Want to separate emotions from trading? Automated crypto bots can help you

From its very inception, cryptocurrencies have been highly volatile with prices fluctuating within seconds. However, when it comes to investing outside the traditional system, most people fear the potential ups and downs that they may experience.

The crypto trading market runs 24/7, making it difficult for most traders to keep track of the market at all times. As a result, traders and investors often wake up to see a big fall in prices, and they could also miss an excellent opportunity to buy or sell if they are not watching the market 24/7.

There are several trading strategies for the human mind to process and most traders lose money due to emotional trading decisions. The volatility of the crypto market limits the effectiveness of human crypto trading in several ways.

There are solutions to these challenges. One of the solutions involves using automated crypto trading bots to analyse and execute trades.

Let's see how crypto trading bots can help eliminate emotional decision-making in trading.

Crypto trading

The Commonwealth Bank of Australia (CBA) is known to be the first bank in Australia to adopt cryptocurrency services. Some analysts predict that Bitcoin could surge above US$100,000 as the digital currency continues to gain traction from institutional investors.

According to El Salvador President Nayib Bukele, legalising Bitcoin could increase investment opportunities in the country. Notably, El Salvador is the first country to accept Bitcoin as legal tender. These adoptions are pointers to a possible new era of decentralised finance (DeFi).

The question is, how can you take advantage of this wave in crypto without being too emotional about your trading decisions? 

To be successful in the crypto market, investors or traders require various trading skills but none is as essential as the trader's mindset. Research has shown that experienced traders detach their emotions from the constant fluctuation of prices in the financial market.

You might be thinking of how to control fear and greed in trading the financial market, right? Automated trading bots can help you eliminate emotional decision-making and increase your profit potential.

Automated crypto trading bot explained

The automated crypto trading bot uses algorithms to help you trade cryptocurrency without you having to spend much time on your computer watching the market. Based on predefined data, trading bots can analyse and interpret price movement. They can buy/sell any asset for you.

Having a crypto bot is like hiring an expert to trade for you while you sit and watch your portfolio increase. While a human investor might find it challenging to analyse the market constantly, an automated trading bot is most likely to execute good trades since it works 24/7.

You can automate entry and exit rules and allow bots to monitor and execute trades on your behalf. Also, one of the attractions of trading bots is that it reduces emotional decision-making in trading since most of the trades are taken when the market meets predefined criteria.

Types of bots

There are various types of trading bots. For example, one of the most popular crypto trading bots is the Arbitrage bot. It examines prices across several exchanges and executes trades by taking advantage of the varying prices in different exchange platforms.

Due to the high volatility of digital currencies, bots can be fast enough to beat some exchanges that are slow in their price updates. Some bots are created to operate exclusively on a single exchange, e.g., Binance trading bots. Other trading bots are programmed to execute trades using a particular strategy, e.g., trend trading, market-making, scalping bots, etc.

How trading bots work

There are a lot of trading bots an investor or trader can get, based on the features that match their requirements. However, most trading bots consist of three stages:

• Signal Generator: The bot uses the available data to analyse the price movements and decide in microseconds whether to buy, sell or hold.
• Risk management: The crypto bot can manage risk by allocating selected volumes of trades to various assets in your portfolio.
• Execution: After generating signals and applying proper risk management, the bot can take trades on your behalf.

Advantages and disadvantages of automated crypto bots

Below are some advantages of having a computer monitoring the market and executing trades on your behalf.

• Unlike humans, the bot trades round the clock.
• The bot can process vast amounts of market data and instantly execute orders according to defined parameters.
• They save time and prevent traders from making careless trade decisions.
• Lack of emotional trading and strict adherence to a trading plan.

Disadvantages of Automated Crypto Bots

• It might be difficult for a trading bot to quantify market sentiment. Hence, it still requires monitoring.
• Technical glitches can occur.

It is worth noting that while the advantages of using an automated trading bot outweigh its disadvantages, it's not a get-rich-quick scheme. However, it can be a source of passive income for an investor.

How emotional decision-making can result in trading gaffes

Oftentimes, you hear most crypto analysts say – buy low and sell high. Sounds easy, right? If you are looking for consistent profit, the fluctuation of price make buying low and selling high a difficult trading strategy.

Elon Musk's tweet and China’s crackdown on digital currencies plunged Bitcoin to almost US$30,000 on the 19th of May 2021 from highs of US$59,000 seen earlier in May 2021. Out of panic, crypto holders sold their coins.

Most investors find it difficult to look beyond the short-term benefits when there's a sudden drop (dip) in crypto prices. They overanalyse the daily price movements and develop cold feet out of FOMO (Fear of missing out).

Investors are happy to see the price of an asset go up but, it's a different story when there's a dip. However, crypto prices are bound to plunge once in a while. So, dips are part of a regular market.

Crypto whales sell their assets when the price is high, triggering high panic sales in the market. Then, the cost of an asset can depreciate due to the high sell orders, offering an opportunity for the whales to buy the dip.

The problem here is that most people allow their emotions to cloud their analytical decision-making process. According to Seth Godin, author of The Dip, corrections are your best friend. It creates scarcity, and those who understand how to navigate the dip, become successful.

The emotional disposition of most people is to buy when they see the price increasing instead of the contrary. So how can you avoid being emotional in your trading decision with so many influencers trying to spread FOMO?

Automated crypto trading bots can help you eliminate clouded and emotional decision-making.

Let automated trading bot take care of your trading

Most people are not aware of their emotional approach to the market. Therefore, you might want to use automated trading instead of allowing your emotions to get a better hold of your trading decisions.

Analysing and predicting the crypto market can be difficult. However, controlling your emotions is necessary for successful trading. An automated bot can take care of the emotional burdens and make profits for you.

Conclusion

The crypto market can be highly unpredictable. So, relying solely on technical indicators might not always work for you. Emotional decisions are why so many crypto investors buy when the price is high and sell when the price is low.

The high volatility of the crypto market makes it very difficult to take trades without being emotionally attached. However, you can avoid chasing futile gains or selling your cryptos in panic by using an automated crypto trading bot.

Every investor seeks to make a profit even during a bearish market.  However, research has shown that following a defined strategy and staying on course through market volatility increases profitability. Automated trading bots help investors stick to a trading strategy and eliminate emotional trading decisions.

Risk Disclosure: Trading in cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory, or political events. The laws that apply to crypto products (and how a particular crypto product is regulated) may change. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading in the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed. Kalkine Media cannot and does not represent or guarantee that any of the information/data available here is accurate, reliable, current, complete or appropriate for your needs. Kalkine Media will not accept liability for any loss or damage as a result of your trading or your reliance on the information shared on this website.

Author Bio: Igor Chernsyh

Igor works as a marketing manager at Trality.com. She is a crypto enthusiast and SEO expert.