What types of crypto bots are there?
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Crypto bots perform a wide range of tasks. From riding trends to scalping short term price moves, bots can be a versatile tool when trading cryptocurrency. Our beginner friendly guide explains what all these bots do and how to choose one.
What are the different types of crypto bot?
Each bot has its own trading strategy and time frame for seeing results. You can find robots for both beginners and experts, and they can be connected to most major exchanges as well as brokers that use software like MT4. Here is a list of the main types of Bitcoin bot, along with a short description of each one.
As its name suggests, this type of bot executes orders in line with a market’s current trend. Trend trading bots can use a range of different tools to help identify which way price will move, including price action and technical indicators. You can find trend trading bots that focus on both long and short term trends.
Scalping is a strategy that is used by short term traders to capitalise on small movements in a cryptocurrency’s price. Similar to trend trading bots, scalping bots use lots of tools to enter and exit the market. These bots make hundreds and sometimes thousands of trades throughout the day with many trades lasting only a few seconds.
Arbitrage bots are more complex than some other types of robot. They work by tracking price differences between two or more exchanges. Exchanges have slightly different prices and an arbitrage bot takes advantage of these differences by buying on one platform where price is low and selling on another where it is high. While popular a few years ago, the tightening of prices between exchanges has made arbitrage bots less effective these days.
Dollar cost averaging (DCA)
Dollar cost averaging is a strategy that involves buying a cryptocurrency at regular intervals. DCA bots automate this process and are particularly useful to long term investors. A DCA bot can be set up to buy a specific coin at regular specific dates in the future. It can also be programmed to buy each time there is a dip in the price.
Trading signals are used by lots of beginner traders who copy the trades of an expert. Usually a signal is sent by a provider to a subscriber via email, SMS, or Telegram. There are lots of crypto robots that automate this process. A robot can be downloaded to both the signal provider and signal users’ computers, which will immediately execute trades. This is similar to copy trading functions seen on many social trading platforms, such as eToro.
Some exchanges offer margin trading. This gives traders the ability to take a loan and open bigger positions than they have in their account balances. The same exchanges let other users lend their coins to margin traders, in exchange for interest repayments. The process of lending can be complicated and time consuming. Lending bots automate the whole process and can be set up to search for the best interest rates.
How to choose the right bitcoin bot for me?
Picking the right bot isn’t a complicated process and you can use more than one to include multiple strategies. Most bots require an initial payment or monthly subscription so you’ll need to consider fees before making your decision. Below are some of the factors that you need to take into account when choosing the right bot for you.
- Fees. Bots usually cost money to buy and some even charge monthly subscriptions. When you choose one it’s important to take costs into account as they could eat into your starting capital before trading even starts. If you already have a profitable strategy then you could consider programming your own software or finding a robot for free.
- Budget. Before you start using a bot you should make sure that your budget is able to cope with the specific strategy your automated software employs. If you have a large budget you may want to consider using a scalping robot that makes lots of trades. If on the other hand your budget is low, a trend or DCA bot may be better.
- Time. Crypto robots are designed to work automatically and generate passive income. However, they do require regular adjustments or maintenance and some need more than others. If you have very little time then you should use a bot that will need very little upkeep.
- Objective. The main objective of using automated software is to make money passively while saving time. With a bot you can earn an income or grow your capital and different bots are suited to both. If you want to earn income then you could use a scalping bot for example, or a lending bot can generate capital growth.
What are the best crypto bots to use?
Below are some of the best rated crypto trading bots around. These robots have been selected by our crypto experts and you can start using them in just a few minutes. Click on any of the links below to get started now.
What should I do now?
Now that you have some information about the different types of crypto bots, you may want to start using one. Check out our comparison table above where you can find the top rated robots around. Before you get started you should take the time to research how crypto trading bots work and how to set up and use one. We have lots of interesting guides here on Invezz which you can find by visiting our dedicated cryptocurrency section.
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