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Crypto Trading Bots: What You Need to Know

March 18, 2022 - 16 min read

Bots Allow Traders to Automate Strategies, Potentially Reducing Risk

While many people who participate in the cryptocurrency market hold onto their assets long-term, there’s no doubt that the popularity of cryptocurrency trading has skyrocketed in recent years. In fact, on one day in May 2021, crypto trading volume was estimated to have peaked at $500 billion in one 24-hour period. 

While most days never see this volume (and some crypto trading volume is artificially generated), high daily trading volumes mean that a substantial part of the entire crypto market is traded on a daily basis. Unlike stock, options, and traditional currency markets, crypto is traded 24/7. This makes it particularly challenging for individual, non-institutional traders to take advantage of market fluctuations to increase their profits. 

Just like trading the stock market, trading crypto can be risky, and the challenges are often just as much psychological as technical, as the fear of avoiding loss and the greed inspired by potential gains can cloud the mind of even the most disciplined traders. However, a powerful solution has emerged to address both the issues of the 24/7 market and the frailties of human psychology: crypto trading bots. 

In the traditional stock market, it’s estimated that around 70% of trading volume is automated, so, for industry insiders, it’s no surprise that automated trading is taking off in the crypto industry. Crypto trading bots generally function as APIs (automated programming interfaces), computer programs that directly connect to exchanges to execute trades on a trader’s behalf. Just like human traders, bot APIs can be used to traditionally trade coins and tokens, as well as to execute more complex crypto options and futures trading operations. 

In this article, we’ll review what to look for in a crypto trading bot, as well as review some of the top crypto trading bots on the market today. 

Before we address the particulars of crypto trading bots, it may be useful to review some of the most common investing and trading strategies and indicators. These strategies can be executed by both human traders and bots alike. 

Common Crypto Trading Strategies and Indicators 

Some of the most common crypto trading strategies and indicators include: 

  • Arbitrage: Arbitrage generally involves purchasing digital assets on one exchange and selling it on another exchange. This can be especially effective when a trader or trading bot buys assets on smaller exchanges, where slippage (market price deviations) may be larger, and reselling them on larger exchanges, where price deviations are less likely to occur. 
  • Dollar-Cost Averaging: Dollar-cost averaging is not so much of a trading strategy, as it is a traditional investing strategy, which involves buying a certain amount of an asset at certain set times, such as purchasing $100 of Bitcoin per week. It is designed to reduce the risk of upswings and downswings in the market since assets will be purchased at different times and at different prices. 
  • Fibonacci Indicators: Fibonacci indicators, also referred to as retracement levels, are horizontal lines that show where support and resistance are most likely to occur. In trading, support is a price level where a reduction in price is expected to pause due to increased demand due to that lower price. Resistance is the near opposite to support and occurs when a price level rises to the point where it’s expected that traders will begin to sell. Fibonacci indicators and sequences are mathematical formulas based upon the discoveries of Italian mathematician Leonardo Bonacci, also known as Fibonacci, who worked in 12th and 13th century Pisa. 
  • Long-short: Long-short is a longer-term investing strategy that involves an investor or trader taking long positions in underpriced assets while short-selling underpriced assets. This strategy can also be sped-up in the form of long-short trading. A bot can not only identify which assets should be shorted or longed but can also conduct the necessary trading activities. 
  • EMA: EMA, or exponential moving average, is a complex mathematical trading strategy that relies on technical indicators and the weighting of various price movements over specific periods of time to develop a trading strategy. These moving averages are often reported over 10-day, 50-day, and 200-day periods. 
  • Candlestick Chart Trading: Candlestick trading is based on the previous price activity of an asset for a specified timeframe via the usage of four main factors: the open, close, high and low. Candlestick trading is slightly different for crypto markets since they run 24/7, but it is still a popular method. Candlestick trading is used to identify regular trends that allow traders to profit from the same price variations that occur over different periods of time. Candlestick movements generally are timed at one, two, four or 12 hours, whereas longer-term traders may use candlestick intervals that last days, weeks, or months in order to calculate potential asset price fluctuations. 
  • Ichimoku Cloud: According to Investopedia, The Ichimoku Cloud is “a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction.” This strategy operates by utilizing multiple averages over various periods and plotting them on a chart. It is somewhat similar to Candlestick indicators but uses significantly more data points.  
  • Futures Spot Trading: The spot market is a financial market where assets are traded for immediate delivery, which involves the exchange of cash for the assets. Futures contracts are based on the delivery of a specific asset at a specific future date. Traders can take advantage of both of these markets, and, for example, may decide to purchase futures at a lower price than the current market value if they believe an asset will rise in price at a specific future date. Traders can also actively trade futures contracts if they change their price predictions. 
  • Stop Loss and Take Profit: Stop loss is a trading strategy in which a trader can limit their losses if an asset they have purchased has fallen to a certain point, referred to as a price limit, after which they will sell the asset. Taking profit is the opposite strategy of taking loss, as it automatically sells an asset once a certain profit level is reached in order to reduce risk. Many traders set take profit levels at between 20-25% in order to lock in their profits before an asset falls in value. Both of these strategies can be combined in order to limit potential trading risk. 
  • Grid Trading: Grid trading involves executing a series of buy and sell orders at set intervals around fixed prices. It is ideal for crypto pairs with particularly high volatility but consistent long-term prices. Some grid trading strategies are extremely short-term, trading hundreds of times per hour to create tiny profits per trade. This strategy is ideal for bots, as it can allow for extremely high-speed trading. Other grid trading strategies are executed over longer time periods, such as hours, days, or weeks. 
  • Scalp Trading: Scalp trading short-term daily asset trading strategy which is designed to generate profits from minor price movements. It is somewhat similar to short-term grid trading but uses a variety of other trading indicators, including candlestick indicators and Fibonacci indicators in order to predict upcoming price valuations. 

