Participants of the Trading process. Robots and Algorithms


By Yuriy Bishko Updated November 21, 2021
BikoTrading Academy

The hype of digital currencies continues to attract new and new investors. However, in order to play the exchange game effectively, you not only need to understand its peculiarities (know the patterns of the cryptomarket, react to the signals in time), but also to spend a lot of time on it.

If you realize that cryptocurrency trading lacks a smart assistant who can be delegated most of the routine activities, look into specialized software. Bots for cryptocurrency trading can significantly simplify your life, but still there are a lot of hidden points. So, let’s cover them!

As you have already understood, today we will talk about robots and algorithms in the cryptocurrency market, as well as participants of the trading process in the market. As a matter of fact, robots and algorithms are one of the top market participants, as they work much faster than real traders.

Classification of market participants

Participants of the depth of market are divided into two categories: limit and market. Limit players are in the trading history and are determined by setting buy and ask orders. Market orders go through the market.

These same players can be either real traders or robots. It is important to learn to identify and track them quickly in the market. We analyze this topic in detail in our scalping course. In short, when the price comes to this bid, touches it, then it is clear that this is a real bid. It’s just that the real trader bought or sold a large amount of coins.

Large limit bids (densities) or a set of similar bids are also visible in the market. Again, they are created by real traders, as well as by robots and algorithms. If the order is quickly moving up and down in the depth of the market, it is most likely a robot. It is physically impossible for a human to make such abrupt movements in the market. Robots quickly follow the specified algorithm repeating all the movements of a real person, but with a much faster speed.

There are different classifications of robots. They can also be divided into exchange trading robots and private robots. Exchange robots are market makers and correlators. A market maker can be easily recognized and is present at any DOM. It puts the same bids at the top and at the bottom in the same interval. It stays in a narrow price range and follows the price. The correlator is much harder to find because it aims to correlate the spot and futures prices so that the price doesn’t differ too much. A correlator can also work between two exchanges, analyze the price on one exchange and compare it to the price on the other exchange.

Private robots and algorithms present a huge number of tools designed to perform specific actions on the market for the benefit of the trader. You can find more detailed information about trading robots in our course.

What is a cryptocurrency trading robot?

Bot for cryptocurrency trading in 2021 is simply a must have for any modern trader. The program was created specifically to monitor quotes, identify patterns, trends, and make transactions according to the parameters specified by the owner.

As a matter of fact, it is a technical tool that helps to monitor market behavior round-the-clock, to close positions effectively and, most importantly, in time. With the correct setting of such programs, it is possible to avoid many unpleasant surprises. In this review, we will consider in detail what this software is, what are the advantages and disadvantages of using it, and we will present examples of bots for cryptocurrency trading.

Despite the fact that cryptocurrency exchanges are slightly different from traditional platforms, in general the mechanisms of their work are similar. But the functionality of bots can differ significantly. For example, the simplest ones provide for selling when the curve is rising and buying when the price is falling. In more complex and expensive software a lot of indicators are taken into account, such as previous trends, the reset of coins only in a certain price range, etc.

There are two main varieties of cryptocurrency robots:

  • arbitrage. Such software allows traders to work on several exchanges simultaneously. It brings income by buying coins at a low price on one platform and selling them at a higher price on another.
  • trading. Such a robot carries out operations with coins on one platform. The profit brings at the expense of a difference of rates.

In addition, you should consider that specialized software for trading cryptocurrencies can be customizable or scripted. In the first case, bots are triggered by the parameters set by the owner, and in the second, traders have the opportunity to program a unique trading strategy and work in accordance with it.

Today you can find a lot of bots for trading digital currencies on the web. Some of them are products of reputable companies, others are developed by crypto-enthusiasts. Before you make your choice, we suggest you get acquainted with the pros and cons of using specialized software for trading in coins.

Advantages and disadvantages of using bots for forex trading

What are the advantages of using specialized programs for cryptocurrency speculation? Is it possible to rely entirely on such bots and free your time? Let’s find out.

So, among the main advantages of using robots for trading digital coins can be noted:

  • Significant time savings. Once the robot is properly configured and running, it can trade without interruption at least around the clock. Of course, no human is capable of trading in such a mode.
  • Possibility to cover several crypto exchanges. It will allow to increase trading turnover by times and achieve financial success faster.
  • Absence of human factor. The robot has no emotions, sense of fatigue, it just supports the strategy chosen by the owner and makes transactions. Therefore, emotional errors in carrying out transactions are excluded.
  • High speed of operations. The bot makes transactions almost instantaneously. Considering that in trading even a split second can play a big role, it is very important.
  • It increases the efficiency of currency trading operations in the short and long term.
  • A wide range of trading robots for different trading strategies and currency pairs allows traders to customize several systems. In this case each of them will bring profit.

