Just like every activity needs a platform on which it can be carried out, crypto trading also needs a platform. A cryptocurrency exchange is a platform that is used by people who want to make investments in or trade different digital currencies. Typically, cryptocurrencies can be categorized into three types depending on how they operate.
But ever since the first cryptocurrency was launched in the year 2009, new technologies and practices keep getting introduced in the industry of digital currencies. These technologies and practices cater to different aspects, such as exchanges, taxes, and strategies.
One of the practices that have gained popularity recently is the use of automated cryptocurrency trading platforms. As the name suggests, these platforms make the trading of digital currencies automated. In simple words, these platforms are automated software pieces that utilize algorithms to buy and sell various digital currencies based on the inputs given by users. The algorithms employed in such platforms are built intelligently to achieve the desired objectives.
Now, you might be thinking, “Can I ditch a cryptocurrency exchange if I register on an automated crypto trading platform?”. Well, the answer is ‘Yes’ and ‘No’. Automated crypto trading software pieces have bots. These bots fall into two categories: 1) API Trading Bots and 2) Blockchain-Operated Trading Bots.
The first type of automated crypto trading bot works as APIs. So, when you use such automated crypto trading platforms or bots, you have to connect them to a cryptocurrency exchange. The second type of automated trading bot does not work as APIs. Instead, they use smart contracts on the blockchain. Thus, you don’t have to connect such bots or platforms to a digital currency exchange.
Finding the right automated cryptocurrency trading platform might be challenging for investors, especially those who are newbies to cryptocurrency. In order to help such investors out, we recommend them to try Bitcoin Code, a reliable and advanced automated cryptocurrency trading software.
How Can an Automated Cryptocurrency Trading Software Help You?
If you want to invest in cryptocurrency, but don’t have the time to study and analyze the market scenario, then automated cryptocurrency trading software is just for you. The automated cryptocurrency (or digital currency) trading software pieces (also known as platforms or bots) use specially-designed algorithms. Each platform has its own algorithm that is built by the tech team of the company that runs the platform.
The automated bot will make the transactions, i.e., buy or sell the digital currencies at certain times based on the parameters set by you. These parameters can be the market price of cryptocurrencies, technical or market indicators, or rebalancing the portfolio. Bots use the parameters you give to execute the trades automatically without having you to be active on the platform during the execution of trades. Some bots provide you with notifications whenever they recommend a trade.
Cryptocurrency automated trading platforms have features and trading strategies. These may vary from one platform to another. In order to start trading using an automated platform, all you need to do is select the most suitable platform. You can prepare a list of all the platforms that can be accessed in your region (state or country).
Then, you can study the pros and cons of each platform so that you can shortlist a few platforms. You can finalize one platform based on the cryptocurrencies available for trading on the shortlisted software and some other factors. If you choose the platform with a bot that works as an API, you should consider the digital currency exchange that you are already using as one of the factors.
Then, you need to create an account on that platform by filling out the necessary forms and providing the required details. You have to choose the digital currency trading strategy that should be used by the bot while carrying out the trading process on your behalf.
Types, Advantages, and Disadvantages of Automated Trading Bots
As mentioned earlier in this blog post, every cryptocurrency automated trading platform has a bot. It can either work as an API or not work as an API. The bots that work as APIs (Application Programming Interfaces) are more common. They can be regarded as intermediaries as they have to be connected with cryptocurrency exchanges for carrying out trades and managing investments.
When choosing a cryptocurrency automated trading bot, you need to ensure that it is compatible with the crypto exchange that you are using currently or want to use. Bots that don’t work as APIs, i.e., blockchain-operated bots, store your digital currencies in the form of smart contracts on a blockchain. Cryptocurrency automated trading platforms that have such bots are known as decentralized platforms.
Decentralized cryptocurrency automated trading platforms, just like decentralized cryptocurrency exchanges, are less susceptible to risks like hacking. By using these platforms, you can trade digital currencies anonymously. Such platforms issue cryptocurrency tokens through which you can redeem your funds stored in smart contracts.
One of the major benefits of using an automated trading platform is speed. Trades can be executed much faster by these platforms than they can be executed manually. Moreover, the cryptocurrency buying and selling orders placed are more precise. The bots on these platforms operate consistently by using specific market indicators.
If you can’t make the time to keep an eye on the market, then an automated platform is the perfect solution for you. Automated platforms provide you with the data regarding historical data and technical analysis of digital currencies available for trade with them.
But cryptocurrency automated trading platforms have drawbacks as well. For example, traders should have knowledge about the trading indicators or market indicators that bots use. So, at times, only experienced traders can feel more comfortable while using the automated software.
You cannot assume that just by using a digital currency automated trading platform, you will make profits. the cryptocurrency market is quite volatile and unpredictable. So, despite registering on an automated trading platform, you should watch the market whenever possible.