Crypto Trading Bots: Do They Really Work?

A dream many people have would be to find a money printing machine and never have to work again. However, we all know that’s not possible. Still, driven by our desire to make the amount of money to never have to work again we look for high yield investments.

Crypto is one of these and many who enter the space are looking for a quick way to get rich. This results in people actively trying to trade the markets and while some may be profitable the majority lose money. But despite that more and more people want to do it. However, a problem for many is the lack of time to sit staring at price charts. This is where cryptocurrency trading bots come in.

What are Crypto Trading Bots?

Simply put, crypto trading bots are algorithms programmed to follow certain crypto trading strategies. The simplest follow rules like “buy 1 bitcoin if the price hits $40,000”. The most complex search for different patterns and signals and then trade if all the criteria are met. To use crypto trading bots, you connect the trading bot to your exchange with something called an application program interface (API).

This means that the program has access to make trades on your behalf depending on what the code says. This is a reason you must be careful with trading bots and only use trusted ones. You don’t want a trading bot to withdraw all your funds due to a malicious code hidden within the bot. However, you can put API restrictions like limiting it to only be able to buy or sell, and not withdraw. You can also limit by IP address, this means that you can set it so that only orders coming from your IP address are put through.

No, there’s not really a robot sitting behind a laptop. I know, I was disappointed too. Image via Shutterstock

A common misinterpretation that I also fell for is that crypto trading bots are only for short-term trading. This is completely wrong since the strategies you can use with bots are completely up to you. A common use case for long-term hodlers is a bot that automatically rebalances your portfolio. cryptocurrency trading bots can also be categorized based on the underlying crypto trading strategies they use. There are three categories.

First, we have signal bots. These are created by so-called experts and are based on their trading strategies and patterns. Another possibility is a signal bot created by a computer that has gone through mountains of data to distinguish different buy signals. The next feature of these bots is risk allocation, the trading bot analysis the risk and then decides how much to allocate to various positions. If you use signal bots you need to be careful since certain signals can basically be based on thin air, and it just happens that it has worked several times in the past.

The second category of trading bots is arbitrage bots. These are basically bots that take advantage of the difference in prices offered by different exchanges. If you didn’t know, the prices shown on Google or CoinMarketCap are only the average price of what is offered by different exchanges. The price difference from exchange to exchange opens the potential to make money by buying lower on one exchange and selling higher on another.

However, it isn’t as easy as it sounds. First of all, to find major differences you need to either look at low liquidity coins or low liquidity exchanges. Large-cap cryptos tend to have about the same price on high-quality exchanges which makes it unprofitable to do this when trading fees and other fees for using a bot like this are accounted for.

This results in people trying to take advantage of low liquidity exchanges which can offer vastly different prices. But, naturally using low liquidity exchanges has its own risks which is why many only lose money on this. Arbitrage bots might sound like money printing machines but just remember that they aren’t really, otherwise everyone would use them to get rich.

As you can see the price varies depending on both the exchange and trading pair. Image via CoinMarketCap

The third category is programmable bots. These are simply trading on your behalf and you can program them to conduct trades based on a certain set of rules. It can either be simple rules like the Bitcoin example used earlier, or it can be based on multiple complex indicators. If you use these right, they can work just as you would do, with the difference being that they work 24/7.

Another excellent feature with these, that many sites offer, is the possibility of backtesting. Basically, it takes the strategy that you’ve created and applies it to historical price data. And while it’s said that past performance is no indication of future success, it’s still a safe way to start.

Crypto Trading Bots Pros and Cons

We humans must sleep. This results in us missing what’s going on in the markets for about 8 hours a day. This is a significant amount of time for crypto markets, and many of us would like to capitalize on what’s going on while we’re asleep. Therefore, using these tools, which work like automated trading tools, is a brilliant way to keep us in the game while not physically being there.

For active traders, bots can take a huge burden off their shoulders. Instead of having to stare at 10 different screens at the same time to find what you’re looking for, you can just have one laptop and let the bot do the searching. If you have the bot set to do exactly the same thing you would do then what’s the difference if you do it or if you let the bot do it? And believe me, the bot will be even better than you would since we humans tend to make more errors.

One of those primary errors is that we have emotions. Many times, we do irrational things, especially when struck by fear or greed. Bots, on the other hand, are cold-hearted and only follow the instructions we gave them, which for this particular purpose is perfect.

We Humans Tend to act Irrationally in Extreme Situations Because our Emotions Take Over.

On the con side of this list, there is quite a lot to talk about. To start with, signal bots are something that Guy commented on in his Coin Bureau YouTube video on trading bots with these words “They scare the bejesus out of me”. This is because many tend to be scammy and simply don’t work.

