Trading Bots: Are They a Force for Good?

Trading bots have become a staple of today’s markets — especially in the 24-hour cryptocurrency industry. But while some have gained popularity by enabling enthusiasts to execute their strategies automatically and keep on top of the latest trends, others have caused controversy by manipulating prices using methods that would break the law on regulated exchanges.

For everyday crypto consumers, knowing the difference can be crucial. Bad bots are often involved in a practice known as “wash trading,” which sees buy and sell orders being placed simultaneously in order to distort true levels of activity in the market. As reported by Cointelegraph in March, one alarming study by Bitwise Asset Management suggested that 95% of reported volumes on unregulated exchanges appears to be fake or noneconomic in nature.

Wash trading is the type of unethical behavior that could put innocent traders in harm’s way. Lesser-known exchanges may be engaging in these strategies with a view to improving their rankings, making it seem like they have higher levels of liquidity — deceiving investors in the process.

However, not all trading bots are used for nefarious means — and indeed, some are having a positive influence on the market by helping investors to make faster decisions while reducing the amount of time they have to spend monitoring the ups and downs of the crypto world hunched over a laptop.

Cutting mistakes

According to Cryptorg, a service that offers bots to automate digital currency trading on major cryptocurrency exchanges, the technology has the potential to reduce the mistakes made in the heat of the moment. The company says success often heavily depends on the psychological state of a trader — and this means that spontaneously chasing losses or holding out for additional gains can have huge ramifications if their knee-jerk strategy doesn’t work. Such erratic decisions would often not be made by these professionals in the cold light of day, and as such, trading bots enable users to meticulously set out their strategy to a predetermined algorithm — complete with orders on when to buy or sell coins.  

As the markets never sleep, traders can also feel like they are under pressure to stay glued to their computers and smartphones for fear of missing out on the next big price jump. Bots can play an instrumental role in helping crypto enthusiasts determine their strategies morning, noon and night, leaving them free to pursue other business endeavors or indulge in some leisure time while safe in the knowledge that the settings they choose will do all of the hard work for them.

Indeed, it is also possible that bots could help traders enjoy greater success with their chosen strategies. This is because automated software can instantly react to data points and execute the necessary transactions in a matter of seconds. In some cases, human traders can be a lot slower than their bot counterparts in achieving the same outcome — and when markets are moving fast, this time difference can prove to be exceedingly valuable.

But aside from the fact that bots have the potential to reduce mistakes, take the emotion out of trading and allow crypto traders to catch up on some much-needed sleep, Cryptorg says that there’s another thing to consider: ease of use. When traders are using a myriad of exchanges — often with complicated and conflicting interfaces — the company says that users can run the real risk of pressing the wrong button and making a costly error.

According to Cryptorg, its goal is to remedy this by offering a unified interface that enables traders to access multiple exchanges in one place — Poloniex, Binance, Bittrex, Bitfinex, KuCoin, HitBTC and AlienCloud among them. This can also help eliminate the big to-do list that users face before they make a trade, eliminating a multitude of complicated logins and delivering a simple point of access.

But, are there downsides?

There can be. Many trading bot platforms are only as good as the technology they have been built upon, and to this end, it is crucial to ensure that a company’s systems are robust — eliminating pesky delays that could cost traders money or see them shut out of trading at crucial moments because of downtime and technical hiccups.

There is also a risk that some traders may think that bots can do all of the heavy lifting for them, meaning that they don’t monitor their chosen platform anywhere near as much as they should. System quirks and missing orders can never be ruled out, and checking in on a regular basis can ensure that any problems are rectified before financial damage is inflicted.

Bots are also only as good as the strategies that they are told to execute, and oftentimes, it takes more than this to enjoy success when crypto trading. Automated systems can detect trends but cannot accurately react to or understand the significance of news events that can cause currency prices to soar dramatically or crash unexpectedly. Meanwhile, many traders use something called “backtesting” to see how strategies they are considering will play out based on historical data. Although this can be an exceedingly useful guide, past market movements cannot dictate what’s going to happen in the future — and as such, it’s always worth using such features with a great deal of caution.

With almost 7,000 active trading bots at the time of writing, Cryptorg says its goal is to furnish traders with as much information as possible to help them enjoy success while trading. Its platform will incorporate elements of social networks to build a community where users can share promising strategies, seek advice from other professionals and send signals to others.

Other features give users the ability to trade and mine (including the company's native token, CTG) at the same time, while integration with the Bitmex exchange enables them to trade with leverage using bots.

Four subscriptions are also offered for Cryptorg’s automated trading platform, depending on how many bots and API keys a user requires. More advanced pricing plans enable traders to access greater numbers of trading pairs simultaneously, along with technical support that’s tailored to their own exact requirements.