How Does Automated Bitcoin Trading Work?

The world of cryptocurrencies is rapidly evolving, and the potential for profit is attracting more and more investors. Bitcoin trading has gained immense popularity in recent years due to its high returns and volatility.

Manual trading is a thing of the past. With so many advancements in various internet technologies, the rise of automation was just a question of time. Today, automated Bitcoin trading is used widely across the industry. There are hundreds of vendors to choose from, but we want to focus our attention on those that deliver truly game-changing products.

What is crypto automation?

When it comes to crypto auto trading platforms, their main purpose is to reduce time waste occurring during any manual trading. There are several steps that human traders spend too much time on: 

• Assessing the current market situation and identifying good entry points.
• Manually placing an order on an exchange of their choice.
• Adding take-profit and stop-loss orders to reduce risks.
• Tracking the position at all times to ensure that everything goes according to the plan.

At the same time, humans may hesitate to enter a market position and simply miss excellent opportunities when sleeping. The goal of automated crypto investing is to ensure that retail traders stay active around the clock and make decisions quickly to outperform the market in general.

There are natural differences between investors too. For example, some people are simply faster thinkers and have better equipment and/or internet connection to be faster than others. A robot levels the playing field creating a more equal environment for a small price.

How to automate crypto trading?

In 1984, the first automated trading systems (ATS) started appearing on Wall Street making banks for their owners. For a long time, this method of trading was hidden behind a massive paywall. Only the richest could afford such instruments.

The advent of the internet created an environment where any applications became cheap and readily available to millions. Today, an automated crypto trading app is not something that impresses a retail trader, but a tool becoming more and more essential for thousands of professional investors. 

The automation, in principle, requires three key components:

1. A signal generator: It can be a trading terminal (which is commonly used by desktop auto traders) or an online platform like TradingView. The latter is a charting tool with an immense catalog of technical indicators and graphical overlays. You can use signals generated by this platform to write bots.
2. An automation provider: Companies like WunderTrading offer bots and everything you need to write a trading script. These bots receive signals and make decisions based on user-written rules. Then, they send orders to exchanges for further execution. 
3. An exchange account: There are several dozens of CEX platforms with APIs allowing for third-party integrations. Whether you work with Binance, Kraken, or KuCoin, you will be able to use bots for order placement.

Note that all these components interact with each other instantly. The time between signal detection and order placement can be less than a second when perfect conditions occur. When it comes to dealing with a hugely popular asset like Bitcoin, automated trading systems outperform human traders in the short term.

The long-term success of any strategy depends on the quality of indicators and their compatibility. Look for top user-rated technical indicator strategies on specialized forums and social media.

Should you use automated trading software for Bitcoin?

There are many benefits to using bots for BTC trading. Since the market never stops, retail traders who stay active around the clock usually generate better results than average investors. Bitcoin is also a very volatile asset favoring automation solutions relying on price swings and frequent market fluctuations.

BTC has a dynamic market presence with enough trading volume to allow for all sorts of orders that can be executed instantly. Using preset bots like GRID or DCA is also a valid strategy in such environments. WunderTrading offers these unique bots that you can finely tune for a relatively low price. Some of them you can even try for free.

The main takeaway

Automated trading does not require you to have any technical know-how and will work in any crypto market. Any bot works with only a couple of components. You need to understand how to work with TradingView and have a reliable strategy. Then, an automation service provider will give you everything else to run a successful robot.

The question of profitability is raised quite often when a discussion touches upon the topic of automation. Since bots are only extensions of your strategies that eliminate time waste, their profitability is ultimately decided by the quality of your trading strategy.

This argument is not so relevant when it comes to preset products like GRID or DCA, or Arbitrage, but even then, a significant portion of responsibility falls on retail traders running bots, and not on bots themselves.