Diligently checking the crypto markets on a daily—or perhaps hourly—basis: it’s an adrenaline rush, but is it the most efficient way to trade? If efficiency is your goal, algorithmic cryptocurrency trading bots can help.
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Find the best crypto trading bot (expert-reviewed)
Trading bots are one tool in the arsenal of savvy crypto traders interested in algorithmic trading and data-informed automation to grow profits while minimizing risk and limiting losses.
A crypto trading bot is just a program that operates online and performs tasks more efficiently than a human possibly could. It’s estimated more than half of traffic on the Internet is comprised of bots that interact with websites and users, run content scans, and do other tasks, like trading crypto on behalf of savvy holders.
This article showcases bots our experts individually selected and tested to help you select the bot that’s right for your goals. Here are our top five picks, followed by the complete list of the best 11 crypto trading bots.
What are crypto trading bots?
Cryptocurrency trading bots are computer programs that create and submit buy and sell orders to exchanges based on the rules of a pre-defined trading strategy. For example, a very simple trading bot might be programmed to sell Bitcoin when its price reaches a certain threshold.
In short, crypto trading bots enable trading based on data and trends—not on emotional impulse. Ultimately, this usually grows their profits, minimizes their risks, and limits their losses across exchanges. Furthermore, bots can produce passive income 24 hours a day. Whether you’re sleeping, biking, giving a presentation, whatever: you could also be earning from automated trades.
Automated trading is supported by a growing number of platforms, but we’ve done the research and presented our favorites below.
Features to look for in crypto trading bots and tools
When assessing crypto trading bots and tools, you’ll want to look at some key features to determine which is the best crypto trading bot for you. These include:
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Code or no-code: does the bot require knowledge of a programming language?
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Pricing: is access to the trader bot free, require a monthly or annual subscription, and/or is there a trading fee for use?
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Support: does the bot provider offer support, and if so, at what level? Beginner traders may want one-on-one phone or chat support.
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Exchange integration: what exchanges can a given trader bot be used on? Is the bot built-in to an exchange (e.g. Pionex’s bots)?
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Mobile app: will you be able to monitor your bot with a mobile application on the go?
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Social integration: does the bot support copy trading, so you can benefit from successful traders’ strategies and track records?
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Simulated trades: does the bot platform offer backtesting and paper trading so you can simulate a given trader bot’s performance before deploying it?
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Bot types and strategies: what types of bots and strategies does a given platform offer? We’ll look at some common strategies further in this article.
How much does a crypto bot cost?
The price of crypto bots ranges from free, to a small monthly or annual fee, through to thousands of dollars in annual deposit fees. Some crypto bots are charged a small percentage trading fee, as with Pionex’s .05% trading fee on each grid trading transaction. Many crypto trading bot platforms offer very limited free bot trading trials for users.
Pros and cons of crypto trading bots
Perhaps the number one advantage to crypto trading bots is they remove the emotion from trading cryptocurrencies. Crypto is highly volatile, and trading manually can lead users to panic, become overconfident, and make emotional rather than rational decisions. A crypto trading bot has no such issues and will execute trades based purely on data, without attachment to funds or sentimentality about market conditions.
That noted, cryptocurrency bots are not perfect. With a boy working for you, you might be tempted to step away from crypto entirely and assume the bot has things handled. This can lead to complacency, and it’s important to check in with your bot periodically to ensure it’s functioning and working toward your goals.
There are also security concerns. Crypto trading bots typically conduct trades via APIs and so require no ongoing manual input. Bad actors might target bots or exchanges, so you should take extra steps to secure yourself. Deactivate automatic withdrawals and take extra precaution with your API keys and passwords.
Crypto tax software and your trading bot
A crypto trading bot will in many cases execute more trades than a human could or would. This can lead to confusion during tax season, as you might feel the need to pour over every transaction and do complex calculations around fees, gains, etc.
TokenTax can take the headache out of tax season after a year of successful crypto bot trading with the best crypto bot you’ve found for your goals. Our platform integrates with dozens of the world’s most popular exchanges, so you can import your crypto bot trades in minutes, greatly simplifying your annual crypto tax preparations.
