Do Crypto Trading Bots Really Work?

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Bots and talk of bots is endemic within the crypto space, with behavior, good and bad, often attributed to their actions. Mt Gox famously had the Willy Bot manipulating merrily, perennial bear Bitfinexed sees bots everywhere, and crypto traders are prone to boasting about the sick returns they’ve raked in from their proprietary arb bots. There’s no doubt that bot activity is very real. But is it profitable?

Got Bots?

Do Crypto Trading Bots Really Work?In the 1950s, robots were promised that would soon eliminate the daily chores of housewives across the globe. 60 years later, and their cyber counterparts – bots – are promised that will do the same for crypto traders. If the hype is to be believed, these bundles of code can deliver a passive income for even the laziest or dumbest of traders. But as almost everyone knows, the hype is never to be believed. Profiting from bots isn’t that simple or easy.

There are several types of trading bots available including arbitrage (arb) bots that capitalize on the difference in prices across exchanges. The price of bitcoin usually differs from exchange to exchange; Bitstamp, for example, typically displays a slightly lower price than Bittrex. The movements of bitcoin and other cryptocurrencies is always mirrored across exchanges, however, so if BTC breaks out due to a massive buy order on Binance, you can bet that the other exchanges will follow suit. Bots work by profiting from the delay it takes for prices to update across all exchanges.

How Profitable Are Bots?

To make any sort of tangible profit from bot trading, you ideally need a stack of crypto to start with. If you’re running a bitcoin arb bot, for example, you’ll need BTC deposited on multiple exchanges that are connected to your bot via API. And even if you do have a healthy spread of coins, the returns can be slight. Romano – Viacoin developer and well-known crypto trader – claims the Hass bot he uses can make “0.26 BTC ($2K) a day by using 9 BTC for example just by using market inefficiencies” before adding that he doesn’t use the market maker bot that comes with Hass and cautioning that it’s “only for skilled traders”.

Arb trading can be likened to playing online poker. If you’re good at setting up your bots, you can make a living off it, but you’ve got to grind it out. Crypto trading bots are reminiscent of those money-making Forex programs that you find “veteran traders” trying to flog. If those Forex guys are as rich and successful as they profess to be, wouldn’t they be better served keeping that esoteric knowledge to themselves rather than offloading it to the masses for $100 a month? In other words, beware of geeks bearing bots.

Examples of Trading Bots

A slew of tokenized projects has emerged that promise “algorithmically-based smarter trading delivered via AI and machine learning” or words to that effect. These systems also utilize bots, but their claims of profitability have yet to be proven. If one of these new platforms were to deliver the goods and provide consistently high returns, crypto traders would flock to it, which simply hasn’t happened.

There is no doubt that machine learning has the potential to yield more profitable trading, but there is also no doubt that a lot of the claims attributed to AI should be filed under As If.

These are the most popular crypto bots on the market (and should only be tried at your own risk):

  • Haasbot allows for automated trading across all major bitcoin exchanges, with monthly subscriptions starting from .073 BTC
  • Profit Trailer allows you to average down on coins you buy into using bots, although there’s no guarantee that doing so will lead to eventual profit. It starts at $35 p/m
  • Cryptohopper is a cloud-based trading bot that starts from $19 per month
  • Gekko is free and open source but you need to tell it what to do and thus it’s only as smart as you are
  • Cryptotrader also needs to be programmed and starts from .0048 BTC for a Pro account (Basic is cheaper but too basic)

Others, such as BTC Robot, are so spammy and scammy that we’re not even going to provide a link. For traders seeking a passive income or “easy money” there really is none to be had. The reality is that bots are trading tools rather than workhorses that will set up and execute winning trades on your behalf. In using bots, you also leave yourself open to the possibility of scammy developers or flash crashes, either of which can liquidate your crypto.

As one redditor put it:

To see returns you have to be comfortably profitable already and be familiar with different strategies. The conditions for profitability are moving targets so bot trading isn’t really a ‘set it and forget it’ type of operation.

Bot or Not?

It is safe to say that the best bots are the ones you never hear about and will never be offered. Because if everyone was using these bots, the trading edge they bestow would be eliminated due to arbing and other opportunities being eliminated. If you’re interested in putting a trading bot to the test, by all means give it a try with some spare satoshis or shitcoins. Be sceptical though of anyone touting a bot delivering guaranteed returns, and be especially sceptical of the profits crypto traders claim to have made with their aid.

At least the creator of the open source Zenbot is honest enough to concede it “is having trouble reliably making profit. At this point, I would recommend against trading with large amounts until some of these issues can be worked out”.

Even if you can find a system that delivers modest returns, you may wish to ask yourself this: What would you rather have – a bot that can turn 5 BTC into 5.1 BTC every week or the freedom of having 5 BTC free to invest in a simple day trading strategy? Bots can do a lot, but as it stands, they can’t factor in fundamental analysis, breaking news, insider knowledge and the myriad other factors that make markets move.

1950s housewives (and house husbands) are still waiting on those domestic chore-performing robots to materialize. And similarly, we’ve still got some way to go before bots render human traders obsolete. If you want a job done profitably, do it yourself.

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Fishy Bot is sik!