Considerations for Choosing a Crypto Bot

Before choosing a crypto trading bot, there are a variety of aspects a trader should consider. Some of them include:  

  • Backtesting Functions: The best crypto trading bots have backtesting features that allow traders to test strategies against historical price information in order to determine the potential effectiveness of their bot’s trading strategy. 
  • Community Involvement: Some traders may prefer to choose bots that have active trading communities on platforms like Reddit, Telegram, or Discord. Interacting with fellow traders can help both new and experienced traders refine their strategies and address or prevent potential technical issues. 
  • Social Trading: Some trading bots allow traders to directly copy the strategies of other traders, which can be an excellent option for beginners. 
  • Cloud or Server-Based: For most traders, cloud-based bots are ideal, as they don’t require a trader to have their server operating at all hours just to conduct trades. 
  • Free Trials: If a trading bot does not offer a free trial, traders may want to stay away. On the other hand, choosing to avoid bots without a free trial could exclude some excellent options. 
  • Tax Software Integrations: For highly-active traders, reporting capital gains and losses can be tough, so integration with popular crypto tax software options may be an important aspect to consider.  
  • Customer Support and Tutorials: As with any software product, customer support is key. Tutorials may also be ideal for beginning traders. 

The Three Stages of Crypto Bot API Trading 

Crypto bot APIs typically work in three stages or function steps; the first stage involves the activation of the signal generator. The signal generator makes predictions and identifies potential trades based on the specifics of how its’ been programmed. To do this, it utilizes market data scanned from the exchanges that it interfaces with. 

The second step in trade execution is risk allocation; most crypto trading bots are designed to minimize risk based on their programming, allocating various amounts of capital to trades with various potential risk profiles. Like the signal generation step, these risk allocations are set specifically by the programmer.  

The third step is actually the execution of the trade. This occurs when trading signals are converted into API key requests, which are processed by the exchange itself. 

