Crypto trading bot

Developing a Crypto Trading Bot – ‘How To’ Guide

How to build your own crypto trading bot

About Crypto Trading Bots

A crypto trading bot is a computer program designed to trade on behalf of humans. Depending on the area of use, trading bots differ in the features they are equipped with. But, the primary goal of a crypto bot is to facilitate the trading experience of its master and bring higher returns.

Algorithmic Crypto Trading Bots

Algorithmic trading is also called automated trading. It utilizes computer programs that follow a predefined set of instructions to place trade orders. These defined sets of instructions are based on timing, price, quantity, or any mathematical model.

There are different types of crypto trading bots, each being developed with different trading algorithms. The primary purpose of trading algorithms is to execute trades automatically with respect to the market conditions.

Benefits of automated Crypto Bot Trading

  • Trade order placement is always accurate and takes less than a second to be placed
  • Trade timings are followed correctly in order to avoid significant breakthroughs
  • Crypto Bots execute the trades at the right time with the best profitable price
  • Transaction costs are usually reduced in algorithmic trading
  • Simultaneous price analysis across multiple crypto exchanges
  • Human errors while placing trades are reduced to a greater extent

What programming languages can we use to develop trading bots?

You can choose any programming language to develop your bot. However, the bot’s functions and features will then rely on the language you’ve decided. The best advice is that you use a popular high-level language that has an active community and widespread user base.

You also need to make sure that the language is easy to use, scale, adapt, and add to in case the situation arises. As of now, the language that’s used widely by developers is JavaScript and the second is Python.

Other commonly used languages include:

  • Java
  • C#
  • C/C++
  • PHP
  • Visual Tools
  • Swift
  • Ruby
  • Kotlin

What is a Crypto Trading Strategy?

A cryptocurrency trading strategy provides crypto traders with the ability to earn more using less investment. Crypto bots are programmed to react only to human instructions. So, they cannot act according to fundamental market conditions such as decisions by the government or exchange hacks.

Thus, when you develop a crypto bot, it’s essential to keep in mind the trading strategies mentioned below and so that you can design the bot to suit all conditions.

Types of Crypto Trading Strategies

Trend Following Strategy

With the trend-following strategy, a crypto trading bot can be designed to analyze the past, present, and future trends of a particular currency. After that, the bot executes buy and sell decisions based on the trends. Crypto bots are useful when it comes to ‘trading with the trend.’ The trend-following strategy works to acquire profits by finding a currency’s momentum in a given direction. Traders who implement this strategy will enter into a long position when a currency trends upwards and a short position when the currency trends downwards.

Arbitrage

The Arbitrage strategy is where a trader takes advantage of a price difference between two or more cryptocurrency exchanges. The trader buys cryptocurrencies from one market and sells them in another, therefore, earning a profit in the process. In the past, when the crypto exchanges were decentralized, the price differences were significant, and traders could make huge profits with arbitrage trading. Whereas now, the spread between exchanges has heated up. However, a crypto arbitrage trading bot can aid a trader make his/her trading more profitable.

Market Making

Market making is one dynamic trading strategy that crypto bots are competent in executing. In this strategy, the primary factor is “non-stop buying and selling of multiple spot digital currencies and digital derivatives contracts.” It is done to catch the spread between the buy and sell price. To implement this strategy, a trader will place limit orders on both sides of the book (buy and sell). The crypto trading bot will then place limit orders continuously to profit from the spread. This strategy can also go unprofitable when there is extreme market competition or low liquidity environments.

How To build your own crypto trading Bot

The prime advantage of using a handcrafted crypto trading bot is ‘maintaining control over your own private keys.’ You can also implement whatever functionality you wish into the trading bot. Along with that, once the trading bot is set, you can trade non-stop, therefore, raising your odds of making profits through quick trade order execution.

Technical Requirements

There are three steps involved in implementing a lucrative algorithmic trading strategy:

  • Collection of Data
  • Creation of Strategy
  • Backtesting

What you need

  • A little or extensive knowledge of programming languages
  • Easy access to trading platforms to place trade orders
  • Access to crypto market feeds for the algorithm to monitor live

Open-Source Platforms

The crypto market is constantly evolving and expanding at a rapid rate each passing day, and so is the number of crypto trading bots. These days, many popular trading bots seem to be very expensive to afford and some are offered on a subscription basis. If you want to avoid the hassles mentioned above, then why don’t you develop a bot on your own. You can find the required software (ready-made code) in various open-source platforms. Get the software on your system and start customizing it according to your requirements.

Setting up the API

APIs are extremely important in today’s crypto world. An API or Application Program Interface is unique for each user and it permits a crypto bot to send and receive data from a crypto exchange.

Most cryptocurrency exchanges allow you to use their API interface for the trading bot. However, these systems rely on a few permission-levels that are protected with unique keys and secrets. You have to generate an API key on the exchange, and after that, you’ll need to integrate the API and secret keys into the trading bot to access the API.

API keys should be kept confidential at all times. In case the keys are stolen or hacked, then the person who took the keys can easily access your trading bot and use it to trade or make withdrawals without your permission.

If the API has the withdrawal option enabled, it is advised that you turn the feature off, therefore,  restricting the bot from withdrawing from your account and allowing you to make withdrawals manually.

Risk involved in Developing a Bot

Building a crypto trading bot is not as simple as it appears. Bots are automated tools built on specific codes and algorithms that drive them. Even minor defects in the development phase can make the bot ineffective to use. The developer will have to look into the bot may for minor bugs or system glitches or unidentified errors embedded deep into the code of the bot. Therefore, one requires advanced programming and technical analysis knowledge to develop a bot on their own. 

Almost all types of crypto trading bots are difficult to develop and implement, and in particular, for beginners. Those who invest their valuable time and huge amounts of money in developing their own bot may find that their bot doesn’t operate in the way they expected.

However, there is one exception. NexFolio – Ai crypto trading bot has addressed all the problems and offered a one-stop solution for both novice and experienced traders. The bot is extremely easy to set up and use. It performs really well when compared to other trading bots of its class.

  • The bot’s system is well-integrated and offers support for the most popular crypto exchange Binance.
  • It has an elegant design and intuitive dashboard that allows all the traders to maximize their trading potential.
  • NexFolio is developed with a wide range of high-level programming languages including Python and JavaScript.
  • It offers a good range of trading tools such as Spot Trading and FX Trading on top of the automated bot.
  • NexFolio plans are easily affordable. Purchase a paid plan and get access to NexFolio’s list of premium features.

Conclusion

You can see that developing a crypto trading bot on your own is not an easy task. It requires extensive programming knowledge, dedicated time, a lump sum of money, and other essential things. Even after developing your bot, it may not function effectively.

To avoid this hassle, you may get a trading bot from companies like NexFolio. With the NexFolio crypto trading bot, profits assured along with seamless trading experience. The simple and elegant user interface makes the bot easy to configure even for beginners. Also. the NexFolio pricing structure is one of the best in the market.

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