Having rolled my own as I too do not trust any scammy coders out there selling poor excuses for bots that tend to loose more money than they make, with code that looks like it was written by a 7 year old…

  1. Gekko is a tool kit, you still have the learn it and learn how to trade with it, it is not a magic pill, there is no magic pill. It is also rather lacking and has significant issues with recovering from problems.
  2. You have to learn how to trade professionally and know all the rules inside out, which takes many many years, none of the 3rd party bots I have looked at, trade professionally.
  3. As a human, you can take advantage of bots, once you see what their rules are. Once you know these rules well enough, you can automated taking advantage of bots.
  4. Almost every single bot out there is not coded professionally, stuff breaks, it breaks all the time and your code has to self-repair every single type of breakage there is. My code is up to version 78 and consists of over 480Mb of source code, the majority of the code is not the actual trading code, it is taking care of all the problems which arise in an automated manner. This is why most bots fail, they are not graceful on recoveries.
  5. Arbitrage trading is not profitable and complex, you are better off just swing trading. This is where bots do a bit better, they have no emotion, execute based on specific rules and go in and out 24/7 doing on average 472 trades a day. They are not greedy, they enter and exit in exact detail of a professional trade. Having said that and the above, the majority of bots you can get written by someone else that you pay money for or even get for free, do not do professional trades. That is the secret sauce of a professional bot and those ones you cannot buy, they don’t get sold.
  6. Machine Learning and AI don’t bring much to the table if the bot doesn’t trade professionally and rather than saying its like playing the pokies, its more akin to playing poker. Gotta know when to hold them and when to fold them.

The reality is that bots are trading tools rather than workhorses that will set up and execute winning trades on your behalf.

A well written bot is a workhorse, it requires very little attention, but does require constant maintenance. Stuff changes all the time, bugs need to be fixed, unforeseen issues have to be addressed, its a never ending cycle. That’s the problem with almost all the bots you buy off the market, they are not being properly maintained. People come and go on a project and the new people have to deal with the legacy code written by some monkey that didn’t document any of the code and work out how to fix issues without any guidance and most of these programmers are not professional traders. Don’t buy a bot, you have to build it.

similarly, we’ve still got some way to go before bots render human traders obsolete.

There is actually very few human Forex traders anymore.

If you want a job done profitably, do it yourself.

Absolutely, you want a bot to get the job done professionally, you have to build it - professionally.

(To John: I know you don’t write these articles and I appreciate you posting them, my comments were to the original author who obviously hasn’t done much research and to educate people here on reality).

Cheers…

Mike Fishy

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They work. I’m using the Dex bot at Dropil.com!
Gains and returns are nice and steady…

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@john

Thanks for sharing the article. One thing the writer didn’t discuss is the fact that bots can work 24/7 while we are only awake 16+ hours a day. There are so many times when a swing happens when I’m sleeping and I would be frustrated at a missed trade. I recently started using Gekko and I got it to work the way I want and love there’s so much more I can explore (ex; genetic algorithms, IRC/telegram/email notifications, simultaneous backtesting a single strategy across multiple alts). The other thing I want to point out is don’t trust any bot that you don’t run on your own machine or VPS. You have to give these bots your private API keys. If these keys are compromised, your funds can be stolen from some really bad trades.

@Mike_Fishy

It’s awesome you rolled your own bot. Is it something you sell or is it for your private use? I’m glad to have figured out Gekko and didn’t spend the ridiculous money that some of these other bots are charging. I didn’t run into any issues like you have mentioned. I’m guessing it is either I’m running it on Linux or I’m just lucky.

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No, at this time my platform private use only, I don’t consider it commercial quality yet.

Gekko doesn’t recover well from network issues plus its in Java, which has it’s own issues. You will notice it at some point, but if your strategy is sound, any potential losses are generally minimal. I’m not saying Gekko is totally bad, after all it is a toolkit and is actually not a bad basis to expand upon if you can code. It is also being maintained on a fairly regular basis.

Some of those commercial ones though…

Be Fishy

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I see. Thanks for pointing out the specific issue. I’m not good enough a coder (or just don’t have the patience) to roll my own bot. But Gekko is the right balance for me. It definitely requires coding knowledge to create your own strategy (plus read the strategies that comes default, which are not very good IMO) and chart reading knowledge with at least the basic indicators like EMA, MACD and RSI.

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You can check out what I have been up to here:

This is more akin to a Forex bot and how they generally operate (I have written Forex bots too for a certain Financial Entity that is well known, but not well liked :stuck_out_tongue: )

Stay Fishy

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I’m intrested in using your Bot can you contact me for more Information?

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I’ve been earning arbitration for a long time. It’s simple. You buy cheap and sold more. It is important to catch “holes” in the course of the coin on different exchanges. This is easy to do with a Bibitbot (http://www.bibitbot.com/). It sends a thousand notifications to the Telegram. I advice. About it a lot of writing on the forums. Can install a free trial)

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Too bad u can’t just use eth… using idex is a hassle

Cool platform tho

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Hi guys,
I’m wondering whats the best/simplest option for a windows user. Looked briefly at Gekko and this video
which made me think maybe there are easier options:

I’m a old developer so i could perhaps go into files and edit variables and such but its been a long time ago i coded myself. If there are easier options i like to try them first.
Any suggestions?

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I have been busy in this field and I think the biggest lesson is not to be too disheartened when it doesn’t work. I have built a bot in python and it works however I had had one hell of a time of learning python and multi threading python. I have got several scripts working together doing different tasks… and things go wrong all the time and I look at modifying settings sometimes twice a day and when it breaks more often.

Is there a best way to do this? I would do some research and try and figure out which platform works for you.

Also it’s really important to build some backtesting capability and an understanding of risk reward ratios.

Hopefully this helps… good luck

Crash.

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