Cryptohopper is perhaps the most popular crypto trading bot on the market today. It allows traders to work with a variety of digital assets, including Bitcoin, Ethereum, Litecoin, and many more. Cryptohopper provides a variety of free bot protocols and strategies, and according to reviewers, offers both a high level of security and a user-friendly interface. It is cloud-based and also offers iOS and Android mobile apps for trading on the go. 

Cryptohopper

Cryptohopper offers four pricing models, including: 

  • Pioneer: This free version of Cryptohopper allows traders to take up to 20 positions, engage in portfolio management, and is available on all exchanges, including Kraken, Bittrex, Bitfinex, Coinbase Pro, KuCoin, and many others. 
  • Explorer: This version of Cryptohopper costs $19.99 per month, allowing traders to take up to 80 positions, utilize 5 selected coins and two triggers, and allows technical analysis with ten-minute intervals. 
  • Adventurer: This version of Cryptohopper costs $49.99 per month, allowing traders to take 200 positions, utilize 50 selected coins and five triggers, and allows for both technical analysis with five-minute intervals, as well as permitting for exchange arbitrage. 
  • Hero: This version of Cryptohopper costs $99.99 per month, allowing traders to take 500 positions, utilize 75 selected coins and ten triggers, and allows for technical analysis with two-minute intervals, as well as permitting for market arbitrage and market-making. It also has an artificial intelligence feature. 

Pionex

Pionex is another highly-popular crypto bot service that also functions as a fully-functioning crypto exchange. It provides 16 free trading bots and aggregates liquidity from Binance and Huobi global. Unlike some bots, it provides a leveraged grid bot with up to 5x leverage, particularly low fees of 0.05% per maker and taker trades. In addition, it provides spot-futures arbitrage, allowing traders to limit risk while maximizing potential returns. 

Instead of charging users for the bots, the exchange/bot service only makes money from trading and withdrawal fees. 

Bitsgap

Bitsgap is a trading bot that specializes in analyzing crypto pairs, with 10,000+ pairs currently offered. It also offers a point-and-click bot creation service for ease of use. Bitsgap interfaces with a variety of exchanges including Binance, Bitfinex, Huobi, Kucoin, Kraken, Livecoin, Coinbene, Liquid, Gemini, and many others. 

Bitsgap offers three pricing models, including: 

  • Basic: Bitsgap’s basic offering is priced at $29 per month, and provides two active bots, grid bots, and unlimited smart orders. 
  • Advanced: Bitsgap’s advanced offering is priced at $69 per month, and provides five active bots, grid bots, unlimited smart orders, futures bots, and trailing up and down for bots. 
  • Pro: Bitsgap’s advanced offering is priced at $149 per month, and provides 20 active bots, grid bots, unlimited smart orders, futures bots, trailing up and down for bots, and taking profit for loss. 

3Commas

3Commas is another trading bot option, which is specifically designed to reduce trading risk. It has more than 20 built-in trading indicators to make the platform easy to use, even for beginner traders. The system allows you to copy the settings of other traders’ bots, balance your portfolio via maintaining coin ratios, engage in backtesting, dollar-cost averaging, and a wide variety of signals.  It also provides direct deal notification via a mobile app offered on iOS and Android, a browser app, and via email. 

3Commas interfaces with a wide variety of exchanges including Coinbase Pro, Binance DEX, Binance, Binance.us, Bitfinex, Huobi Global, KuCoin, Kraken, and many others. 

3commas offers four pricing options including: 

  • Free: 3Commas’ free option allows for one grid bot, one options bot, one DCA bot, and one multi/single pair for spot or one for futures trading. It also offers one active smart trade, an unlimited scalper terminal, and paper trading. 
  • Starter: 3Commas’ starter option costs $29 per month or $14.50 a month for annual billing. It offers all the same features as the free bot service, as well as unlimited smart trades. 
  • Advanced: 3Commas’ advanced option costs $45 per month or $24.50 a month for annual billing. It offers all the same features as the starter bot service, as well as unlimited DCA bots, and unlimited single pairs for spot trades. 
  • Pro: 3Commas’ pro option costs $99 per month or $49.50 a month for annual billing. It offers all the same features as the advanced bot service, as well as unlimited multi/single pairs for spot trading and unlimited futures pairs. 

