Informative
Mar 22, 25
Introduction to Crypto Trading Bots
Crypto trading is a laborious process that involves:
Monitoring multiple exchanges
Analyzing social media signals
Making trades in numerous exchanges with millisecond latency
By running automated tools to analyze the exchange(s)
And much more simultaneously!
Considering that crypto and DeFi exchanges can change hugely in seconds, you will understand that automated bots are much better suited for this process.
Automated bots have the following capacities:
They have no limit to the number of exchanges they can monitor
They can also analyze multiple social media platforms in microseconds
They can run trades simultaneously in multiple exchanges
They can use advanced algorithms that have been proven to create profits
They never need food, sleep, rest, bathroom, or holiday breaks
They are not prone to panic selling or panic buying
That is, they have no emotions, so there is a limit to the losses you can incur
They can continuously improve themselves using advanced AI technology
Open-source bots exist (mainly in Python) that are high-profit and have already been tested
When you understand this, you will wonder why we considered not using automated crypto trading bots.
This article is a step-by-step breakdown of how you can build a crypto trading bot.
I suggest you go through this article to find out the best AI-powered crypto trading bot platforms and why they are so popular for crypto trading:
Best AI Crypto Trading Bots & Platforms for Automation | Botify Updates
Botify.cloud is an emerging platform with massive potential for automated crypto trading bots, built without code!
You can go through the following gitbook to understand more about this powerful platform:
But let us learn some basic concepts first.
What is a Crypto Trading Bot?
According to BitDegree:
"A crypto trading bot is an automated program designed to execute cryptocurrency trades on behalf of its user. These bots operate based on predefined rules and strategies, enabling traders to make data-driven decisions without constant monitoring." (Source)
Automated crypto trading bots use predefined logic about market conditions to create an analysis of market signals and execute trades according to those signals.
Some of the key types of automated trading bots with their functionalities are given below:
Arbitrage Bots:
The same coins in multiple exchanges can differ in price, an automatic profitability technique.
Trend Following Bots:
Bots can follow market trends, identify momentum, and profit from the signals generated by market movements.
Market Making Bots:
When multiple buy and sell orders are placed under the correct conditions, they can ensure profitability.
Technical Analysis Bots:
Historical data and carefully analyzed signals can guide specific bots to profitable trades.
Dollar-Cost Averaging (DCA) Bots:
Investing fixed amounts at regular intervals can optimize profitability by the law of averages.
Mean Reversion Bots:
Bots that capitalize on the reversions can profit hugely when prices revert to historical trends.
Scalping Bots:
Many trades made quickly can profit from even small price changes, especially in crypto exchanges.
Momentum Trading Bots:
Following the market trends can also lead to profits in the right market conditions.
Of course, because of crypto markets' extreme volatility, stop-loss and take-profit points should be set wisely to avoid huge potential losses.
Of course, the highest chance of loss is due to human emotions, such as panic selling, so automated bots are our best solution!
You might want to consider going through the article below, which explains bot creation in simple language:
How to Build a Crypto Trading Bot? [7 Easy Steps]
We go into rich detail, which will also be helpful to anyone interested in building their crypto bots.
Planning the Creation of a Crypto Trading Bot
Every crypto bot has to be carefully planned before creation.
You must choose your budget, platform, tools, APIs, and strategy.
If you are a beginner, your best option is to purchase a high-performing bot in Botify's crypto bot marketplace and start using it.
If you want to get your feet wet in the pool of creating your bots, you need to:
Choose a strategy:
Using scalping, market making, or arbitrage bots are always good starting points.
Choose your tools:
Are you going for a no-code platform? Or will you use a programming language like Python, C++, Java, C#, Go, or Rust? Of the lot, Python is highly recommended because it has the most significant number of prebuilt libraries that you can reuse for yourself.
Finalize your budget:
Some costs are non-negotiable, like API access keys. Sometimes, platforms demand a subscription charge.
Choose your exchange:
While common choices are Binance and Kucoin, there are a large number of exchanges, both centralized and decentralized, that you can take advantage of. Do your research as far as possible (also called DYOR).
