Advantages & Disadvantages of using a Crypto Trading Bot

4 minutes read

Crypto trading bots are automated crypto trading tools used for executing trades without human intervention. These software programs execute functions using artificial intelligence based on pre-established parameters. It’s like hiring an expert to do crypto trading for you while you can sit back and watch the profit grow.

Although bots can trade for us, we have to understand the advantages and disadvantages of using a crypto trading bot. Even, not every bot is useful for every level of trader or investor. As there are advantages of using a crypto bot, there may be some drawbacks for some traders or in case we do not use it properly.

So, here are some pros and cons of using an automated crypto trading bot:

Advantages of Crypto Trading Bot

Emotionless trading

Emotionless trading is perhaps the main advantage of using a crypto bot. Investors are humans with different kinds of emotions attached to the cryptocurrency market. Being a highly volatile market, cryptocurrency trading is very risky to deal with emotional attachments.

It’s common to hear that more than 80% of traders lose money due to a variety of factors. Trading volatile cryptocurrency is an emotional business, and emotions lead to mistakes in judgment. Our emotional moods can affect up to 39% of manual trades, causing us to make irrational judgments. It’s just basic human psychology.

Robots operate orders of magnitude quicker than a human’s thinking time plus reaction time. Thus, one of the pros of crypto trading bots is that these bots lack emotional attachment — and have fewer chances of errors.

24/7 Trade

Everyone wants to earn even while sleeping, working, or enjoying other hobbies. Considering the fact that the crypto market runs 24/7, traders tend to set up bots to work while they’re asleep or at work, and can’t tend to their portfolio. No human can work 24 a day throughout the month and year without any rest. But with the help of a bot, you can trade 24/7/30.

A crypto bot works even when you are sleeping. A bot doesn’t get tired and never asks for rest or sleep. It can trade for you in case of a market pump or dump. You don’t have to look every time at the graphs.

So, a continuous trade without any break is another great advantage of using crypto bots.

By using a crypto bot, you are out of FOMO. You are out of getting worried as trading is not your headache.

Exceptional Speed and Efficiency

Time is money. And when it comes to speed, bots just outperform humans: they can do millions of computations and thousands of transactions across several time zones and marketplaces relatively quickly. Trades are executed in a fraction of a second – considerably quicker than any individual trader can.

Due to their multitasking capabilities, cryptocurrency trading bots have made the process of cryptocurrency trading more efficient, while also giving investors abundant possibilities and data analysis for making informed judgments at critical times. Robots operate magnitudes faster than a human’s thinking time plus reaction time. Thus, you can trade many coins at a time using a crypto bot that a human can’t.

Bots don’t have a Limit

Bots, like humans, have no boundaries in terms of speed and efficiency. Bots are capable of processing terabytes of data every second. Humans just cannot digest that much info in that amount of time. Humans can excel in certain areas, most notably with subjective reasoning.

A bot can monitor and trade a huge number of pairs at the same time across multiple exchanges which a human can’t do manually.

Bots Made Trading Simplest

Crypto trading bots have made cryptocurrency trading more efficient due to their multitasking capabilities, while also offering investors sufficient opportunity and data analysis for making informed selections at critical periods.

You don’t have to fully understand the crypto market trading strategies exchange policies, market analysis by reading charts, and other crypto-related factors. Just join a crypto bot and start your crypto journey. That’s why it is suitable for beginners and inexperienced traders.

Backtesting and paper trading

Backtesting and paper trading with trading bots allow you to leverage the power of historical data to simulate the feasibility of a certain trading strategy or pricing model. The goal is not to predict the future (after all, we’d all be rich by now), but rather to estimate how well (or poorly) a certain trading strategy is expected to perform based on previous data.

Armed with a reliable backtesting tool and an accurate set of data, you can explore new strategies, add expertise and build confidence before you’re ready to put your money on the line.

Disadvantages of Crypto Trading Bot

Not Suitable for Experts

Also, crypto trading bots aren’t generally used for expert-level traders. An expert trader can manually gain high profit as compared to a bot which is predefined.

For one, most provide only marginal returns, making them disadvantageous for experienced traders who can use their knowledge to boost their gains.

Some Supervision is Still Required

For some bots, While cryptocurrency trading bots automate a lot of repetitive tasks, you’ll still need to check in regularly. You can’t leave the bot to work independently forever without monitoring it.

It will not think for you. A trading bot can only be as smart as the person who built or configured it and it will only expect a set of actions to perform and will repeat those actions, nothing more.

Ony Work on Predefined Strategies

Because the crypto market is so unpredictable, it’s hard to correctly build trading bots to consistently perform the way they should in a deal. If there is a significant market crash or a circumstance that a robot has not been designed for, it may make the wrong judgment, putting your capital in danger.

Final Thoughts

Although crypto bots have a few disadvantages, these bots are very handy for beginners-level traders and for those who can’t invest their full time in analyzing crypto markets. Using a crypto bot is suggested as it is not risky.

Bits Leader

4 minutes read