What is an Algorithmic Trading Bot?
An algorithmic Trading bot is an automated trading computer platform known as an algorithmic trading robot capable of generating and executing buy and sell instructions in trading markets. Traders often use a process-based algorithmic crypto trading bot to employ strategic trading. This programmed software helps crypto robots/bots to hold, buy, and sell digital assets. Different types of crypto bots are available in the market. The bots are not fully automatic, requiring certain parameters and information for trading strategies. These applications raise revenue and reduce losses by enabling users to manage all crypto accounts in one space.
Advantages and Disadvantages of Algorithmic Trading
Big institutional investors or brokerage houses use algorithmic trading for a big win. The crypto trading bot has many benefits compared to manual trading. The advantages include the following:
- Less transaction cost
- Automated process
- Less human intervention
- Capitalizing large order sizes
- Rapid and easy order execution at the best possible prices
- Accurate and instant trade placement
- Keeps track of market conditions
- Accuracy and consistency
- Capability to deal with the market’s volatility
- Increased volume and liquidity of the market
- High speed in entry and exit
- Programming can be backtested using historical and real-time data
With the numerous advantages of algo trading, there are certain limitations as well, which have to be taken care of. Some of the disadvantages of the trading bot with cryptocurrency are as follows:
- Quick trading execution: It may lead to a loss of liquidity.
- Technology dependency: In case of internet connection failure, the trade orders are not placed on the server.
- Constant monitoring: A check on mechanical issues like power loss and connectivity need constant monitoring to ensure successful execution.
- Loss of human intervention: Its completely automated program does not permit humans to choose. Even if the trader does not want to place a particular order, there is no way to control the program.
- Programming knowledge: It requires programming skills that are complicated to understand by common people.
- Over-optimization risk
- Costly resources
- Inability to understand Irrational markets
Stages to build an Algorithmic Trading Bot?
Step 1: Create an account in the Google Cloud Platform
Log in or sign up to the Google account at https://cloud.google.com/.
Fill in the required information and create a “New Project” to start.
The new users will benefit from a $300 credit in a free trial by selecting “Activate” on its page.
Step 2: Create Python Script
The next step is to create Python Script carefully with a single function.
That function will then be called in Google Cloud. However, this is a significant step to automate the script.
Step 3: Connect API
After the account has been set up, the user can access API keys from the dashboard placed on the right side, and below the API key ID is the confidential key.
Step 4: Create a new email account and add email notification functionality to the Python function
For security purposes, creating a new email account is recommended as it will automatically turn on the access to less secure sites and also add email notifications to the trading script so that the user can check on when the script is functioning and what are the trading outcomes.
Step 5: Build a trading strategy into the script
Create a systematic program for trading logic with the necessary variables. After the script is ready, it will then run in the cloud.
Step 6: Create a Google Cloud Function
Open the Cloud Functions on the left side panel in the Google cloud console.
Click on “Create Function.”
Name the function of your choice and select the Runtime as Python 3.7. Paste the python script, which is created in “main.py.”
The function’s name is to be written in the ‘Function to execute’ box without fail.
The final step is to add the desired packages in the requirements.txt to let the cloud understand what packages a user needs for their Python script to run.
Step 7: Create a Google Scheduler Job
Click on “Tools” => Cloud scheduler.
Give a unique title and paste the URL from the Cloud Function.
Enter the specific time and days in the frequency tab when we want the script to run.
However, this will run according to the specific time mentioned.
These were the steps to create and automate any required crypto trading bot strategies. Crypto trading bots bridge financial trade markets and computer operating systems based on pre-programmed functions. Traders can leverage executing power to the cloud computing service and set when they want the program to open or close their trade. The algorithmic trading bot is becoming popular among traders in the financial markets as it provides various functions according to their needs and connects programming skills to the trading experience.