ETBOT Review What You Should Know About Etbot.io AI Crypto Trading – Guide!

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Contents

Crypto Trading Bots · A helpful guide for beginners [2020]

Everything you need to know before you start your journey

Welcome to your Crypto Trading Bot Journey

I’ve been a trader at Citi & Merrill Lynch for 7 years and recently I started applying my algorithmic trading knowledge to the cryptocurrency space. I’m here to share what I’ve learnt in the hope that it helps you too.

Cryptocurrencies as an asset class are volatile, very volatile. Now, as a buy and hold (or hodl ��) investor, volatility isn’t what you want. Imagine the pain of losing 20% of your entire hard-earned money in one day or even worse 23% in 15 hours — ouch!

However, for a trader, volatility is great.

Being able to invest at lower prices when the market is having a tantrum and offloading risk when the market is in euphoria is literally the life-blood of a market maker at an Investment Bank.

If we could apply the same principles to create algorithms and then automate the whole set up, well that would be just fab now wouldn’t it?

This is exactly what I’ve been working on for the past 1.5 years and I’m finally close to having something I can share with the world.

Enough about me though, let’s jump right in.

What exactly are crypto trading bots anyway?

Cryptocurrency trading bots are computer programs that automagically buy and sell various cryptocurrencies at the right time with the goal of generating a profit.

That’s literally it.

It’s important to note here that not every bot is profitable, in fact, most aren’t.

It is trivial to make a working bot, less so to have a profitable one. @pdesgrippes

Ideally the bots actually generate a profit and ideally that profit is greater in risk-adjusted terms than had you have just bought the same coins and held them throughout.

When I say risk-adjusted, what I mean is that your positive gains relative to the negative gains you’ve suffered whilst being invested is better. To demonstrate this have a think about the following,

Which would you rather have:

  1. Daily returns of 1% every single day with zero negative days, with a total return across the year of 250%.
  2. Returns of +10% Monday, -5% Tuesday, +3% Wednesday (and so on) with a total return across the year of 500%.

Hopefully you picked the first one.

The first example is consistent. And when something is consistent it becomes a lot less risky.

In fact, you should still prefer the consistent returns of the first example even if the second one ended up at 1000% over the course of the year.

Hint, the key is in compounding: 1.01²⁵⁰ — 1 = 1103% . This is really outside the scope of this article though.

The point here is that given the option of consistent (strong) returns and a rollercoaster ride, you should almost always pick the consistent option even if the rollercoaster ride may land you with higher returns in future.

High returns isn’t enough, you want high risk-adjusted returns.

And this is really what makes crypto trading bots such an interesting proposition. If we can find a way to capture most of the upside of cryptocurrencies yet without the regular gut-punches, this would make a much more attractive investment proposition than what the hodlers have to offer.

How do crypto trading bots work? (no jargon!)

Most sophisticated trading bots work with 3 moving parts:

[signal generator] -> [risk allocation] -> [execution]

Signal Generator

This is where we make predictions. There will be some data that goes into the signal generator and a buy or sell signal pops out of the other side.

If you see any bot’s that use “technical indicators” then it’s probably a good idea to try not to make eye contact and just back away slowly. ��

Risk Allocation

This takes the buy or sell signal then decides how much to buy. As in, should we allocate our entire capital to this trade or just a portion? Should we buy all in one go or should we average in?

So now we know the direction, we know how much we want to buy or sell, next is the part that actually executes the trade.

Execution

See, if you have a lot to buy in one go (say you have to buy $10,000,000 in total for 500 clients) then you probably don’t want to do this all in one trade as you’re unlikely to get a favourable price.

You ideally want to dribble your order into the market.

If you have the exact same bot as 1000 other people and you’re all running in disjoint instances (i.e. they don’t communicate with each other) then this is really going to give you unfavourable pricing.

All three parts, signal, risk, and execution, need their own distinct algorithms and optimisation processes applied. If you have a bot that fudges through any of these parts or worse, disregards them altogether, it won’t hold you in good stead for profitability.

What is the difference between a trading bot vs a human?

