The Advantages and the Disadvantages of using Trading Bots in Cryptocurrency transactions

Introduction:

Cryptocurrency has garnered a lot of attention since its bull run in 2017 when the value of a single Bitcoin increased by almost 300% in three months. From 5000 USD the price of a single coin increased to around 20,000 USD in a very short period. Currently, Bitcoin is on the headlines once again after a recent investment of 1.5 billion USD made by Elon Musk, the CEO of Tesla. 

The popularity of Bitcoin as an alternate currency is due to the blockchain database that it uses which promises to make transactions more time-efficient than it is possible through the traditional banking system.  This currency would be free of any external regulation. No bank or government organization would regulate this new currency.

Through the blockchain database, it was possible to carry out complex cross-border transactions, a process that would normally take a few days till completion, in a matter of a few minutes. The blockchain system also promised improved security to transactions, where every transaction would be stored as blocks of memory connected to previous transaction records, making the record virtually unalterable, as altering previous blocks would be impossible without disrupting the structure of the existing blockchain. If required, you can refer to the information on this website https://yuanpaygroup.site to get a better insight into it.

These new possibilities invited new investors- from the bank across the world to multinational corporates to independent traders in the crypto market. New cryptocurrencies were introduced in the market- Litecoin, Ripple, Ethereum, Algorand to name a few of them. With the increasing profitability, the crypto market is expanding every day.

Trading bots are applications designed to make investment and exchange easier for new as well as accustomed traders. This algorithm-based application is gaining popularity due to its potential to maximize gain. What are these trading bot applications? Let’s find out.

Trading bot application – how it functions

The trading bot applications are algorithm-based programs designed to identify market trends and parameters in the crypto market. The trader can choose any application provided the service it provides is in sync with their investment strategy. The algorithm on detecting a trend that has the best possibility of yielding a specified result would automatically execute the desired trade option. Thus the investor is freed from the burden of keeping a watch on the rapidly changing market trends to make the right purchase or sell decision. The software works as an extension of the traders.

The trading bot applications are developed to respond to certain market trends. They are designed to maximize the probability of making the right purchase decision as an instantaneous reaction to the specified market trends. However, no software can guarantee complete success. Gain also depends on the ability to choose the right application with a methodology that is in tune with the trading strategy.

However, if automation does not serve the purpose one can always switch to manual trading modes. Besides automating trade functions, this software provides a detailed graph that records all the changes in crypto valuation. They provide a real-time statistic of growth, a ranked list of currencies based on their performance. This allows the trader to study the market trends and make the purchase decisions by themselves.

Advantages of automated trading function

• The algorithms in these applications can detect market trends and execute a purchase or sell functions instantly.
• The downsides of manual trading such as slow response time, inability to scan the market completely are eliminated.
• These algorithms constantly scan the market trends to find the right trade opportunity.

Disadvantages of automated trading function

• The trading strategies on which these algorithms are based are not adequately tested.
• Network connectivity, unhindered power supply are some basic problems.
• Processing is dependent on hardware configuration and durability, where lowered performance can stall the process.

Conclusion:

It is important to choose the application that delivers the service that suits you the best. Conducting basic research on the methodology of these applications can be insightful.