Everyone dreams of retiring and living a relaxed life. However, retirement is a long way off, and there are many ways you can do, to make sure you have everything you need to enjoy your life in retirement, which could come sooner rather than later. Especially if you are proactive with collecting a passive income taking advantage of the exciting current cryptocurrency investments that are available.
The crypto market has a wide range of passive income opportunities. Cryptocurrencies can be yielded, loaned, staked, and mined by investors.
But did you know that from Crypto trading, you can generate a significant amount of passive income? Let us introduce you to using cryptocurrency trading bots to generate that passive money stream.
What is a crypto trading bot?
A crypto trading bot is a piece of software that executes transactions automatically using a predetermined trading plan. The bot connects with the market whenever it wants to place an order and is linked to your wallet or exchange account. Trading bots can keep up with complex trading techniques as well as simple orders like buying and selling at different times of the day.
A cryptocurrency trading bot’s task is to perform the task that you are unable to, which is to continuously monitor market data including price, volume, and order book discrepancies. The bot will obey your commands continuously after you program it to do so.
Who utilizes these trading bots as a tool?
- Unfamiliar investors,
- Seasoned investors pressed for time
- Novices with little or no experience
Crypto trading bots are a great way to generate passive income since they allow you to automate tasks that you would typically do by hand. Since automatic trading depends on market data, you won’t need to worry as long as your method is sound.
You must discover a platform that works for you if you want to use a crypto trading bot to generate passive revenue. Given the current popularity of cryptocurrency trading bots, there are several choices available. However, the features and tools you’ll encounter differ from one platform to the next.
Therefore, you must pick a bot carefully by making sure it satisfies a few requirements, such as:
Effortless Use
If you can’t use a crypto trading bot smoothly, is it still worth your time? Because this is a passive investment technique, you shouldn’t have to spend hours getting to know the platform. Pick a crypto trading bot that focuses on usability if you want one that has a user-friendly interface for beginners.
Accessibility
Your trading bot will connect to exchanges and other trading venues to function. Through those platforms, they carry out trades and keep you informed of their progress. However, not every trading bot can be used with every exchange. Some bots connect only to smaller exchanges, while others only to larger ones.
A balanced mixture is what you need. If you have accounts on several exchanges, the trading bot should be compatible with all of them. Using a trading bot on every exchange will damage your chances of being profitable and cost you extra time and money.
A crypto trading bot uses an API key to connect to an exchange. The majority of bots are integrated with the majority of platforms since this key is simple to establish and administer. Most trading bots are available to you if you trade on a well-known exchange like Binance or Coinbase.
Reputation
Check the reputation of the team behind the trading bot and look for reviews before making a final choice. A trading bot can earn poor reviews when they’re:
- not regularly updating the bot,
- not allocating money for server uptime and infrastructure, or
- unsatisfactory customer service.
Who needs a cryptocurrency trading bot platform that fails to execute trades, goes unavailable at crucial times for the market, or ignores its user base? Right?
How to Use a Crypto Trading Bot to Generate Passive Income?
You must understand the fundamental procedures to use a crypto trading bot to generate passive income. Let’s guide you on how to utilize a trading bot platform properly.
Determine a Few Strategies
After selecting a reliable platform, it’s time to experiment with bots, but hold on—you must first choose a plan of action. Bots frequently have pre-made strategies that the makers have designed. Some platforms, meanwhile, also let you program your approach. Programming your trading strategy entails creating scripts that tell your bot how to analyze market data using technical analysis (TA).
Technical analysis-based trading strategies and trades based on unique market situations, can both be programmed into bots. You can program your crypto trading bot using trade indicators in addition to other tactics to help with TA.
Reverse-Engineer Strategies
The straightforward procedure of back testing allows you to assess a strategy’s performance in advance by contrasting it with historical market data. It’s comparable to testing a plan in the past to see how it performed. To avoid trading needlessly with a faulty strategy, back testing enables you to confirm a strategy’s efficacy.
Through TradingView’s replay tool, you may manually back test your strategy. However, cryptocurrency trading software also allows for automated back testing.
Use a Crypto Trading Bot to Test Your Strategy
It’s time to test out your plan now that it presumably works well enough for the market. When utilizing a cryptocurrency trading bot, use the same settings as with the back test and start the automation. The technique ought to perform as your back test indicated. If not, review and improve your strategy.
Have you had bad luck with your plan of action? Before experimenting with the trading bot once more, review and improve the strategy.
The weak points of the plan should be changed, and alternative rules or indications should be used. You must re-back test the strategy after making changes to ensure that it still works.
Are Crypto Trading Bots Safe?
The fact that crypto trading bots use API keys to deal with customer funds makes them typically safe. Your exchange and bot need an API Key, which is comparable to a secret username and password, to communicate and carry out orders.
All orders placed through your bot will be approved by the exchange once you’ve connected it to it using an API Key.
Keeping your API key confidential is the key to a secure cryptocurrency trading bot experience. Keep everything private, and steer clear of con artists. People may contact you by pretending to be your bot’s customer service and via numerous channels. Use only the team’s official avenues of communication to avoid scams.
Stability is a crucial component of a bot’s safety, though. A bot that doesn’t carry out a command, is just as harmful as one that doesn’t protect its API keys. What if the bot failed to send a stop loss order in time when you had a $5,000 long position open?
As the exchange liquidates the position, you will lose your money.
We suggest you find a highly rated, solid Trading Bot if you’re looking for a dependable, secure, and feature-rich crypto trading bot.
So, what’s your take on this? Let us know what you think by leaving a comment below. Come back soon, to read everything you Need2Know.