Security plan:
Hackers and scams are common in this sector. Make sure your exchange encrypts your API keys. Enable 2-factor authentication (2FA) everywhere and monitor deployed agents.
Sometimes, using your highly secured server can be helpful, especially if trading in high amounts. But you need a lot of technical expertise for that.
So now, we finally come to the real meat of this article:
A Step-by-Step Guide to Build a Crypto Trading Bot
\Step 1: Define Your Trading Goals and Strategy
Outline your goals. Are you here for the long term or want a quick profit? Knowing your strategy is the key to building an effective bot.
Choose your strategy. You can choose one, two, or a combination of the strategies given above, but ideally, not more than one because one bot needs one objective; otherwise, the logic could clash.
How much capital are you willing to risk? A good principle is never to trade more than you can afford to lose. Ideally, start with a small amount and build up gradually and incrementally, and regularly withdraw from your profits.
Step 2: Select Your Exchanges and Test Their APIs
You can choose from a wide variety of centralized and decentralized exchanges. Just make sure that they have good documentation. Binance is a good starting point.
Factor in the trading fees along with the number of trades you plan to make every day. Favor platforms like Pionex, which have no subscription fee.
Check API Key security, understand the best practices for API Key limits for your platforms, and follow those practices. Test all API Keys using tools like Postman or the command line. Ensure API Keys are never stored in plain-text format on your trading platform.
For more on APIs, check out this page:
Step 3: Choose Your Approach: Code, Low-Code, or No-Code?
We strongly recommend Python if you choose to code. Create a virtual environment, use a good IDE like PyCharm, install libraries like ccxt, TALib, and pandas, to mention some basic options, and use Git for version control.
Low-code platforms are also an option if you know the basics of coding. Several low-code platforms exist that can be used to automate and create your crypto trading bot.
Finally, the cream of the crop: No-Code platforms. These platforms allow you to create crypto bots within a drag-and-drop interface and even manage your API keys. We strongly recommend Botify.cloud as a leader in this sector.
Step 4: Create the Core Bot Logic
First, connect, verify, and authenticate your API keys. Please make sure they are operational with some dummy transactions. This is the first step, regardless of your code level.
Choose and implement your trading strategy in whatever code or no-code platform you use. Creating different bots for different methods is good practice unless you are using advanced machine learning or ensembling.
Make sure you handle all errors. Of course, no-code platforms do this automatically sometimes, but familiarize yourself with detailed research and try to handle every error that can arise because mistakes will occur.
Step 5: Implement Data Analysis and Signal Generation
Collect market data to analyze for trading signals and technical indicators like MACD, RSI, and Moving Averages (ChatGPT to the rescue if you don’t know the term).
Based on the signals, execute our trading strategy in code if necessary, depending on the platform used. For no-code platforms, you just need to configure the settings in a graphical development environment.
Choose your portfolio's level of risk (choose wisely, do not be too pessimistic or too optimistic: find the middle ground and optimize according to market performance). Implement take-profit and stop-loss limits, but be prepared to change them according to the market's nature later on.
Step 6: Backtesting and Simulation
Using historical data, backtest the bot you created or generated. Check for performance and conduct testing in all types of markets. There are tools available for you to perform backtesting efficiently.
Analyze backtesting results and optimize strategy parameters. Fine-tune those parameters (e.g., indicator settings, thresholds) based on backtesting results, but do not depend too much on backtesting performance. The actual performance in live markets could degrade because of overfitting(Google it).
Use a realistic simulation environment and a customized sandbox to trade with paper cash before deployment. Perform market performance testing every day of the last 50 days in 10-day interval gaps, so 5 days. Use a sandbox environment to test bot performance without risking money.
Step 7: Paper Trading and Live Testing (Gradual Rollout)
This is a continuation of the last step. Start with paper testing. Gradually roll out high-performing agents with limited money (gradual rollout).
Do not roll out one single bot with all your money on it! Start small and increase only if performance is good. Always use several bots with various strategies and diversify your holding portfolio to decrease market volatility risks.
