Best Crypto Trading Bots in 2024

What is the difference between a crypto trading bot and a crypto trading platform?

There are many simple automated crypto trading bots available for purchase, subscription or free download. Their value proposition is simple – offer traders the ability to automate their trades, and wait for the robot traders to make a profit. However, this is not always the case. While basic bots can be linked to a user’s exchange account and automatically execute buy/sell orders, users have limited control over the bot’s strategy which makes them less useful for advanced traders.

These bots are ready-to-go ‘blackbox’ solutions with few options for customization. Users must rely on the programming skills and strategy of the original creator. The quality of these trading bots varies from good, to fair, to poor, to outright scams.

Identifying which crypto trading bots can make a profit, and which are failed experiments, or worse, designed to steal the user’s money, is a daunting task. While a free crypto trading bot sounds like a good deal, free does not mean quality, and the ‘best bot’ really depends on a user’s needs and experience.

Another problem is that off-the-shelf bots are limited and do not take into account all the factors that make markets move. They can be caught out by unexpected factors such as a flash crash, exchange hack or major news event. Events of this kind make the crypto markets very volatile and without human supervision these bots can make useless trades resulting in user losses.

As a result, the trend in 2024 will continue to be towards adaptive trading platforms that give traders granular control over their trading strategy with automatic rebalancing strategies to protect profits. These platforms offer a range of other features including social integrations, backtesting, paper trading, a community, support, copy trading, portfolio tracking, auto portfolio rebalancing, and more.

Reasons to consider using a trading bot platform

Some of the benefits of using a crypto trading bot platform include:

Trade 24/7

Unlike traditional markets, crypto markets never sleep and it is possible to transact in today’s global crypto economy 24/7. For traders, this presents a dilemma – no one can watch the market all the time. Crypto market participants will be familiar with the excitement of waking up to a portfolio gain, and the reverse is equally true – traders with open positions risk waking up to a negative news event that has adversely affected a position leading to incur a loss.

Save time

This is the number one advantage that auto trading and crypto bots offer: efficient, rule-driven trading without looking at the markets. Even active crypto traders are sometimes unable to devote time to the markets. Automated trading strategies provide the means to generate trading profits without being tied to a screen.

Find new opportunities

A bot is always online and can relentlessly hunt the markets for an opportunity to make a profit 24/7. The volatile crypto markets can change very quickly, and bots are always ready to exploit a change in market conditions. Depending on what parameters are set, this will be executed as soon as the bot sees the opportunity.

Take the emotion out of trading

Traditional day trading is one of the most stressful professions on the planet. The volatility in the crypto markets amplifies this stress even more. Crypto trading can be a roller coaster of emotions, characterized by extreme highs and lows. Humans are emotional creatures and are prone to many biases that influence decision making. This can lead to costly miscalculations in the high-stakes world of crypto trading. A rules-based, crypto-bot trading strategy can help protect a trader from their own worst enemy – themselves.

Generate income

Unlike stocks, crypto-assets do not pay dividends. From an investment perspective, crypto-assets can be considered more like a commodity. However, in a bear market there is no reason to hold on to a commodity as it does not provide a return apart from price appreciation, which is unlikely in bearish conditions.

Trading bots can provide crypto holders with a passive income by leveraging their crypto assets via trades. This income stream is not as safe or reliable as crypto compound interest, but it is one of the few options available to crypto investors who intend to hold their assets for the long term.

If a trader can create an automated trading strategy that performs well over a consistent period of time, it can generate long-term passive income. Copy trading platforms allow investors with no trading experience to ‘copy’ the trades of professional traders, or to copy predetermined algorithmic trading strategies managed by the platforms.

Advantages of trading the crypto markets vs stocks

Crypto markets are open 24/7 Low barrier to entry Anyone can join an exchange and start trading Volatility means you can make quick profits (or losses).

Trading is often compared to poker, and in poker there is a concept called ‘Table Selection’. This simply means that a player can choose who they play against. If the goal is to make a profit, given the choice, a rational poker player will choose to play at a table of weaker, less experienced players. Trading in the traditional financial markets is like sitting at a table of professionals. It is possible to win, but you have to be one of the best in the world. However, cryptocurrency traders are generally less experienced. There are a few professionals, but the majority are retail investors.

This is another way of saying that crypto traders are less sophisticated than forex traders. This uncomfortable truth, combined with several factors unique to the crypto markets, has the potential to give savvy crypto traders an edge. Combine that edge with a back-tested, algorithmic trading strategy (a crypto trading bot) and traders will give themselves the best chance to succeed.

The crypto market is often described as the ‘wild west’ because the market is largely unregulated. Each country and exchange has different requirements, and there are no global, standardized regulations. There is not yet an agreed model for the reliable valuation of crypto-assets. This regulatory uncertainty, the possibility of market manipulation and continuous price discovery creates the trader’s best friend – volatility.

Crypto trading bot strategies

Automated trading bots are designed to be configurable to allow for a wide variety of trading strategies. From a simple trend-following strategy to more complex strategies that evaluate a wide variety of data points, today’s bots are highly customizable. Common strategies include:

Trend following

A trend following strategy aims to identify the directional movement of an asset and take advantage of the momentum of this movement. The strategy will go long when the asset is trending up or go short when the asset is trending down.

Arbitrage

Arbitrage trading seeks to exploit the difference in the price of an asset between different markets or exchanges. As a new and emerging market, the spread can vary between different crypto exchanges, although it has become tighter as the market grows.

Market making

A market making strategy is based on the continuous buying and selling of crypto-assets (on both sides of the order book) to capture the spread between the buy and sell price as the price fluctuates.

Copy trade

Copy trading is a growing trend that allows users to automatically copy another trader’s trade. Copy trading often involves a social community and gamification elements such as a leaderboard. The rise of DeFi and the rise of non-custodial platforms such as TokenSets means that it is now possible to copy other traders, or to profit from algorithmic trading strategies without giving up control of your private keys.

What are the risks of Crypto Trading Bot platforms?

Trading bots and algorithmic trading strategies are simply a tool and there is no guarantee of profitability. There are also some risks associated with trading bots and automated platforms. It is important to understand that trading bots are generally designed for traders, not investors, and some are not suitable for people new to crypto or new to trading.

Are you an investor or a trader?

If you are a casual investor who intends to buy and hold crypto assets, a complex black box trading bot strategy may not be appropriate. Investors with no trading experience may choose to ‘copy’ other traders or use existing algorithmic strategies on a trading platform. While platforms vary in their complexity, users with some financial literacy, analytical skills and trading knowledge will have an advantage over those who do not.

Beware of scams and hidden fees

Unregulated, emerging boom markets and new technology tend to attract bad actors. Some crypto trading bots are designed to exploit unsophisticated traders by stealing personal data and funds. Do your due diligence. How? Ask yourself how credible is the team that created the bot or platform? Do they have a public profile? A support team? Can they be contacted? Do they have a community of satisfied customers? Are the fees clearly explained and easy to understand? Are there any hidden costs?

A bot is just another tool in the trading toolkit

While you can set and forget most cryptocurrency trading bots, the best solution is a combination of automated trading with continuous human supervision. Crypto market conditions can change extremely quickly, so traders must ensure that they constantly adjust the parameters of their strategy to reflect this.

There are unknown unknowns

The volatility in the crypto markets makes crypto trading the riskiest of all. Bots can be buggy, can suffer from poor programming, and can be caught out by unusual market conditions like flash crashes or big news events. Expect the unexpected.