Just think about it, if these so-called experts truly found a strategy that works like a money-printing machine, why would they have to sell it for a few hundred bucks? If you have a way to make unlimited money, I doubt if you need to sell it for insignificant amounts, not to mention how pure a heart you need to have to even think about revealing your unlimited money hack. Therefore, be careful when you see these bots being advertised as a guaranteed way to make money.

Many trading bots promise returns that are too good to be true, and they normally are, so it is good to have a healthy dose of scepticism. More people have lost money using trading bots than have profited as the high return promises also come with high risk and more accounts are blown than fortunes made.

Can’t emphasize this enough, be aware of scams!

Then when you do use a trading bot there are a few additional points of concern. To be able to use these you need to keep money on an exchange, and those of you who follow Coin Bureau on YouTube know that Guy is not a fan of this. This is because exchanges can be hacked and if they do there’s no guarantee you get your money back. On top of that, you’re giving a coded algorithm access to your exchange accounts. And yes, as mentioned earlier you do have the opportunity to restrict certain features. However, I myself fear that these may not be enough if you happen to use the wrong bot.

Lastly, one thing that’s overestimated with trading bots is how passive they are. While they may sound like passive machines that you never need to check on, they’re not. To be profitable you’ll have to constantly tweak your strategy and actively follow what’s going on. It’s not enough to once set it and then forget it. Don’t get me wrong it’s not like you have to sit and stare at a screen 10 hours a day, but you have to be alert.

1. Kucoin

Kucoin is one of the top crypto exchanges out there. According to some studies, ¼ of all crypto holders have an account on Kucoin. Being an excellent exchange, they offer a lot more features than just buying and selling, including trading bots. These bots include the following features; spot grid, DCA, futures grid, and smart rebalance. These features are extremely popular since on Kucoin there have been almost 3.4 million bots created, and the growth is not slowing down.

I bet many of you have heard about Kucoin, but here’s a look at it anyways. Image via Kucoin

The reason I included Kucoin in this list is because if you’re already using the exchange and are interested in trying a simple bot to ease your workload then Kucoin is perfect for you. It’s extremely simple to set up and it shouldn’t take more than a couple of minutes if you already have funds available on the exchange.

On top of that, it’s completely free to use these bots which is another reason this is perfect for beginners. You can also simply choose from existing trading bots and mimic those. However, be aware of falling for the trap of seeing a bot that made thousands of percent in one month. For those of you who do not use Kucoin, or want to learn more about it, I would recommend heading to the Coin Bureau YouTube channel and watch the video where Guy offers a guide on how to use Kucoin.

Exchanges such as KuCoin and OKX offer a wide array of dollar-cost-averaging DCA bots, grid trading bots and a plethora of automated trading strategies for users to take advantage of.

2. TradeSanta

TradeSanta is another popular and highly functional automated crypto trading platform. It simplifies the process by offering customizable trading bots, eliminating the need for programming skills. Looking for a guide on how to make a crypto trading bot? TradeSanta has plenty of tutorials along with plug-and-play solutions that help users easily create, manage, and adapt bots to suit their style.

For those familiar with trading bots, finding a reliable one online is like searching for a needle in a haystack. TradeSanta, a reputable player since 2018, stands out amid the clutter. With positive reviews and a proven track record, it’s a dependable choice. Remember, success hinges on chosen settings and strategy and knowing how to properly read and understand the markets.

TradeSanta caters to beginners and advanced traders alike, boasting user-friendliness and customization options.

Image via TradeSanta.com

TradeSanta has a good selection of bots and features including dollar cost averaging DCA bots and Grid trading bots, plus traders can create their own, or perhaps our favourite feature is that traders can copy top-performing bots from the best traders on the platform. TradeSanta also has one of the better mobile apps we’ve seen which is important to be able to monitor your bots on the go.

With this crypto trading bot platform, traders can choose long and short strategies, select take profit targets, have the bot trigger actions by using technical indicators, create bot templates, and of course, monitor their bot’s activities and trades in real-time. If you want to learn more about this platform be sure to check out our in-depth TradeSanta Review.

👉 Sign Up for TradeSanta!

3. Coinrule

Coinrule has been in the game since 2017 and it was founded by a group of crypto and trading enthusiasts. Their team has impressive resumes and there shouldn’t be any issues whether they know what they’re doing or not. The platform is suitable for those who trade according to well-known plans.

This is because Coinrule offers trading based on your selection from over 150 trading rules. This includes trend trading, where you’ll automatically sell coins in a downturn for coins that are trending higher. This has, according to their calculator, made their fictional investor a whopping 200% gain in just 12 months.

However, when compared to the profit of just buying and hodling Bitcoin for 12 months which is about 300% (on the 28th of September) it sounds less impressive. This is not because Coinrule is bad it’s just rather because hodling tends to win over short-term trading. But if you’re interested in automated trading based on different rules then Coinrule might be something for you.

