Cryptocurrencies are a relatively new type of payment that is secure, decentralized, and gaining popularity across the globe quickly.
Crypto trading bots are algorithmic tools that help you purchase and sell cryptocurrencies and manage exchange accounts in one location.
Since they are still undergoing rapid development and change, they have not yet received comprehensive regulation and are therefore still quite vulnerable to fraud and hacking.
In essence, trading using cryptocurrency bots might be worth investing in due to their efficiency. Unlike people who make buying decisions based on emotions, bots analyze data and trends.
In this article, we’ll see whether trading bots are safe to use or not.
What is a crypto exchange?
A cryptocurrency exchange is a platform where you can buy and sell digital currency.
Exchanges can be used to interchange cryptocurrencies, such as converting Bitcoin to Litecoin, or to purchase cryptocurrencies using fiat money like the US dollar.
Some exchanges legitimately have low fees and high security, while others do not. Therefore, always evaluate carefully which crypto exchange is reliable and leverage on fully.
In the next section, we’ll have a close look at some of the things that matter when trading crypto and particularly address the question—are crypto bots safe?
Strategies employed by bots
Before trading, it’s important to understand that each trading strategy has benefits and drawbacks and they all relate to how different bots compare to one another.
Traders that utilize Bitsgap bots can use pre-programmed techniques whose user selection is determined by its backtesting performance, suggesting that a certain method is dependable.
Below are categories of strategies used by bots:
- Analysis strategies, which include those that trade with indicators and those without indicators.
- Market analysis strategies for technical, mixed, and fundamental trading.
- Entry-based strategies, categorized into breakout and inbound trading.
Do bots manage money?
Bots are becoming increasingly popular among cryptocurrency traders as a way to earn without putting the user’s money in jeopardy.
Aside from trading, some bots are used for money management—their algorithms assist users stay on budget and conduct regular analyses to find the best investments.
Do bots have good programming without mistakes?
Bots use clean code since they have been developed by professional programmers who understand how to avoid common coding errors, and they are programmed to follow a set of rules.
These rules are designed to eliminate errors, and the bot’s code can be checked against it to ensure that it is error-free—making trading bots fully functional.
How bots manage risk
Bots can help with risk control in Bitcoin trading. They use market data feeds to measure volatility and then select how much to invest or trade based on that information.
For example, a bot can be programmed to check the market for unusual activity and buy or sell currencies autonomously in order to profit from market conditions.
If one of your transactions does not go through, you can program the bot to cancel all other orders and halt trading. This prevents traders from having a single bad trade, or a succession of bad trades, wipe out their entire account balance.
Which crypto bots should you avoid?
Even with the best strategies and control you have when trading using crypto bots, some risks will still be there—but the good thing is that they are completely avoidable.
In reality, many crypto trading bots are simply scams. You don’t know anything about the bot or its creator, and have no idea how it works.
Bitcoin Millionaire is an example of a ‘free’ scam trading bot that promises to make you a millionaire quickly. It asks for a 2% commission and deposits from people who want to use it.
Examine trading bots carefully, and make sure to avoid Bitcoin Millionaire at all costs. You can find out more at ScammerWatch.
Trading is a very fragile activity, but anyone with access to a bot may make it simple and accessible—although not all the time because of scam crypto bots.