Crypto bots are all the rage right now. Despite the fact that it may seem like an exciting opportunity, you need to understand everything it involves first.
Trading bots help you buy and sell cryptocurrencies at the right time by automating the process. With bots, anyone can set up a source of passive income. One distinct advantage that automated trading offers is that the bots are active 24 hours a day. In many cases, investors cannot react quickly enough to price changes to achieve optimal trading results, unlike bots like Cryptohopper and Binance trading bot. Even with so many positives, It’s not as simple as most people think. It’s possible to lose money if you don’t know what you’re doing. Let us see how crypto bots can actually profit you from the markets.
Risks of Bot Trading, Reading Charts & Understanding the Market
People who get into bot trading think it’s as simple as clicking a button and watching the profits roll in. That’s not the case. To begin with, you need to be familiar with the markets. Not as much as you think, but a bit.
For instance, you should be able to recognize support and resistance levels. In case you don’t know, support is simply an area that the market doesn’t sell below, and resistance is an area that the market doesn’t buy above. It looks something like this:
Even though it’s a basic concept, it’s very crucial when using bots. In order to maximize your profits, you need to make sure you start your bots at the right price. This brings us to our next point:
Looking At Higher Time Frames to Predict Resistance & Support
Many people make the mistake of looking at a lower time frame chart when using bots to trade. However, this is only part of the picture. You’ll want to use higher time frames such as a 4-hour, a 6-hour, or even a daily chart when using a bot to trade.
Why? The higher the time frame, the stronger the support and resistance are going to be. In other words, you may start a bot at a price that looks like support on a 15 minute chart, but shows resistance on a daily chart.
Grid Trading Most Profitable For Crypto Bots
The importance of this component cannot be overstated. At the moment, most bots only profit from grid trading. It buys low and tries to sell those orders at a higher price. When the market is in a range or trending upward, this is fine. But what about when the market is trending downward?
A lot of people lose money here because the bot goes outside its range or the coin doesn’t recover to where it started. In the end, it’s still a net loss if they decide to close the bot, even though they made some money from micro profit transactions.
Are Bots A Good Way To Profit From The Market?
Absolutely. The only thing is that you can’t expect a bot to do all the thinking for you. By arming yourself with some knowledge of how the markets work, you can maximize your gains.
It’s always best to get an understanding instead of being tricked into all the A.I. automated talk. When you know how it works and what makes it all work, you then put the odds of success in your favor.