CryptoHero

CryptoHero is a free bot service designed for beginners and is known for its easy-to-use mobile app available for iOS and Android. It also has a browser-based version. CryptoHero features quick backtesting features, risk-free paper trading, technical indicators with presets, and easily allows users to track their investment and trading performance aggregated across multiple exchanges simultaneously. It also offers 24/7 technical support with real-time chat. 

CryptoHero interfaces with exchanges including Coinbase Pro, FTX, Huobi, Binance, Kraken, Kucoin, Gate.IO, OKEx, and Bitfinex.

Quadency

Quadency is not only a trading bot platform but also operates as a digital asset management application. The platform offers 1500+ digital assets, which gives it an edge over some other bot platforms on the list. 

Unlike some other crypto trading bot options, Quadency is designed for both individual and institutional traders. Quadeny offers customizable bots, automated tools, social network trading charting, automated trading options, and excellent customer support. Also unlike many trading bot platforms, Quadency offers its own token, QUAD, which allows investors to stake and engage in yield farming for additional investment returns. Quadency claims that staking their token allows users to generate up to 64% APR. 

Like many other bot platforms, Quadency currently has mobile apps for Android and iOS. The service has official relationships with Binance, Kucoin, and Bittrex, and also can interface with 10 other exchanges, including Kraken, Coinbase Pro, Gemini, Liquid, Bitfinex, Okex, AAX, HitBTC, Binance.US, and Poloniex. This means that it interfaces with far fewer exchanges than many other trading bots, which may be challenging for traders looking to engage in exchange arbitrage. 

Quadency is currently free for all users and makes money only on trading fees. 

Haasonline

Haasonline is yet another popular crypto bot option. The platform offers 16 standard bots, as well as 50+ technical indicators that allow traders to engage in more complex trading strategies. The platform offers programmable script bots that are written in C# and allows users to integrate backtesting with Discord (VoIP) and Telegram app.

Hassonline integrates with a variety of exchanges, including Gemini, Coinbase Pro Kraken, Kucoin, Huobi, FTX, Poloniex, Binance.US, Binance, Binance Futures, OKCoin, Bitfinex, BitMEX, Bitstamp, Bittrex, Bitpanda Pro, Bybit, OKEx, OKEx Futures, Derbit, CEX.IO, and HitBTC. 

Haasonline is priced at 0.017 Bitcoin for three months of service. 

Etoro

Etoro is technically not a trading bot service, as it does not offer customizable bots or bots set with predefined strategies. However, Etoro is a major competitor to trading bot platforms as it allows traders to exactly copy the trading strategies of other traders on the platform. Some traders are highly regarded and have hundreds of thousands of followers and tens of thousands of traders copying their exact strategies. 

This can be ideal for beginning traders, as they can identify the traders with the best historical performance and mirror their trades for a small fee. Unlike other options on this list, Etoro also allows users to trade stocks, indices, commodities, currenciews, and ETFs, though these non-crypto asset options are not available in the United States. 

Etoro does not have account fees, but it does have trading fees, which vary for each cryptocurrency offered on the platform. These spreads, which cover both the buy and the sell,  can be quite expensive and are often more than 1%. This is one of the major downsides of Etoro and may turn away some cost-conscious traders and investors. 

Creating Your Own Crypto Trading Bot 

For those who want to do things that traditional crypto trading bots cannot, there’s always the option of creating your own bot. Most crypto trading bots are created by experienced programmers who also deeply understand the crypto market. However, there are bot creation options for even the greenest of traders without any coding skills. 

There are a variety of companies in the bot creation space but perhaps the most popular is Traility, a platform that allows both coders and non-coders to create custom crypto trading bots. For semi-experienced coders and non-coders, the company provides a “Rule Builder” that utilizes boolean logic by dragging and dropping trading indicators, as well as incorporating various pre-set strategies. 