You can try Coinrule’s calculator to see how well their strategies work. Image via Coinrule

Coinrule supports many reputable exchanges including Coinbase Pro, Binance , and Kraken. The pricing on Coinrule isn’t bad either. If you only want to try the service then lucky you, Coinrule offers a free plan for those who trade under $3,000. Then after that, you’ll have to pay $29.99 until you break the $50k mark from where you’ll start paying double the amount. However, I would recommend you start with the free plan and see whether you can turn your trading strategy into a comfortable profit.

4. Cryptohopper

I would argue that Cryptohopper is one of the most comprehensive platforms out there. First of all, they support almost all reputable exchanges. Secondly, from Cryptohopper you’ll find every bot you’ll ever need, including arbitrage. This makes it a perfect tool for more experienced traders too since you will find valuable tools here.

Perhaps the most used feature on Cryptohopper is automated trading. With this, you automate your trading based on 130+ indicators and candlestick patterns. Most of these are perfect for traders using technical analysis. You can also set up multiple indicators to be tracked at once to further improve your strategy. If for some reason you don’t have a strategy then no worries.

In Cryptohopper there’s a marketplace where you’ll find top traders you can mimic. The good thing with Cryptohopper’s marketplace is that pro traders found there have all had to submit applications to be allowed on the marketplace, this makes it a lot safer to use. Also, to test out strategies Cryptohopper offers both back-testing and paper trading so make sure to give those a try before heading into the market.

A look at Cryptohopper and all its features. Image via Cryptohopper

Other extremely popular features on Cryptohopper include the trailing features. This includes trailing stop-loss, trailing stop-buy, and trailing stop-short. The most used here is trailing stop-loss. When using this it will automatically change your stop-loss level so that it follows the upwards movement of the market.

This means that only if a coin makes a drop of 10% of the most recent price will you sell your coin, rather than the traditional way of setting a certain price on where to sell. This makes it possible for you to ride the upwards trend without having to worry about being left without any profits if you don’t manage to sell at the right price.

The only negative, but understandable thing about Cryptohopper is that you’ll have to pay to use all the features. However, there is a free plan available that doesn’t include automated trading, which I believe many of those who start using Cryptohopper will want and need.

To access this, you will have to pay a minimum of $19 a month. Luckily though, there is a free 7-day trial that I recommend you to use before making up your mind. Then if you need a shorter time frame TA or more open positions you’ll need to upgrade to either their Adventurer plan for $49 a month or their Hero plan for $99 a month. Be sure to check out our dedicated Cryptohopper review for more information about this platform.

5. Bitsgap

Bitsgap is a robust bot trading platform that offers seamless integration with multiple exchanges like KuCoin, Kraken, Binance, OKX, Bybit, and more. Like most automated trading platforms, Bitsgap supports traders looking to automate their trading, while also providing assistance with advanced trade requirements and:

  • Managing portfolios
  • Automated risk reduction strategies
  • Trade signals
  • Smart Orders
Image via Bitsgap

Bitsgap is one of the most respected players in the auto-trading industry, established all the way in 2017 and firmly headquartered in Estonia. Like many of the other mentions on this list Bitsgap offers the following bots:

  • Grid Bots– Available strategies include: Buy the dip, Flat, and Custom grid
  • DCA Bots– Available strategies include: MACD + RSI, Stochastic + Channel, Pure DCA, Custom DCA
  • Futures Bots- Long and Short strategies available

Bitsgap is also great for traders who are not interested in bots, but need advanced order functionality as the platform offers Smart Orders. This feature allows traders to set things like trailing stop losses and trailing take profits, set scaled orders, and more. We cover Bitsgap in more detail in our Bitsgap review.

Crypto Trading Bots Review: Conclusion

Hopefully, you now understand both the benefits and the risks of using an automatic cryptocurrency trading bot and how they can help with your crypto trading strategies. As with everything in life you need to address the risk/reward ratio. Using scammy bots from unreputable people doesn’t have a risk/reward ratio you want to be playing around with. On the other hand, using an automated DCA bot or a bot that trades based on the same strategies you use when normally trading isn’t necessarily a bad idea if you use reputable sites.

Furthermore, about the sites, these are just my suggestions. There are many other sites available and for the most advanced out there you can even program your own bots if you know how to code. The sites I listed here are simply reputable and have good and user-friendly interfaces which makes them suitable for beginners.

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And lastly, all these sites do offer much more than what I’ve listed here. So, before using any of these I recommend you head on to their websites to do some further research on whether the site truly offers what you’re looking for. After that, it’s simply to set up your bot and have a good night’s sleep knowing you won’t miss any great market movements.

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