As performance improves, gradually increase the size of your trades. This requires monitoring and adjusting bot parameters, so expect a lot of adjustment and optimization. There is no Deploy and Forget stage. Expect to Deploy and Monitor.
Step 8: Continuous Monitoring and Alerting System
Implement dashboards to monitor all bot performance metrics and set up customized alerts and notifications at all critical events like errors, market fluctuations, or profit/loss limits.
To monitor your bot's performance continuously, maintain complete logging systems, and set up a full report of the entire day’s trading. Document all parameter and risk limit values. This information will be invaluable when you review and optimize performance.
Even with automation, there will be times when you have to intervene manually. This is especially true in the initial stages. Even the best bots require adjustment and monitoring at all levels of trading maturity (if such a term exists).
Step 9: Optimization and Feature Enhancement
Using the documentation in the last step, optimize your bot by A/B testing (Google it) on your best-performing parameter values.
Expand incrementally and gradually expand the scope of your bot. With multiple bots, select the ones that perform the best and add features to them one at a time, constantly testing in production before adding the next feature.
Stay updated with market and cryptocurrency information, market parameters, and bot performance, and always document, document, and document everything in a cloud workspace like Notion or Airtable.
Step 10: Security, Risk Management, and Continuous Monitoring
Store API keys securely, never store them in plain text code, and use environment variables whenever possible to ensure critical data never leaves your system. A hacker with your API keys can siphon away all your profits!
Adjust your stop-loss and take-profit values constantly to take advantage of market trends.
Remember that small profits are the way to great wealth. Gambling in large amounts can also lead to significant losses. Always be incremental and test your strategies to make data-driven decisions. This is where the documentation process will be handy.
Crypto markets are highly volatile and unpredictable. Continuous monitoring is essential. You must actively monitor your bot's performance, react to alerts, and make adjustments or even stop the bot if needed.
Market conditions change, and unexpected events can occur. Consistent monitoring and proactive management are vital for the safety of your financial success in trading.
Reading the article below would be helpful for your knowledge of the crypto bot sector:
How to Make a Crypto Trading Bot | Koinly
No-Code Solutions for Crypto Trading Bots
Of course, not all crypto platforms require so much expertise.
Several online platforms enable you to create crypto trading bots without any coding knowledge.
A basic knowledge of the crypto market and trading strategies is a huge plus.
However, with platforms like Botify.cloud, one can purchase a high-performing bot and deploy it to the market for high profitability with minimal effort.
No-code and low-code tools offer several advantages, such as:
1. Accessibility and Ease of Use:
User-friendliness is the main advantage of low-code platforms. They effectively democratize crypto bot creation.
2. Speed and Efficiency:
Setting a bot up on a no-code platform is 10x times faster than manual coding. This also allows for iterative cycles, effectively removing the technical knowledge barrier to bot creation.
4. Cost-Effectiveness:
Some no-code platforms do not have a subscription fee but merely take a percentage of your profit. Furthermore, deploying and managing bots with no-code dashboards is much easier than using code.
5. Pre-built Strategies and Templates:
Many no-code platforms, such as Boitfy.cloud, have pre-built templates for everything from high-performance stock trading bots to utility bots that help you monitor performance. This is a huge game-changer for crypto trading democratization.
6. Platform Support and Community:
Most no-code platforms offer a supportive and helpful community, a library of tutorials, and even YouTube channels dedicated to helping users. For example, you can join the Botify.cloud Telegram group is on the link below to access the latest updates.
Telegram: Contact @botifycloud
You can read the blog below for what makes Botify.cloud so unique among all the other no-code platforms out there:
The Future of Tokenized Crypto Bot Marketplaces | Botify Updates
Avoiding Scams
While you can trust Botify.cloud, scams are rife in the crypto sector.
Here are some best practices for you to identify scams in the crypto space:
Conduct Thorough Research On Your Platform of Choice
Investigate the bot's background, team, and reviews.
Be very careful while choosing a platform that you can use freely.
Do all necessary research (DYOR).
