Do Crypto Trading Bots Work? Advantages and Disadvantages

Do Crypto Trading Bots Work? Advantages and Disadvantages

6 minutes to read | 08.06.2022
TL;DR A crypto trading bot automates buying and selling cryptocurrencies by using algorithms to make trades. Some advantages of a crypto trading bot are making decisions based on data rather than emotions, faster processing speed to trade near instantly, and making trading strategies seamless. Disadvantages to using crypto trading bots are they may still make the wrong decisions since they can't predict the market, they cost a lot of money to get started, and they might not make very much money. Crypto tradings bots work by automating the process of trading, but do not make up for a poor strategies, nor will they make you rich quick.
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Crypto trading bots sound like the life, right? Sit back, relax with a pina colada in your hand, on a beach somewhere chillin’ knowing you are rolling in the dough because you’ve set up a trading bot. A crypto trading bot is an algorithm that will make trades based on certain conditions set up by the user. But, do crypto trading bots work? We will check out some of the advantages and disadvantages of crypto trading bots to find out if they really work.

Advantages of Crypto Trading Bots

First, we will take a look at some of the advantages of crypto trading bots.

Make Crypto Trading Seamless

You can set up a crypto trading bot in a matter of minutes. A bot could make your crypto trading life a lot easier. A bot that has no limit. It can constantly watch the market and trade. Robots don’t need to drink, eat, use the bathroom, sleep, go to work, hang out with their wife, play video games, okay, you get it. They know one thing… and that’s crypto trading. A bot won’t miss a potentially great trade because it’s sleeping. A crypto trading bot saves you a lot of time because you don’t need to constantly watch the market in order to trade. Keeping too watchful eye on the charts is not healthy for a human. It can cause unnecessary stress and can start to affect your personal life (“Ugh, crypto is down again!” your wife hears for the 255th day in a row). Plus it frees you up to go and do other things! Like to stop thinking about crypto.

Crypto Trading Bots Have No Emotion

FOMOing (aka fear of missing out) is something that beginner traders are best at. That fear that you had the chance to buy a coin at a certain price. As you watch the price skyrocket, just when you think it’s going to the moon, you jump in and spend a bunch of money, only for the price to only go down from here. You can lose a lot of money FOMOing into cryptocurrencies. It seems likely every day at least one cryptocurrency is blowing up. Chasing that 10x or 100x is basically gambling. A bot would never FOMO into a coin that’s skyrocketing because they trade based on data instead of emotions. Emotional decisions are usually bad decisions. The bot is using the numbers and trading purely on rational decision making. They don’t get carried away in trying to predict the market based on feelings and hunches. At the same time, it would also not panic sell when it sees a little red in the market. Panic selling is something you should avoid while trading crypto because it can result in a loss or you’ll end up with less crypto in the long run. Crypto trading bots help minimize risk because they don’t get caught up in the emotions of trading.

Higher Speed

A crypto trading bot is way faster at processing transactions than a human. A human takes time to process a decision. The bot can be set to commit transactions at certain prices, and executes those transactions before a human even knows what the price is. Bots can also monitor multiple cryptocurrencies at once, something that is extremely hard for a human to do unless they watch the charts all day. However, a human can’t execute trades for multiple cryptocurrencies within split seconds of each other. Trading multiple cryptocurrencies is great because it diversifies your portfolio and reduces risk. If you are using a trading bot the speed can make sure that you hardly miss out on a good trade. Remember, a robot doesn’t have to sleep, so they can be watching for the perfect moment to make that trade. Speed matters in a market as volatile as crypto.

Disadvantages of Crypto Trading Bots

Now, let’s take a look at a few of the downsides to crypto trading bots.

Might Not Make The Right Decisions

Just because you are using a crypto trading bot doesn’t mean you are magically going to get rich or be able to make profits everyday. Sometimes the bot will finish a day in the red. That’s because most bots are trading on algorithms. Algorithms can’t predict the market. They can only make trades when certain conditions are met. Sometimes these conditions aren’t favorable. There is no way to create a bot that has the perfect algorithm to always make the right decisions. The crypto market is very volatile. There could be a huge crash or a big bull run on a token that the algorithm might not know how to deal with, potentially losing out on a good trade. There could be a time where your dreaming of profits only to wake up and see your portfolio deep in the red because your bot made a few mistakes. Remember, there is always a risk, even when using a crypto trading bot.

They Don’t Make Very Much

Trading bots aren’t meant for massive profits. Instead, they are meant to make lots of transactions that generate very tiny amounts of profit. Obviously, if it were easy to get rich from trading bots then everyone would be doing it. A lot of crypto trading bots on the market aren’t programmed very well. Most of them will likely lose you money rather than gain anything, but when you do make profits, it’s not that much. These profits will likely be countered by a loss the day before or the next day. Sometimes you will get a few lucky days in a row where you have made profits. The amount of money you make also depends on the amount you are using to trade. Obviously, someone with $200,000 will be making more per day than someone who puts in $2,000. If you do use a crypto trading bot you probably won’t make too much.

Crypto Trading Bots Cost Money

Yes, you do have to pay for a crypto trading bot. This could be a subscription to the bot’s algorithm, or paid by fees on the profits they make you. That means you are in the hole before you’ve even made a trade. For fees, there are some that take a small fee of 0.05% per trade, but others that take 15% of your profits. Some subscriptions are anywhere from $30 a month to $450 per month. Even right out of the box your bot has a long road ahead of it. There also may be fees based on the platform you are using to trade, as well as transaction fees on buying and selling the crypto. There is just a lot eating away at your already small profits.

Do Crypto Trading Bots Work?

Trading bots can work if you are lucky, and you have set up the right trading strategy. Most likely what will happen is you will spend a ton of money on a crypto trading bot and lose a bunch of money on the crypto market. However, if you are not focused solely on making huge profits and just want to automate the process of your trading, then a crypto trading bot could be good for you. Summary A crypto trading bot is an algorithm that will automate buying and selling crypto based on certain conditions. Crypto trading bots have a few advantages like having a high processing speed, being able to make trades near instantly, not being susceptible to FOMO and emotions, and making trading seamless. You can even do it in your sleep! The downside to crypto trading bots is they may not always make the right decisions causing you to lose a lot of money. They may not always make a lot of money on their trades, and they cost a lot of money to use, whether that be through trading fees or subscriptions. Now that you know all about crypto trading bots, you can learn about the best cryptocurrencies to stake.
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