Using Crypto Trading Bots to Earn Passive Income
Earning passively as a crypto trader doesn't only aid a better life but also helps you reach your long-term retirement goals as quickly as possible. Undoubtedly, the cryptocurrency industry is enjoying massive acceptance presently, especially for automated trading bots that enable easy cryptocurrency buying and selling with little or zero human intervention.
More and more individuals are finding the idea of automatically trading crypto more lucrative and have used such bots to consistently earn passively since its introduction into the industry. However, the big question is, how do these experienced traders use crypto trading bots to earn passive income?
What Is a Crypto Trading Bot?
There is an evidently increasing need for a better, smarter, and easier way to trade the crypto market. This has resulted in the emergence of technology-driven trading tools, otherwise called cryptocurrency trading bots.
Crypto trading bots are programs using machine learning and Artificial Intelligence, AI to identify the best times to buy or sell cryptocurrencies. These bots will help you perform such trades based on predefined algorithms with little or no human interventions.
In essence, trading with bots is a means of leveraging AI to maximize profits.
How Do They Work?
Presently, there are several trading bots available for use in the crypto industry. Understanding how trading bots work is instrumental to understanding how to use these bots to earn passively.
Typically, cryptocurrency trading bots work in three (3) stages: signal generation, risk allocation, and trade execution.
Signal Generation: At this stage, the trading bots helps the trader make predictions and identify possible trades based on technical analysis indicator and market data available. At this stage, the bot identifies the coin to buy or sell and when precisely to execute such trade.
Risk Allocation: After identifying possible trades, the trading bot allocates risk based on certain rules and parameters already set by the trader. Here, the bot allocates a part of the trading capital to the trade, sets the SL and TP, etc. This stage is synonymous with the risk management strategy a human trader would implement when entering a trade.
Trade Execution: This is when the bot actually buys or sells the cryptocurrencies based on the earlier generated signals. The bot converts these signals into API key requests for the crypto exchange to understand and process.
How Experienced Traders Use Crypto Trading Bots to Earn Passively
Some traders believe it is almost impossible to consistently earn money using another person's software. To them, if such software is actually effective, such a person won't willingly share it with other traders.
Well, this is somewhat logical. Of course, crypto trading bots don't guarantee 100% profit. Technically, what it does is to improve certain critical trading operations, ultimately helping experienced traders have better trading results.
While bots can automate trading, strategy is also essential. And this is why it seems experienced traders are the ones "hitting it big" with bots. Realistically, this set of traders understands that there are different types of trading bots with different purposes. Hence, they use bots that suit their strategy. In essence, they must have a trading strategy first before using crypto trading bots, and not the other way around, or not having a strategy at all.
Therefore, beginner traders (or just any trader) who doesn't understand how the cryptocurrency market works won't do much with crypto trading bots.
Summarily, below are a few ways crypto trading bots help experienced traders to earn passively:
1. Aids Transitioning from Buy-And-Hold Strategy to Active Trading.
Those who use the buy-and-hold strategy are generally regarded as crypto investors. Trading bots help such person's transition from being crypto investors to crypto traders.
Most people choose to be investors because of the knowledge and time factor associated with active crypto trading. While there's absolutely nothing wrong with being an investor, active trading allows you to earn more passively. And typically, experienced traders know this. This is why they use crypto trading bots more!
With these bots, you do not need to sit in front of your computer all day analyzing the crypto market. The bot does everything automatically, including trade execution, while you go ahead with your daily life.
2. Helps in Eliminating Emotions
FOMO and FUD are critical elements, crypto traders, especially newbies, should always keep in mind. Understanding your emotions and keeping them under control is essential to making consistent profits.
However, regardless of how much some individuals try, they always battle to keep their emotions in check. Undoubtedly, effectively controlling your feelings is a skill that needs time to attain perfection. It's undeniably hard to see your hard-earned money vanishing and still stay calm.
Thankfully, crypto trading bots are now to the rescue! Experienced traders use these bots to significantly conquer their emotions - automated programs do not have feelings.