Be Skeptical of Unrealistic Offers
Avoid all offers that sound too good to be true because they usually are!
Free bots with guaranteed returns are usually scams; it takes effort to create genuinely profitable bots.
The crypt trading space is highly competitive.
Secure Your Accounts with Additional Security Features
Enable 2FA (Two-Factor Authentication) and Google Authenticator everywhere
Use secret API keys and ensure the API keys are encrypted on your platform
Several crypto platforms have faced issues when storing API keys in plaintext.
Start Small and Gradually Build Your Capital
Before committing large sums, test the bot with small investments and build your bot incrementally, testing every new change.
This is a good practice for all crypto bots and investments.
Make sure the testing is thorough. Crypto markets are volatile and experience extreme change often.
Monitor the Activity Of Your Bot Multiple Times a Day
Regularly monitor the bot's activity for suspicious patterns and always go through the generated daily report.
Inform the platform's support team if you notice anything unusual, and ensure they take action.
If no action is taken, you can rest assured that the platform is fraudulent.
Stay Informed About the Crypto Sector
Continuously read about new scams, developments, and trends in crypto.
Participate in forums and communities to learn from others' experiences. This is a gold mine where you can find unfiltered and genuine information.
Use Reddit to search for keywords like the platform name. Subreddits in your coin name are also a highly reliable source of information.
Use Secure Exchanges and Platforms
Only use platforms with strong security measures, such as 2FA, and secure encryption of all critical information, especially API keys (we don't mind repeating this because it is critical)!
If necessary, create a Google alert on your platform's name to receive additional email updates on all developments and news about the platform.
This article also has helpful updates on building crypto bots:
How to Create a Crypto Trading Bot: A Comprehensive Guide
Finally, it's time for commonly asked questions as we wrap up!
FAQs
Do cryptocurrency trading bots make profits?
While the crypto market is fiercely competitive and many people worldwide are competing for the best strategies, yes, making substantial profits with AI-powered crypto bots is possible.
Do these crypto bots pose risks?
All crypto investing has an inherent risk because of the volatility of the platform. However, when suitable stop-loss limits are put in place, crypto bots can be safer than depending upon humans thanks to the 24x7x365 nature of the industry,
Is there a free AI trading bot?
Yes, free trade is a common open-source bot that can be controlled via Telegram and is free. Some no-code platforms do not charge subscription fees. The GitHub repository below contains more information:
bot crypto-io/awesome-crypto-trading-bots: Awesome crypto trading bots
How much would it cost to create a Crypto Trading Bot?
It depends upon the platform and the features you want for your trading bot, but many platforms offer basic crypto bots for free, and most platforms (if not all) have limited free plans.
Are crypto trading bots profitable?
With enough research, monitoring, and optimization, crypto bots can be highly profitable. The best path to high profits is to start small and build incrementally.
What is the best crypto trading bot for beginners?
Arbitrage bots are a good way to start because the concept is simple, and all crypto bot platforms have free arbitrage bots. Try them out for yourself and see. Remember, start small.
Do I need coding skills to create a crypto trading bot?
Once upon a time, it would have been yes, but no. The answer is no. Several platforms like Botify.cloud enable you to roll out crypto trading bots without coding. However, for advanced machine learning capabilities, coding in Python is required. However, using simple strategies and diversifying your portfolio can generate higher returns than a single all-in-one customized crypto bot.
Is it safe to use a crypto trading bot?
Without stop-loss and correct limits, it would not be safe. But now, even no-code platforms have the stop-loss feature built into their configuration settings in the no-code bot builder. The answer is that it is safe if you follow best practices. And always Do Your Research. (DYOR)
The End of the Beginning Of Your Crypto Journey
So now you have a comprehensive understanding of what it takes to create an automated crypto bot.
We also believe that you understand how simple the process can be with Botify.cloud.
Please check out the following steps on this journey and understand how Botify simplifies crypto reading at a very high level.
Sign up for Botify and start creating your crypto bots today.
To better understand what Botify can do for you, check out the blog below:
What Shopify Got Right & How Botify Is Innovating Automation | Botify Updates
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