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February 11 2023 Cryptocurrency

What do we need to know about trading with the stock market robot?

Trading on a stock exchange robot is an exciting topic. Automatic trading systems based on algorithmic principles are developing at a tremendous pace all over the world. Today, there is hardly an investor who does not use these programs in his trading. Let's see what we need to know about these robots!

What are trading robots?

Basically, stock trading robots are bots that can trade automatically without constant human supervision. This is a huge convenience for traders as they do not have to constantly monitor stock market movements. As a result, these software programs save considerable time and energy for their users.

The advantages of trading with a stock exchange robot

Traders learn the rules of stock exchange trading in vain. Even if they learn how to analyse charts, they cannot completely eliminate the potential for human error from the trading process. People are not able to devote their full and constant attention to this activity. This is particularly true for crypto markets that are active 24 hours a day. Moreover, we are not in full control of our emotions. Fear and greed are very bad advisors in stock market operations. 

Trading bots, on the other hand, are tireless and always execute the most ideal transactions according to the strategy set. They will not be overcome by FOMO and other emotions. By their very nature, they work for us even when we are sleeping the dream of the righteous or engaged in other important activities.

What are the disadvantages of automated trading?

Due to the increased unpredictability and volatility of crypto markets, trading bots can be subject to movements that they have not been pre-programmed to anticipate. If the trading rules they use are not set up properly and with due care, they can lose money. To avoid this, it's worth being aware of the basic terms of robotic trading and learning how they work before practicing what you've learned with your own money in a live account.

As a basic rule, it is not worth entrusting all your invested capital to a single robot. Diversification is also a good idea here. This is an effective way to reduce the risks of trading with robots.

How do crypto trading robots work?

If you want to trade on cryptocurrency exchanges in an automated way, it is important to be aware of how the robots used for this purpose work. Most importantly, we need to connect them to the exchanges and to our wallet. This will provide the basis for their operation. We can typically do this by using different API keys. Besides connectivity, proper programming is also key. We need to configure them to perform their activities according to rules.

What types of automated trading exist?

Market maker bots make profits for their users by exploiting the difference between the bid and ask price. Their principle of operation is basically simple: they buy assets at a lower price and then resell them at a higher price. 

Arbitrage trading, on the other hand, exploits price differences between different exchanges.

Whatever strategy you intend to follow, it may take time to find the right settings and be able to make a reasonable profit from this activity.

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