We are both crypto tax calculation software and a full-service crypto tax accounting firm, so whether you want to prepare your crypto taxes yourself with our software or need some extra assistance, we’re able to help you accurately file even the most complicated crypto taxes.
How do you file taxes for crypto bot trading?
You’ve selected your best crypto bot, programmed its strategies, and watched its results. Now, how do you file taxes on these transactions?
Put simply, crypto bots trade on exchanges on your behalf. So when it comes time to report cryptocurrency on your taxes, you just need to import your trades from these exchanges into cryptocurrency tax software. It’s the same process you’d use for trades you make yourself.
When choosing a bot trading strategy, it’s crucial to be aware of how many trades the bot will be making. High frequency trading bots making dozens or hundreds of trades a day can result in tens—or even hundreds—of thousands of transactions that must be reported. This increases the complexity of your tax calculations, even if you’re using a crypto tax calculator. However, if you determine high frequency passive crypto trading is the right strategy for you, TokenTax can handle such trading with the appropriate crypto tax plan.
Try these crypto bot strategies
Are cryptocurrency trading bots profitable? They can be if used properly. Here are a few of our best crypto trading bot strategies to help you discover the right trader bot for your situation and goals.
Arbitrage bots
A crypto arbitrage bot is a computer program that compares coin prices across exchanges in order to make automated trades that take advantage of price discrepancies.
For example, a BTC arbitrage bot might identify that Bitcoin is trading for $200 more per token on Kraken than it is on bitFlyer. It would then buy BTC on bitFlyer and quickly sell it on Kraken in order to make a small profit.
Grid bots
A grid bot is simple and good for beginners. You simply set multiple “grids” of upper and lower cost limits for a certain cryptocurrency. The bot then makes a series of interchangeable trades and incrementally accumulates profit. Let’s say you had the following parameters for COMP:
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Lower limit: $100
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Upper limit: $200
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Grid quantity: 10
If the price of COMP is at $150 when you program the bot, you will have 4 open orders for sell and 5 open orders for buy. If the price increases to $16, the bot will automatically place two paired orders: sell at $160 and buy at $150. The $10 profit is added to your balance.
Sandwich bots
Sandwich bots detect when a trader is placing a bid on a token. They then place a higher bid on the same token, betting that the trader will still want the token. If the bot wins the token, it will immediately try to sell it to the original bidder at a higher price.
Frequently asked questions
Here are some common questions about bot trading, automated crypto trading, and crypto trading bots.
What is the best crypto to bot trade?
Generally speaking, you’ll want your crypto trading bot to work with blue chip cryptocurrencies like Bitcoin or Ethereum, as these have the most liquidity. Liquidity as it pertains to bot trading simply means there aren’t discounts or premiums attached to a given asset when buying or selling, so it’s easier for your bot to execute buys and sells when needed.
How successful is a trading bot?
Crypto trading bots have a high rate of success when used properly, and bots are used broadly across capital markets. According to a 2020 report from the SEC, 78% of market trades were performed by trading centers depending on automation and algorithms. If trader bots didn’t work, institutions wouldn’t use them. It’s estimated the volume of stock trades coming from bots is 60% to 70%. Some analysts estimate that up to 86% of crypto volume occurs from bot trading.
Let’s be real, can you get rich from trading bots?
Nobody can answer this question. A crypto trading bot will almost certainly not secure a 100x moonshot on a risky meme coin, for example. But if you have a solid amount of crypto and want to make steady returns, secure gains on long-term holds, and take the emotion out of your crypto trading, automated crypto trading might work for you.
Over time, if you find the best crypto trading bot for your strategy and manage to compound your gains, you will likely do better than manual traders subject to the market volatility and their own emotions.
What types of cryptocurrencies are suitable for trading with bots?
In general, it’s advisable to use your crypto trading bot with established cryptocurrencies like Bitcoin or Ethereum, often referred to as “blue chip” cryptocurrencies. These coins tend to have the highest liquidity, which means that there are minimal price variations or premiums when buying or selling. High liquidity makes it easier for your bot to execute trades promptly and efficiently.
