Why no cryptocurrency trading bot can make you money, and what you need to use instead

The Internet is filled with people trying to sell you bots that they claim will make you thousands of dollars with a click of a button. Will they though?! 

Let's make one thing clear at the beginning. I'm not saying that all trading bots are bad. Or that they are not good for anything at all. But before using them, you need to set your expectations straight. I hope this article can help you with that. 

Why people choose trading bots

Most people are greedy yet lazy to put on the actual work, so they look for shortcuts. That's just how it is in life I guess. 

In other words, they look for garbage solutions, and because of that, there are always people on the Internet looking to sell you garbage. 

In the beginning phase of starting a new career, we need someone telling us that "we can do it". We need someone to make us picture success. And that's what their marketing teams target us with. They create this image in our heads that trading will be easy once we subscribe to their service. That we will be making money in our sleep.

But if you're already passed the beginning steps of trading, you need someone to burst the bubble for you:

You are not going to get super rich just with buying someone else's trading bot and clicking the "start trading" button.

Crazy cryptocurrency markets

Cryptocurrencies are crazy indeed. Because we've seen people making as big as 300x profits simply by buying and holding assets. Many actually get into trading these markets with such crazy expectations. 

Where ever there are crazy expectations, there are crazy offerings too

I've seen trading platforms that offer trading bots for a price of $100 per month, and their strategies are as simple:

  • Buy Bitcoin
  • Sell when the price rises x%
  • buy again at a 5% lower price
  • Repeat 

I saw even an advanced (as the platform called it) strategy signal which was nothing but a simple Bollinger Bands signals for the 5m time frame.

If you really think such a strategy can make you rich, I have not much to say except to ask you this one question:

If it's really that easy, why is it that there are so many people in the trading industry, working their butts off just to make a living?

You are far better just buying and holding assets instead. At least this way you don't pay monthly premiums. 

Use bots as a tool, nothing more

Like any job in life, you need to do your own homework. You need to actually learn the basics of technical analysis, and then, and only then you can use tools that make your job easier. 

Trading bots should not be anything other than a tool for you. Do not trust a black box to trade your hard-earned money for you. Even if a strategy uses machine learning, you must understand the underlying logic of the model before using it.  

One critical feature of a trading 

Speaking of learning, humans learn better by practicing in action. But practicing with real money in real-time markets is expensive and costs you both a lot of money and a lot of time. 

Hence, having a fast and accurate backtest simulation is essential in algo trading. That way you can learn about technical indicators and strategies by actually practicing trading them without losing real money. 

But shallow trading bots don't focus on their backtest mode as much as they should. Many don't offer it at all! And those which do, don't include it in their starting plans.

This causes many users to skip backtesting entirely and jump into live trading or maybe paper trading which just cannot replace backtesting. 

Example of bots that offer backtesting feature

I find these trading bots to be useful because they offer backtesting feature for free:

  • Jesse: "The Progressive Python Framework For Trading Cryptocurrencies". This is actually an open-source trading framework. It is well documented with examples and tutorials to get you started. Highly recommended for backtesting.
  • FreqTrade: A nice open-source trading bot in Python. This is my second recommendation. It's API is not as simple as Jesse, but it is an older and more mature project. 
  • Gekko: It is an open-source bot written in Javascript. If you're not familiar with Python, this is probably the option to go with. 
  • ZenBot: Again another open-source bot in Javascript. The original author of the project is no longer involved, but the community is still active. It worth a shot.
  • Find more projects at https://awesomeopensource.com/projects/trading-bot

Conclusion 

I hope this article had an impact on your mind for choosing the right trading software. 

I'm aware that backtesting is not as exciting as live trading. But is the key to success in algotrading.

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