Possible risks

Many novice traders think that they can earn good money and spend considerably less time working, but that is not true. To make the program profitable, it is necessary to understand the market trends, its peculiarities and the principle of trading on the currency market. For this reason it is desirable for beginners to spend time on manual trade and only after that to resort to the help of specialized programs.

The information obtained during manual trading will help to choose the right settings for the bot and make its work as profitable as possible. In addition, do not forget that bots can be focused on different trading strategies: flat, trend trading, scalping and others.

The dynamics of the currency market also suggests that over time, the program settings will become outdated and simply irrelevant, which will lead to losses. To avoid this, you should keep abreast of events and periodically update the settings of your robot.

Robots are not a panacea and do not guarantee successful trading. It is important to understand that there is no universal robot that helps everyone earn. They’re just machines who make mistakes too. They can learn tons of information which later turns out to be wrong.

Although automated cryptocurrency trading software has its own nuances. In particular, if you make small profits, you will lose on commissions, and if you set it up incorrectly or make no adjustments, the program can easily wipe out your entire deposit. In addition, there is always the risk of downloading a robot that contains a virus.

Robots should always be controlled! It is strictly forbidden to launch robots and leave them unattended and unsupervised. Trading robots are common market participants performing the same actions as a human, but much faster. But it is not a living person, a robot is unable to think critically in force majeure circumstances, it cannot stop itself if changes in the market occur beyond its competence.

How to choose a robot correctly?

Choose a robot only on proven trading platforms with technical support for robots. There are three key factors influencing the choice of an effective trading robot:

  • The acceptable level of risk and potential profitability. This factor is based on money management rules that are defined for the trader. For example, if deep drawdowns are unacceptable, then preference should be given to robots built on conservative strategies with minimal risk, but with low potential profitability.
  • Type of trading robot. The choice of the type of forex expert depends on the trader’s preferences and trading style. Thus, the scalping robot is not suitable for using it with currency pairs showing stable trends.
  • The opportunity to test the robot. Before placing the advisor on a real account, traders make debugging of parameters and final settings in the strategy test. It is even more important to test the Expert Advisor in real trading mode, rather than on historical data. For this, as a rule, a demo account or cent account are used.
  • Providing a test version of the Expert Advisor, which is usually free, will be an advantage. It gives you the opportunity to check the functioning of the robot in practice and to choose the most suitable variant for purchase.

Where to get a bot for cryptocurrency trading?

There are several options. First of all, you can choose the most simple way and download it for free. You have to remember that the quality of such software can be questionable. Although our review showed that even among free trading bots there are some really interesting options. You can choose one of those recommended by us on our scalping course . Reviews and expert reviews will help you decide on the best solution.

Another option is to purchase it. There will be no problems with the purchase of a cryptobot. This product is quite popular, and both well-known companies and private traders sell software for automated trading. Some crypto-enthusiasts even offer to rent a cryptocurrency trading robot so that the user can evaluate its effectiveness and then buy it.

Or if you have enough experience and time you can write it yourself. Of course, this option is not for beginners. To create your own robot, you need to know at least a little bit about scripts and be able to work with API. The main advantage of this method is the possibility to create a unique product that is customized exactly for your needs.

Undoubtedly, bots for cryptocurrency trading will be popular in 2021. The recent “bullish rally” of bitcoin and altcoins has shown that this market has great potential. However, given the high volatility and the probability of a virtually instant trend reversal, the use of some technical tricks and support from top traders will not be superfluous. Crypto-trading automation software is varied, there are a lot of interesting options. We hope that our material was useful for you.


How to detect a robot in the market?

In order to detect a robot you need to: carefully examine the DOM; analyze trading history; compare Ask orders and Bid orders. Once you have identified the robot you can decide on your next steps.

What are the most popular robots?

One of the most simple and popular is considered Buyer bot and Seller bot. This is a robot that buys and sells on the same interval at the same price. If you look at the feed for a long time, you can see that similar bids appear. If buy bids appear at the same time, it is a buyer bot. If sell requests appear at the same time, this is a clear example of a seller bot. It is necessary to keep an eye on them and analyse how they work.

What is the difference between a trading robot and an advisor

Originally forex robots were called trading advisors because they did not have a function of automated market entry. They could only recommend the point of opening and closing positions, Take Profit and Stop Loss, based on data from the strategy. Today, there is a difference between these concepts. Forex robots are able to automatically enter the market and open a deal in the presence of appropriate trading signals. A trading advisor does not have this function. It only recommends a trader the appropriate entry point, based on the strategy it contains. Nevertheless, forex robots are often called trading advisors and vice versa.