  1. Longevity. Bots can operate 24/7, humans need to sleep (and rest).
  2. Speed. Robots operate magnitudes faster than a humans thinking time plus reaction time.
  3. Emotionless. Robots aren’t driven by greed or fear. They’ll always do what’s statistically more likely to win.
  4. Capacity. Robots can process gigabytes of data per second. Humans quite simply can’t process that much data in that timeframe.

You see, there are many benefits to running bots and it’s all down to their skill set being vastly different to that of a human. Bots are consistent and monotonous. To be profitable you need consistency and quite frankly have to do everything thats highly counterintuitive to human nature.

Like, running towards the fire.

However it’s worth bearing in mind, a bot, any bot, is only ever going to be as good as the human creating it. The old adage is true, garbage in, garbage out.

There are ways in which humans can outperform and that’s mainly with subjective thinking.

When a particular piece of information doesn’t have a specific outcome attached and lateral or second-degree thinking is needed to understand the implication then you’re better off with a human.

I wouldn’t really worry about this too much because whenever a bot reaches a state that’s fairly subjective it can choose to not invest at all.

What are the different types of trading algorithms used?

Without going too technical (I can cover this in another post if anyone wants) there are really only ever two types of algorithm used. They’re disguised in different ways and called different things but this is really all there is to it.

Momentum

Prices are up and we think they’ll continue to go up = Buy (or vice versa). Statistically, most momentum strategies don’t win particularly often but when they do win their gains are fairly large. Win:lose rates of around 55% with gain:loss of around 70% are fairly common with profitable algo’s.

Mean-Reversion

Prices are up but we think they’re due a pull-back = Sell (or vice versa). Conversely, most mean reversion strategies win more often than they lose however the gain to loss ratio is smaller. Win:lose rates of around 70% with gain:loss of around 55% are also pretty common with profitable algo’s.

Yup, it’s that simple.

A commonly overlooked factor that greatly impacts your profitability is your fees.

Your transaction costs (paid to the exchange) and trading costs (bid offer) can have a drastic effect on how much your bot makes.

Exchange fees can vary whether a bot is a liquidity taker (passive) or a liquidity maker (active).

The best algorithms will manage their active to passive trade ratio and also trade across multiple exchanges dynamically choosing an exchange based on the optimal transaction costs.

Bot’s that only eke out a small statistical edge can have this completely swallowed up in fees if it’s the aggressor on every trade.

Are Crypto trading bots profitable?

Now, admittedly I haven’t gone out and tested a bunch of bots yet however we can turn to our good friends over on reddit and other blogs to see what the consensus is from those that have used bots available on the market.

All commercial bots I’ve tried lost money compared to buy and hold, no matter what settings were tried. — intertron

If bots worked everyone would use them. This does not discount the private bots used by BlackRock and other massive trading firms. We will never have access to the data and teams of devs that they do. — vibrate

It is safe to say that the best bots are the ones you never hear about and will never be offered. — Kai Sedgwick via Coin Trellis

Its a good way to lose all your money….if people here don’t know what they are doing in the market I wouldn’t expect them to be able to […] set [a bot] up so it is useful. — Person51389

This is unfortunately where the reality of the current trading bots (available to the public) kicks in.

The problem really is that there’s just a huge level of disconnect between the knowledge base of professional investors vs the hackers that build these sorts of algorithms and then make them available to the public.

The fact that so many public-facing forums still tout technical analysis as a viable investing tool gives you a small glimpse into the extent of the problem.

And don’t even get me started about overfitting.

The lack of profitability of existing solutions is what motivated me to start creating a platform for the crypto community in the first place.

What to look out for when picking a trading bot

Before you buy/trial/invest in any bot, ask yourself these 3 questions:

  1. What is the professional experience level of the senior leaders of that firm? If they haven’t managed >$100m and have a good track record doing so, you should probably bat on.
  2. Are their algorithms widely known and openly available to anyone? (hint: if they’re giving you trade-level data then their algorithm can quite easily be replicated). If so, whatever “edge” their bot has will be quickly arbitraged away.
  3. Is their success aligned with your success? If you lose money are they willing to cut their fees? If you make money will they succeed too? If they just hand you a platform and send you on your merry way to figure things out by yourself it’s never a good sign unless you know exactly what you’re doing.

Unfortunately, choosing a trading bot to go with isn’t as trivial as answering these three questions.

