Technological advancements have given birth to innumerable marvel, and bots are certainly one of them. ‘Bot’ is an abbreviation for a robot; it is an autonomous programme on a network whose main purpose is to interact with users or built-up systems. The introduction of automatic equipment in order to provide some facilities or for use in several other manufacturing processes, with an aim to reduce human intervention to the minimum is what comprises what is known as ‘automation’.
In the year 1949, Richard Davoud Donchian, an American commodities and futures trader, had come up with the concept of an automated trading system. Besides this, he also introduced a set of rules to buy and sell funds. Following the idea and path of Donchian, famous traders, of which John Henry was a prominent name began to adopt the concept of “rule-based trading”. This took place in the 1980s. Trading bots eventually became an exciting shiny phenomenon in the market, starting from that time. They were highly popular and did rounds in one form or another.
Automation is not necessarily the absolute absence of human involvement. Also, the need for automation arose with the requirement for a substitute to carry out extremely repetitive, time consuming tasks, too laborious for humans. Regarding automation, the system creators need to keep a keen eye on taking care of the basics.
Advancements in this field has led to the invention of crypto trading bots. These are automated computer programmes and their programming is written to perform a pivotal task- buying and selling cryptocurrencies at accurate time. Crypto trading bots continuously monitor the market and in accord with a set of prearranged rules, they react. The main objective of these boys is to generate profit- as much as they possibly can, as well as identifying potential trades or arbitrage opportunities.. The predetermined set of rules assist the bot in analysing the various market actions. Now, the entire process is quite expensive and is mostly meant for wealthy investors. The boy’s price may range from $0 to as high as $1000 per month. There is no wonder about the expertise with which they carry out the tasks, but it should be taken into notice that in reality, most of the trading bots are immensely complicated to use. It requires profound skill to run most of them.
Mainly there are two uses of the trading bots. Besides the obvious one of using the robots for making the whole trading process a lot simpler and error-free, as can be seen in the ability of the bots to handle complicated factors such as index construction, rebalancing of portfolios, portfolio diversification, to name a few; the other one being more complicated that involves the bot analysing the market with the sole goal of making profits consistently. This process, needless to say, requires ample research beforehand.
However, with cryptocurrency trading, the need for bots has become more prevalent. Strong support provided by the core team has helped to gain much momentum in this field. As reported: “Trading bots and algorithmic high-frequency trading are ubiquitous on Wall Street, but cryptocurrency networks offer a unique environment for them to help reduce risk, experiment with new methods and even take advantage of market manipulation”.