Crypto trading bots have become the hottest topic among the millions of cryptocurrency users around the globe.
In recent years, many companies and individual traders have dipped their toes into this fascinating market in order to perform cryptocurrency trading. Then crypto trading bots came into existence.
Crypto trading bot
Crypto trading bot is nothing but a software program that allows you to buy, sell, or monitor cryptocurrencies such as Bitcoins, Ethereum, etc.. without any manual interaction.
Simply put, bots automatically trades on exchanges instead of manually performing each trade. This process is managed through computers with high levels of speed and accuracy that is not possible with humans.
This article intends to provide you with insights on what strategies one should hard cord into their bots! Now, let’s get started.
Crypto trading bot strategies
Mean reversion
The mean reversion is an easy-peasy strategy. If the price of a coin has a slight shift from its average price, it will eventually revert back to the actual average price.
For a detailed understanding, let’s assume a cryptocurrency that has a price average of $1. If the price of a coin goes to $1.25, then the traders will sell all their assets in bulk, and as a result, the price will fall to $1.
Similarly, if a coin price falls by $0.75, then it is considered as a bottom line, and traders start accumulating as much as possible and raise the price to $1.
Momentum trading
The main scenario of this strategy is to have a positive trade with your assets and then sell them off immediately when the market reverses.
The price of an asset will hit about average and then run out of momentum, and price falls down. In such cases, the timing of buying and selling is momentous.
Arbitrage
As there is a lot of fluctuation in the price of the assets across the market, so the price of an asset varies on each exchange.
For instance, an asset is priced at $1 in exchange A and $2 in exchange B. Here with the help of the arbitrage strategy, you can make a profit by buying and selling in exchanges simultaneously.
Naive Bayes
Naive Bayes trading is a set of algorithms paired with machine learning (ML) and artificial intelligence (AI).
The enter and exit for momentum strategy are considered as extremely high-risk and prone to human error. To avoid this, you can feed algorithms into your (ML), and it can automatically pick the optimal time for your trade.
Natural language processing
Information is the key to today’s cryptocurrency market. Articles, blogs, tweets, and other content can travel across the world in seconds, and that may affect some traders’ views of certain projects.
NPL guides their bots on how to interpret words and phrases to disseminate emotion programmatically.
For instance, if an article says X is booming after the manager buys stake. The NPL algorithm will process the sentence as keywords like (X, booming, buy) and will act accordingly.
Closing thoughts
Finally, there you have the strategies that one should hard cord into their bots. Also, it takes a lot of stress, difficulty, and hard work to do everything manually from scratch, so it is wiser to rely on any cryptocurrency trading bot development company, take guidance, and fulfill all your requirements!
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