It is true that automation makes crypto trading simpler, but you must still consider a number of factors before you fully rely on this method.
An automated trading system or an algorithmic trading system allows traders or investors to develop precise rules for trade entries, exits, and money management which, once programmed, can automatically be executed through a computer.
The crypto-currency market is active all the time. It never pauses or stops, not even at night. Thus, monitoring can be very stressful for traders and investors. Imagine waking up in the morning only to find a pleasant or unpleasant surprise. Also, a lot of opportunities are lost as a person can’t monitor trade 24×7.
This issue can be resolved by employing automated trading solutions. It has turned out to be a boon for online financial asset traders as it can effectively eliminate the vulnerabilities of manual trade.
About 75% of all the shares traded in the US. Stock exchanges are automated.
Developing Trading ‘Rules’
The auto-trading solutions will scan the markets round the clock in search of favorable opportunities based on the trading rules. Many trading platforms have their ‘wizards’ which help in building strategies to carry out trade. This is done by selecting from a common list of available options for various marketing parameters.
You can not only set the entry and exit trade parameters but also set conditions such as trading times, stake amount, order types and more conditions. However, often the traders choose to customize their strategies by closely working with a programmer.
Though this requires more effort than simply using the platform’s wizard, this helps the trader gain more command over his trade which can lead to better results. A greater number of trading rules will give you more control over your activities.
Pros of Automation
Automated trading software helps in completely removing any emotions from your trading system. This ensures that a strategy is applied properly, without the intervention of any human thoughts which may arise while working manually.
The automation ensures that trade orders get executed according to the plans. This will help the traders who are hesitant to pull the trigger and the ones who are overconfident to regulate their crypto trades.
Backtesting applies the various trading algorithms to historic market data. This is done to determine the effectiveness of the rules. This time-consuming activity can be done easily and accurately through a trading system.
Since the establishment and execution of trade rules is automated, discipline is preserved even in continuously changing markets. While trading manually, this discipline is often lost due to fear or anxiety but the automated trade ensures that no mistakes are made due to these issues.
Improving Entry Speed and Accuracy
As computers are active 24×7 and respond immediately, automated trade can generate orders as soon as the trade criteria are met. Even a few seconds delay in crypto can cost you millions!
Cons of Automation
Too much of Optimisation
The biggest risk while using automated trading solutions is that in order to establish the best, traders may fall in the trap of an over-optimizing strategy. They may continually adjust their strategies to achieve 100% profitable outcomes. The trader must bear in mind that optimizing trade means to gather overall profit, not perfection.
Mechanical Failures and Inflexibility
Since the automated trading solutions being used for crypto trade are ultimately computer software which is susceptible to random technical mishaps. It may happen that the host system crashes or internet connection is lost. In such a case a valuable order might not be placed in the market.
As the software is essentially programmed, it may not be able to get around the problems associated with market changes due to unforeseen factors such as economic or political events.
Think Before You Automate
It is true that automation makes a task simpler, but you must still keep a few things in mind before going for it. Though it promises quick profits, you must remember that these trading systems can be quite complex and you might not be able to comfortably run it if you don’t have the required experience.
If you wish to achieve big in crypto, strategizing is a crucial aspect. There is no such solution that is optimal for all. Thus, you need to carve your own way ahead with your own preferred strategies.
Prince Kapoor is a seasoned Marketing Analyst and Blogger. With his skills, he has been helping fellow marketers and brands worldwide.