3. Make Better-Informed Investing & Trading Decisions
Artificial Intelligence is overtaking almost all aspects of modernization for various reasonable reasons. The cryptocurrency industry isn't alienated from these technological advancements.
Experienced crypto traders say their decisions have been a lot more exponentially smarter. These automated bots harness the intelligence of various experts while leveraging AI to help deliver better trading results.
4. Easier Investments Scalability
Even if you've managed to learn almost everything about crypto trading, and time isn't a restrictive factor, there are still other important factors that will limit your earning possibilities.
Realistically, it is uncertain to dedicated 24/7 of your daily life to trading. But then, that is what the market wants - it's one of its beauties. The crypto trading bots help experienced traders stay atop the market trends, helping them scale their investments efficiently.
Crypto Trading Bots You Should Consider
Having understood how experienced traders use crypto trading bots to earn passive income, we should review a few top bots currently available in the market that you should consider.
Pionex is a crypto exchange with integrated trading bots. Pionex is an excellent option for traders who are just starting out with automated crypto trading and aren't experienced. It's free and offers access to twelve (12) unique trading bots that allow you to automate your crypto trading strategies without the need to sit all day analyzing the market. Pionex is excellent for mobile and high-volume investors.
Apart from trading bots, Pionex also allows you to trade manually between some popular cryptocurrencies.
Another crypto trading bot that many experienced traders use is Bitsgap. Bitsgap combines technical indicators and advanced trading tools with an intuitive interface for trade automation. This safe, fully encrypted platform guarantees a steady flow of passive income with minimal risk.
Bitsgap introduces three versatile crypto trading bots: SBOT, Scalper Bot, and Trailing Bot.
With SBOT being the latest addition to Bitsgap's arsenal, it's the platform's approach to help traders minimize losses on bearish trends while maximizing profits on neutral and bullish trends.
Bitsgap's Scalper Bot helps crypto traders to minimize price spreads regardless of the strength of price movements. This way, profit accumulation is achieved as prices move upwards, while loss minimization is achieved by offsetting incoming profits the crypto bot had generated. It is a tool for traders who like to play it safe.
Bitsgap's third offering, the Trailing Bot, features a trailing option that allows the bot to move levels whenever the cryptocurrency price appreciates, crossing the upper threshold. This ultimately maximized profits by automatically selling and buying cryptocurrencies within a preset price range defined by a lower and upper limit. Bitsgap uses this trading bot for profit generation as the quote currency.
3Commas is arguably the easiest crypto trading bot, especially for newbie crypto traders. Compatible with major cryptocurrency exchanges, 3Commas stands out for its affordability and several self-explanatory automated strategies that help traders earn passively from the cryptocurrency market. One of such features is the Smart Trade feature.
However, you can't customize 3Commas trading bots unless you've linked a TradingView account.
Can Trading Bots Manipulative Crypto Prices?
The answer is YES. And these price manipulations are gradually garnering attention.
Crypto trading bots manipulate the cryptocurrency market via artificial price inflation, causing (new) traders to overpay for cryptos when buying. This is a coordinated strategy to "deceive" investors to buy the pump; as they buy, the bots dump the coin, causing it to lose its value and ultimately making such traders or investors lose their money.
Have you ever noticed a sudden drop in crypto prices that doesn't conform to human trading behavior? Well, that may be trading bots at work. This doesn't mean all dips are caused by bots, though.
Two major indicators of price manipulation by crypto trading bots are volume and price momentum. Monitoring these indicators can help you avoid potential dumps and pumps before they happen.
Using bots developed by professionals and understanding how they work is essential; it is a new way to automate your trades and earn higher in the long run. Of course, like other trading tools, trading bots doesn't translate to automatic trading success, but they can make crypto trading more lucrative.
If using a crypto trading bot to automate your trades sounds interesting to you, then knowing how other traders go about it is instrumental to consistently making profits. While bots can help tremendously in taking out the emotional elements of trading, it's vital to understand how to set them up in order to automate a trading strategy.