4 Problems with Using a Crypto Trading Bot on Exchanges

crypto trading bot guide“Get a crypto trading bot”, said a friend. “You will be swimming in cash”, he said. It was with the ultimate of best intentions that my friend advised me to use a trading bot. They are definitely a great way for crypto trading newbies to start making money and understanding how exchanges and the markets work but are trading bots simple to use? And is it really that easy to make money with them?

Those were questions I had when starting on this trading adventure and here are four problems I encountered when using a crypto trading bot to make cash on exchanges.

#1 – You need to keep it on for 24/7

I naturally assumed from the beginning that I pretty much only had to connect my trading bot to an exchange such as Binance, fill it to the brim with BTC, turn it on and watch it weave its mercurial magic while hanging around on my newly purchased superyacht. I was wrong about that. You can’t purchase a superyacht with pesetas anymore.

The first thing I realized about my trading bot is that to get the best from it I needed to leave it on 24/7. Its fundamental way of doing things is to trade BTC into other altcoins, wait for their price to go up by a small amount and then trade it back into BTC for a small profit. The bot rinses and repeats that process. However, to be effective, you need to keep it running 24-hours per day, which means you need either to keep your PC on forever or purchase some space on a virtual server.

#2 – Getting the right crypto trading bot settings

Just turning on your crypto trading bot and expecting it to make you money is naïve. The most successful people I know who use a trading bot have special algorithms and settings that they purchased from experts. Having the right settings is very important and basically lays out the strategy your bot will use.

#3 – You constantly have to watch the market for pump and dumps

Your crypto trading bot might not have the personal touch you would get from a hired-escort, but it can definitely make mistakes just like us evolved primates. The bot’s settings are adept at knowing when an altcoin is currently well below its normal trading price and to take advantage of this. However, it cannot sense when an artificial “pump and dump” is taking place on a certain coin.

A pump and dump could well be a concerted effort by several people who own a certain coin to drive up the price and then to cash out while the price is at an optimal point. The price then proceeds to drop, which is bread and butter for your crypto trading bot who then thinks the coin is now at the ideal value to buy (well below its normal market level). The coin continues to drop some more, and before you know it, your trade on the said coin is now 20% down on your initial buying price, and it’s brown trousers time.

It is important that you keep an eye on the trades your bot is making, just to make sure it doesn’t buy into a pump and dump.

#4 – Everything can change overnight

As we have seen some massive drops in BTC prices since the beginning of 2018, the market can be very unpredictable, and traders can lose or make a vast fortune overnight. If the price of BTC massively drops while you are in bed sleeping, you wake up to most of your altcoin trades being at least 10% down on your bot. If you are lucky, this can go on for a few days and then the altcoins and BTC manage to steady themselves which helps to straighten out the prices of trades. In some cases, you can lose massive amounts on your portfolio.

A crypto trading bot is a great way to learn more about the crypto markets for newbies, but only use what you can afford to lose and do not expect it all to be ‘high-fives’ and champagne breakfasts.

I am very experienced writer/blogger who has been an active member of the cryptocurrency community for several years. I have experience writing for crypto news sites and proactively been involved in the startup of other ICO and crypto ventures over the course of the past four years.

Hayden P.

A blockchain and cryptocurrency enthusiast

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