An automated trading bot uses a computer program to execute your crypto trades for you. In other words, an automated trading bot allows you to use software to automate part or the entire trading process. Crypto trading is still very new, but it is not going anywhere. Apart from being cheap, anonymous, and fast, cryptocurrencies solve many problems. The trade represents the revolution of the financial sector and exciting ventures in the tech industry. Currently, there are dozens of cryptocurrency trading bots on offer. You will find both free and expensive programs that you can use. However, professional crypto traders use expensive and subscription-based bots. This article explores four things you should know about using an automated trading bot.
(Top 4) Things to Know About using an Automated Trading Bot
So here are the top 4 best things to know about using an automated trading bot. So just check it out,
In crypto trading, compound interest is the key to wealth. Although it may take time, the best thing is to focus on the bigger picture. Do not get obsessed with everyday trade. Instead, allow your money to grow through consistent profits over time. The truth is that not everyone has the time and ability to become a full-time trader. You have to learn the curves, market change, and drawdowns. Almost everyone loses their money before becoming a professional. Nevertheless, the trick is to utilize an automated trading bot to make the trades for you and use a strategy that could otherwise be difficult to do manually.
Find a Trading Bot that Works
Since you will find several automated trading bots in the market, you need to find one that works. Use TradingView software to automatically backtest the crypto bot to find out if it works. The profitability of automated trade bots depends on the market. Most trend-following strategies get chopped up in a ranging market. Learn to eliminate emotions and fear since they will work against you. Learn to manage the plan and shut it off when the price consolidates. You can also look for someone who knows what he is doing and use his ideas to reach a level of consistent profits.
In the US, taxes on crypto are in a mess. The draconian policy and the IRS treat crypto trades as property transfers. Every single trade is a taxable process and should be reported. However, you can trade your futures on Bitmex to prevent the taxes from drowning you. On Bitmex, you trade a financial derivative that is attached to an exchange price for bitcoin instead of the real thing. As such, the trade is not treated as property transfer, and all gains go into your annual capital gains tax.
Before entering a scenario, you should measure the worst-case scenario. Most beginners make little to no trades in a month. You may even wait for two months before entering a new position. If you opt for the smaller time frame bots, you will be signing up for higher drawdowns and lower accuracy per trade. Using automated trading bots depends on the risk you are willing to take.
If you are thinking of crypto trading, you need some working capital to start you off and enough patience for it to become profitable.