch if you’re serious about making money and becoming an expert in the field.
How to Make Your Own Free Automated Trading Bot Without Coding
Python is the most popular programming language for constructing a trading bot. If you don’t know how to code in Python, there are other methods for creating a trading bot.
Use Capitalise.ai To Make a Free Trading Bot
Capitalise.ai (https://capitalise.ai/) is the greatest platform I’ve found for quickly developing an automated trading strategy for the FX and cryptocurrency markets.
Rather than writing code, you could simply type down your strategy in the “description” section. Compared to coding a python signal, it has fewer indicators offered, but you can still come up with highly profitable trading techniques with it.
Below is an example of a very profitable strategy.
This is the entry description for my strategy. This is a simple moving average crossover strategy, and also uses the MACD for trading with the trend direction. This strategy will enter a long trade for BTC/USDT when the 7 EMA crosses above the 12 EMA on the 5-minute chart and the 1-hour MACD is crossed up.
After making the entry rules for your strategy, the next stage is to add in the exit rules.
For this strategy the exit rules are if the 7 EMA crosses below the 12 EMA, then it will close the trade.
Backtesting Your Automated Trading Strategy
Immediately after designing a trading strategy, set it to simulate. Simulating a strategy for at least a week will allow you to test it without risking real money.
Although this was a very simple crossover trading strategy, it proved to be quite successful when it was tested for one week. This strategy was able to yield 29% profit when simulated for one week.
Connecting Your Trading Account
You can easily connect your trading account to Capitalise.ai, by navigating to the bottom left corner of the screen and clicking on the “connect trading account” button. It brings up an interface for you to input your API account keys, and voila, you’re good to go.
Creating your Auto Trading Strategy
Trading strategies are derived from two sets of analyses; quantitative and qualitative.
Qualitative analysis entails understanding the market’s psyche and perceived values. This includes news stories, social media activity, keyword frequency, overall attitude, and anything else relating to a cryptocurrency’s non-numerical features.
Quantitative analysis is the study of the market’s figures and statistics. These include moving averages, momentum, strength indices, statistical patterns, and anything else relating to a cryptocurrency’s numbers.
In conclusion, Algorithm trading in crypto involves using AI or bots to execute trades for us in the market. This saves time and classifies as passive income. With a very good trading strategy, you can cut off losses attributed to human sentiments (don’t we all have those?). Learn about crypto airdrops that pays and crypto punk in our article