Boolean Logic is a unique, yet simple form of algebra that is centered around three simple phrases, “Or,” “And,” and “Not”, which are referred to as Boolean Operators. “Or” is utilized to express that as long as one of two or more conditions are met, a specific query is true. For example, a Boolean Logic-based stop loss and take profit portfolio rebalancing strategy could be set that if Bitcoin falls below $40,000 and “And” Ethereum rises above $4,000, the bot should buy sufficient Bitcoin to bring up the trader’s Bitcoin portfolio percentage to 20% while ensuring that the portfolio’s Ethereum portfolio percentage does not rise above 10%, selling Ethereum if necessary. 

More experienced developers can take advantage of the company’s browser-based Python Bot Code Editor, which also allows for a variety of pre-set trading functions, debugging, and access to a wide variety of technical analysis indicators.

Traility has four pricing options, including: 

  • Free: Traility’s free option allows trading volume up to €5,000, tick intervals as small as 60 minutes, one live bot, one virtual bot, one week of log retention, and unlimited backtesting. 
  • Knight: Traility’s Knight option is priced at €9.99 per month and €95 annually, allows trading volume up to €25,000, tick intervals as small as 60 minutes, two live bots, two virtual bots, one month of log retention, and unlimited backtesting. 
  • Rook: Traility’s Rook option is priced at €39.99 per month and €383 annually, allows trading volume up to €250,000, tick intervals as small as five minutes, five live bots, five virtual bots, six months of log retention, and unlimited backtesting. 
  • Queen: Traility’s Queen option is priced at €59.99 per month and €575 annually, allows unlimited trading volume, tick intervals as small as one minute, ten live bots, ten virtual bots, unlimited log retention, and unlimited backtesting. 

Traility also offers bespoke options for enterprises or professional traders that may be able to incorporate more advanced features. 

Crypto Bots are Only As Useful As The Trading Strategies They Employ

Actively trading any asset, whether crypto, stocks, bonds, commodities, or forex has inherent risks. It’s important to realize that just because you’re using a bot, it doesn’t make you a good trader. In general, non-professional traders should only trade with money they’re willing to lose and should educate themselves on a variety of strategies before putting any significant amount of money in the market. It’s often a great idea for beginning crypto traders to engage in paper trading (trading without real money) first in order to test their strategies, as well as to engage in backtesting their potential trading strategies. It can also be a good idea to model your trading off of other successful investors, which platforms like Etoro easily allow you to do. 

References

  1. Overall cryptocurrency 24h trade volume from July 1, 2019 to November 3, 2021. Statista. 
  2. Sharma, R. (2021, Sept.) Are Crypto’s High Trading Volumes a Scam?. Investopedia. 
  3. Austin, R. (2021, Nov.) 5 strategies to start day trading crypto. Business Insider. 
  4. Chen, J. (2021, Apr.) Exponential Moving Average (EMA). Investopedia. 
  5. Mitchell, C. (2021, Apr.) Ichimoku Cloud Definition and Uses. Investopedia. 
  6. Shah, A. (2021, Jun.) What is a Grid Trading Bot?. Medium: Coinmonks. 
  7. Scalping Crypto. Daytrading.com
  8. Thompson, B. (2022, Jan.) 20 Best Crypto Trading Bots for Binance (Free & Paid) Jan 2022. Guru99. 
  9. Plans and Pricing. Bitsgap. 
  10. Pricing. Cryptohopper. 
  11. (2021, Sept.) Automated Trading Dominates the Crypto Market. UKTN. 
  12. Plans. 3Commas. 
  13. Simplify Your Digital Asset Experience. Quadency. 
  14. The world’s most advanced automated crypto trade bots. Haasonline. 
  15. Our Fees. eToro. 
  16. Crypto trading bots: The ultimate beginner’s guide. Traility. 
  17. Pricing. Traility. 

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