The very short answer is: Yes.
It is possible to make money with crypto trading bots. But, always there is a "but" even for the bots.
Cryptocurrencies are an asset class that has seen a steep increase in value over the past few years.
Cryptocurrencies are an asset class that has seen a steep increase in value over the past few years.
Investing in cryptocurrencies can be profitable if one knows how to do it. However, the volatility of the crypto market makes it hard for one to predict what will happen next, and there is always the risk of losing everything overnight.
The use of AI might be able to help with this problem.
This would mean that you can make more intelligent decisions about when to buy and sell, thus decreasing your risk exposure while also increasing your chance of making a profit.
A crypto bot can trade on your behalf, giving you the ability to automate your cryptocurrency trading. Some traders like the convenience of auto-trading and it has helped them make more profits than they would if they were trading manually.
It is possible to make money with a crypto bot, but it all depends on what kind of trading strategy you are using, how much capital you have and how much time you are willing to spend with the bot.
We need to look at the different types of trading bots in order to determine whether the trading bots and automations are profitable.
Algorithmic trading (also called algo-trading) is a form of trading that uses algorithms, and it is the execution of trade orders based on automated preprogrammed rules. Bots or automations are like agents for these programs. Our term for bots typically refers to the agents and programs working together.
According to Mordor Intelligence, 60-73% of all United States equity trading is made with algo-trading. There is no specific reference that shows the involvement of bots in the cryptocurrency market but there are some rumors that say more than 70% of trading is done by bots. As a rule of thumb, if it isn't more than 70%, it is probably not less than that.
There are a lot of facts that make this estimation more valid. A cryptocurrency market, for example, is open 24 hours a day, unlike the stock market, which is a very suitable environment for bots since they do not sleep at all. And also most of the exchanges give you permission to trade outside of their platform which all bots love this option.
The programs behind bots are generally grouped into three categories:
1- An actual human supervisor:
The bots in this category are going to follow the orders of a real trader. On "eToro" the followers' bots are going to buy and sell after the trader (here, a professional in financial market trading) starts their positions on the platform.
2- Rule-based signals:
Market signals (buy or sell) are triggered by certain rules. These rules can be very complex or they can be very simple. There is usually a program running in the background that follows a particular strategy. At this point, the algorithmic trading shows up. Algo-trading has a bunch of strategies, for example, "Arbitrage" and "Mean Reversion". These strategies work based on some formulas and rules.
The challenge with some of these strategies is keeping them updated and profitable. If you find a rule for buying or selling and it works for a while, there is no guarantee that it will work forever. To make your profit balanced, you must change the rule constantly. The bots will start buying and selling the assets after the trigger is run by the algorithm.
To date, all algotrading has been controlled by banks and powerful companies. Recently, there have been several platforms such as "Cryptohopper" and "3commas" that allow traders and ordinary people to build their strategies and rules. The difficulty for people here is the limited rules they can apply to their strategy. Additionally, a lack of maintenance on strategies can also turn a profitable bot into an inefficient one.
Now, modern methods supported by machine learning algorithms have been developed to overcome these limitations.
3- Machine Learning Signals:
In machine learning trading, two major problems can be solved (finding the fit rule and maintaining the algorithm), and many limitations can be overcome.
There are some articles with the title "How to design a machine learning trading bot", which give you the idea of using machine learning in trading. However, in summary, when you use machine learning, the signal for buying or selling comes from an ML model. A trigger activates the bots to place the order in the markets. 1DES provides all of these in one place. Additionally, a machine learning model monitors the market to keep an eye on each position. The interesting thing here is that modern technology and the latest innovation are available to everyone, regardless of whether they are a bank, VC, conglomerate, or holding company. Still, there are some challenges here. (That made me wonder if there wasn't a challenge). As these are very new concepts to the world, Ml trading is in an experimentation phase which is developing so fast. There is a lot to do and the time is moving quickly. Also, the speed of innovation in the world is way faster than the speed of implementing in the right and correct way.
Conclusion:
- Bots are the agents to place an order on behalf of you in the markets.
- Most of the time, there is a background program that activates the bots for trading.
- A properly designed strategy and periodic updates will almost earn you some profit.
- Modern machine learning methods can automate the process of model fining and make it easier and faster to maintain the strategy. They also provide many advantages over rule-based methods.
Here are some other ways of phrasing this question:
Do crypto trading bots work?
How effective are crypto trading bots?
Crypto trading bots: do they work?
Crypto trading bots: Are they effective?
Is it possible for crypto trading bots to work?
How well do crypto trading bots perform?