An Essential Guide To Build A Crypto Trading Bot
Crypto trading bots are becoming more mainstream in 2021. With the significant rise in bitcoin and altcoins’ prices in 2020, millions of individuals and hundreds of businesses have stepped into the crypto world. Mining and trading cryptos are widely adopted by people worldwide since they provide more profits while simultaneously attracting developers/companies to build crypto trading bots.
Many exchange platforms are doing their
best to provide crypto enthusiasts with better access to crypto services. One
such service is the crypto trading bot, a computer program that trades on
behalf of a trader. Not only exchanges, but we can also find private trading
bot providers who deliver customized crypto bot development services.
If your end goal is to adopt a fully
functioning crypto trading bot, you have two options - approach a bot
development company or develop a bot from scratch on your own. Either of these
two options is better depending on your investment, time, management, and other
constraints.
Though some parties prefer free bots
from third-party developers, the outcome & performance of those bots may be
unpredictable. So it is recommended that you choose a paid one for reliable
services.
Developing A Bot
If you plan to pursue trading and
become a professional crypto trader, you will need to invest more of everything
- money, time, and knowledge. To use efficient, performance-oriented,
results-driven bots for trading cryptocurrencies, you need customized
solutions.
Before diving into the development, you
could spend some time studying other popular crypto trading bots in the market
- Nexfolio, Cryptohopper, 3commas, and Shrimpy.
5 Essential Factors Determining
Resource Costs
1.
Features
- What & How many
The basic features of a bot include
strategy implementation, market tracking, backtesting, transaction logging,
security, and notification. As we know, the more the features, the more the
resources needed. So it is better to integrate only the necessary features (the
ones mentioned above).
Add-on
knowledge on each feature
- Strategy
implementation - It is the core feature of a trading bot that executes a
chosen strategy. The bot can also change the strategy if it proves to be
inefficient.
- Market
tracking - It helps to collect market data and store it for subsequent
retrieval, reference, and analysis. This information is essential for
developing new algorithms and improving existing ones.
- Backtesting -
When you build a new trading strategy, you need to backtest it to ensure
its effectiveness. You can check a new strategy by simulating its outcome
using past data obtained from tracking markets.
- Transaction
records - This function keeps the history of all the transactions
performed by you. You can track past transactions like transfers and
profits & losses.
- Notifications
- The crypto market is open 24 *7 and profitable opportunities may knock
on your door anytime. So you need to enable notifications to stay updated
with the latest market prices, trends, fluctuations, and other things.
- Security -
2FA/multi-factor authentication, biometric, email & SMS authentication
are some of the significant security features to include in your bot.
2.
Compatibility
- Exchange + Coins
You can connect with all the exchanges
or focus on one exchange marketplace. Likewise, you can limit the
cryptocurrencies supported by your crypto bot. Depending on the conditions you
choose, it will be faster and cheaper to build an efficient bot.
3.
Trading
Strategies
You need different trading strategies
to trade in different market conditions. So include as many strategies as you
could in the bot. An adequately designed trading bot should also allow
creating, testing, and implementing user strategies.
4.
Design
You need to spend some extra money for
the bot’s better navigation and easy-to-use interface. This is completely optional.
5.
Technology
& Team
A team of skilled developers &
testers is essential to develop an efficient bot. So you need to form the best
team without compromising on costs. And then, you should decide the technology
requirements for the bot - you can find many open source codes online - “python
is the widely preferred programming language.”
What Do You Need?
1.
Choose
the Language
The commonly used programming languages
to develop bots are Python, Javascript, Perl, and C. You can easily assemble
the dev team familiar with any one of these languages. Once you choose the
team, commence the development process. The Internet is full of open source
websites where you can find the required codes to develop the bot of your
choice.
2. APIs
You will also need to get hold of the APIs required for the bot to access the
exchange marketplaces you want to trade on. The good news is that most crypto
exchanges allow you to use their API interface for the bot. So you just need to
generate API and secret keys on the exchange and put them into the bot.
3.
Trading
Strategies
Trading strategies direct the bot to
react to various market conditions. Based on your preset conditions &
strategy, the bot will make necessary trading decisions. Some of the most
common trading strategies include trend following strategy, arbitrage strategy,
and market making strategy.
The Actual Development Process
1.
Bot
Creation
Once everything is in place, your team
can begin the development tasks. It may take weeks or months to complete the
process. So you need to be more patient and tackle the challenges in the path.
Record your progress each day and have a meeting with your team once or twice a
week. If you want to make any changes, it is recommended that you do it in the
early phase - to avoid extra costs and time delays.
2.
Testing
Testing helps to make sure your bot
works as planned and can cope with the fluctuations in the market. You need to
evaluate factors such as risk-reward, functional errors, and other bugs at this
stage. And next, you need to tweak the bot’s performance - optimizing the bot’s
behavior according to your preferences.
3.
Deploy
After fixing the bugs and sorting out
the errors, deploy the bot into the market and start trading with actual
values. For your safety, you can initially start with small funds and once you
are completely satisfied with the bot’s performance, make big trading decisions
as you wish.
Other Things To Remember
- Understand the
market before even getting started.
- Create a
dynamic development plan that’s devoid of loopholes.
- Make sure your
approach is powerful enough to be developed.
- Hire the right
people to develop your bot.
- Once stepped
in, never deviate from the path.
Conclusion
Crypto bot development is a long project and involves huge investments. But keep in mind that these investments will yield high returns and make you financially stable (and attain financial freedom) if everything happens in your favor.
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