Many novices without any prior exposure to the crypto industry often become disheartened by the market after trying to trade manually for some time. While it is possible to build wealth and be successful without using any automation, people who don’t usually put themselves at a significant disadvantage.
You should consider running a trading bot crypto enthusiasts usually suggest. It is hugely important for newcomers to learn about automation. Current trends in the market indicate that the prevalence of automated trading will continue growing as more and more retail traders become adept at using bots to optimize profitability and increase the efficiency of their investment activities.
What is a trading bot?
Just a year ago, many people believed that the extent to which the automation industry will expand will be forever limited by relatively simple scripts executing algorithms defined by users. However, the recent developments in machine learning and the advancements in cloud technologies (mostly its ability to run complex machine learning algorithms) made it clear that automation is more than just a sum of its parts.
AI-assisted trading will be the next logical step for the industry. Some companies like WunderTrading already have solutions powered by expert artificial intelligence systems. Advanced trading strategies that use some principles of statistical arbitrage can be launched without any involvement on the part of the investor aside from some initial tinkering with settings.
While the prospect of using expert AI systems to make money consistently seems appealing, newcomers should start with learning how to efficiently use crypto trading bots in their portfolios.
Usually, when people say “trading bot” they mean a system that often consists of three distinct components:
- A trigger that initiates algorithms. It is usually a trading signal generated by a technical analysis strategy deployed on the TradingView platform or provided by a specialized vendor. Scripts can be triggered manually, but more and more traders prefer using signal providers or technical indicators.
- A script that executes an algorithm. When your software or an automation platform receives a trading signal, it initiates a sequence of events that are predefined by user. It is a robot that communicates with a centralized crypto exchange via API.
- A CEX platform. Here, a trading bot executes its commands. A centralized exchange must have a functional API (almost all CEX platforms do) and have the necessary assets.
As you see, a provider of automation services is just a part of a bigger system. Nevertheless, it is hugely important to choose a good automation platform to work with as it is often responsible for many technical aspects of your automated trading system. Server stability, software consistency, and many other important technicalities should be sorted out by your vendor.
How to create an account and connect your exchange to WunderTrading
One of the best automation vendors in the cryptocurrency market is WunderTrading. It is quite easy to set up an account and launch an automated trading system using this platform. The whole process takes just a couple of simple steps:
- Go to the WunderTrading website and create a new account.
- After your first login, you will be asked by the system to connect an existing CEX account.
- Go to the centralized exchange, login and get your API key.
- Use the API key to connect your exchange account where bots will place orders.
- In the WunderTrading dashboard look for “My Bots” or create a new Signal or GRID bot from the side menu.
- Follow the instructions and launch your first bot.
Note that if you do not plan to use the services of dedicated trading signal providers, you will need to either trigger bots manually or use a technical analysis strategy at TradingView. For the best experience, it is recommended to create an account with TradingView and purchase a paid plan.
Using crypto bot trading strategies safely
The main concern of any individual investor is the safety of their portfolio. Risk management is a hugely important skill to learn. The WunderTrading platform offers you a wide range of risk mitigation tools that you should use for all bots.
When you create a new bot, you will be able to adjust settings and choose some parameters of your automated trading system. While there are many interesting features to work with, you need to pay extra attention to several important settings:
- Delayed orders. Stop-loss and Take-profit are types of delayed orders that close a market position when the price reaches a certain threshold. Take profit determines your profitability goals. You can close profitable trades manually, but using a TP order is still recommended to lock in profits consistently. SL orders are designed to prevent unsustainable losses and reduce the exposure of your market positions to risks associated with unexpected price changes that may cause financial damage.
- Market position size. An automated crypto trading bot does not care about the limitations of your portfolio if you do not prevent it from using all available assets. It is a good idea to limit market positions to just 1% — 2% of your total portfolio size, but you may increase or decrease this threshold depending on your risk tolerance and investment preferences.
Remember to diversify your investments. Relying solely on bots is a risky proposition that may turn into a disaster if something goes wrong in the market. Splitting your capital and allocating it across multiple asset classes is a preferable approach for many investors, but it is possible to diversify with only automation products.
For example, WunderTrading offers you an opportunity to invest in copy trading, AI-assisted statistical arbitrage, DCA bots, GRID bots, and many other forms of automated trading systems. Some of them have lower overall risk (like DCA and GRID). Some promise bigger returns but may present a significant level of risk (aggressive copied retail traders are a good example).
Regardless of your preferences and risk style, you can find a good combination of automation products to build a robust portfolio. Newcomers are encouraged to use demo accounts and study ways to preemptively test their investment strategies.