In my opinion, everything ultimately comes down to people.

Forget about the marketing malarkey surrounding the company and ask yourself, would you trust this person with your money?

Where to go from here?

About Credium

We’re creating a “set and forget” crypto trading bot platform which is ideal for beginners (although applicable to experienced folk too) with the basic premise that our bots are already fully optimised to run out of the box.

We also take full responsibility for the profitability of our clients as opposed to leaving you out there all by yourself.

All you’ll need to get started is:

  1. $1000
  2. To press a single button to get the bots started

There’s an early bird offer on there too for the first members given we haven’t launched yet.

How to start trading Guides for new crypto Traders

Тему создал/а wasabiaki, October 13, 2020 in Tutorials

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    How to Build a Crypto Trading Bot

    There are lots of reasons as to why companies and individual traders might want to build a crypto trading bot. It might be to allow them to buy and sell cryptocurrencies such as bitcoin without needing to physically undertake transactions. Another common reason for creating a crypto trading bot is to make it commercially available to others for a fee.

    Whatever the reason, crypto trading bot development is a lucrative field, provided you get it right. In this article, I want to examine how companies can build their own trading bot so that they won’t have to pay to use existing ones.

    I will begin by defining exactly what a crypto trading bot is before explaining how such programs operate. To do this, I will take a look at the different types of trading strategies these bots use before finally going on to explain how to make a trading bot.

    Since the intention of this article is to provide an overview of the process, I will add links at the bottom of the page to articles that cover the process of creating a cryptocurrency trading bot in more detail.

    Please keep in mind that articles often outline bot architectures and algorithms that quickly go out-of-date. For this reason, all of the articles I reference should be viewed as guides rather than a step by step process to follow.

    If you don’t have experience in creating a trading bot then you should seek expert help to do so. A great tip on how to find the most up-to-date information and approaches is to hit the popular developer forums that include CodeProject and Stack Overflow.

    Sites such as these are loaded with topics that will help and also serve as a great way to tap the best programmers for free advice on how to create a trading bot.

    Contents

    What is a crypto trading bot?

    Since the beginning of the cryptocurrency boom that started in early 2020, people all around the world have been clamoring to trade in bitcoin and other altcoins. The problem with any commodity in the global marketplace is traders cannot be at their station 24 hours a day, 7 days a week.

    Apple co-founder and tech guru Steve Wozniak recently admitted that he had sold his entire holdings of bitcoin because he had grown tired of constantly looking to see what the price was. Even the most dedicated trader will not want to spend their entire life staring at cryptocurrency price charts either.

    Trading in cryptocurrencies is particularly addictive because the market is highly volatile. Bitcoin prices can and have dropped by as much as 25% in a day. While investors who are in for the long term might not worry about taking advantage of such fluctuations, cryptocurrency traders can make huge amounts of money from such volatility.

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    The solution to this problem is the trading bot. Such bots have been used by companies to set buy/sell commodities on global stock exchanges for decades. Trading bots help to automate the process and thereby relieving pressure on companies and traders.

    Trading bots are software programs that use API’s to interact with financial exchanges. They actively monitor exchanges around the clock and will react in accordance to whatever predetermined criteria they have been programmed with.

    How do crypto bots work?

    Hire expert developers for your next project

    Trusted by

    To give a basic example, if a trading bot has been told to buy a commodity once the price hits $1 or lower, and sell once it hits $2, it will act in accordance with these limits, hopefully making a profit.

    A cryptocurrency trading bot operates on these exact principles to facilitate the buying and selling of bitcoin and other cryptocurrencies.

    Different bot trading strategies

    Crypto trading bots rely on algorithmic trading in order to run and process complex mathematical formulas and automate and accelerate the trading process.

    So, how do you do algorithmic trading?

    Trend Following Strategy

    This is the simplest trading strategy in which the bot responds to direct market changes. Trend following doesn’t require complex algorithms that need to factor in such things as predictive analysis etc., and so are very simple.

    Arbitrage

    The arbitrage model involves cryptocurrency bots exploiting the difference in prices between the numerous cryptocurrency exchanges throughout the world.

