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
- 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.
- 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.
- 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.
You need to spend some extra money for the bot’s better navigation and easy-to-use interface. This is completely optional.
- 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?
- Choose the Language
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.
- 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
- 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.
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.
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.
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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