    Since there is no one centralized exchange to determine the price of a cryptocurrency – a role that with fiat money is a filled by the central banks – for this reason, prices vary from exchange to exchange.

    South Korean exchanges, for example, have historically had a higher price than U.S ones, so offering good potential profits for anyone trading between the two.

    Trading bots help traders take advantage of this differential by allowing them to trigger trades when certain price differentials are met.

    Market Making

    The market making strategy allows traders to buy and sell high volumes of currency and profit from the spread. In order to be able to trade such volumes, market making traders rely on trading bots.

    List of the best cryptocurrency trading bots:

    Finally, let’s tackle the most important question – how to build a trading bot.

    How to build a crypto trading bot

    Do it alone: Download an exisiting open-source bot

    There are several ways that you can build a crypto trading bot. The cheapest and easiest approach is simply to find an open-source crypto bot that you can download and use straight away. This requires only a minimal amount of technical knowledge and helps to keep costs and development time to a minimum.

    However, in order to build in your own features, continue development, and fix any bugs/security issues, etc., you will need to retain at least one expert software programmer. Since the bot has already been developed, the downside is that this approach often makes it harder to build in your unique features or adapt its trading algorithm.

    Best open source crypto bots:

    Start from scratch: Get a great dev team together and start coding

    Cryptocurrency trading software development can be both a personally and financially rewarding thing for those people who are able to be successful at it. The most important part of this approach is ensuring you have a team that is filled with passion and dedication, as well as all the relevant skills and experience, of course.

    The most basic trading bot can be built in a matter of weeks. One such example is the arbitrage crypto trading bot built by Carlo Revelli. His bot allows for the trade between two exchanges, Etherdelta and Bittrex, and was created using his “own python etherscan API wrapper and pythereum to create the transactions and etherscan to publish them”.

    Carlos crypto trading bot contained around 400 lines of code and took 2 weeks to write.

    You can read more about how he created his bot in his article How to make your own trading bot.

    Hire expert developers for your next project

    To create a more sophisticated trading bot, which can trade on multiple exchanges, will naturally take more time. More time will also be needed for creating the algorithm and ensuring that there are no obvious security flaws which can be exploited by hackers.

    Key steps to creating a trading bot from scratch

    1. Decide on the programming language you will use.

    It is a good idea to select a familiar programming script to write your bot with. Python, Javascript, Perl, and C are the most commonly used languages for crypto bot development. The advantage of using such well-known programming languages is the ability to easily bring in other developers to help write/fix the code should you need to.
    Finding a reliable Python trading bot tutorial, for example, can make things much easier for you.

    1. Getting hold of your APIs

    Before you begin coding you will also need to get hold of the APIs that allow your bot to access whichever exchanges you want your bot to trade on. The good news is that all of the main cryptocurrency exchanges offer APIs to allow access to their currency data.

    API links for main currency exchanges:

    3. Create accounts with all the exchanges you will use

    Account creation is a relatively straightforward task. Please keep in mind that different exchanges have different procedures for setting up new accounts. Some exchanges require personal information to be vetted and approved while others allow for anonymous trading. Vetting takes more time, so factor this in when project planning.

    1. Pick a bot trading model

    Trend following, Arbitrage or Market Making etc.? Keep in mind that more complex trading models will require more development time.

    Your bot’s architecture will have massive implications as to how it functions and performs. Key to a how a bot operates is deciding on the algorithms it will use to interpret data. Algorithmic trading is a massive industry that makes billions of dollars each year in profits.

    For any algorithm, the mathematical model on which it is based must be solid. If it is not then it is likely that the bot will either prove to be unreliable or will end up losing money. You can read more on the topic of mathematical modeling via this link.

    Part of the process involves clearly defining the type of data you want your algorithm to interpret. For more complex trading models you will need your bot to be able to identify such things as market inefficiencies etc. This means it will need to be able to analyze historical trends as part of its function.

    All of these things need to be considered before you get down to create a trading bot.

    Once you have outlined your bot’s architecture you can get coding. Naturally, this will be the most time-consuming part of the process. If you have a team of developers working on different parts of the bot then it is vital to make sure that you have good project management/communications procedures in place.

    Start by opening a group chat on Slack or a similar program where every member of the team can talk to one another. Hold weekly meetings to make sure each and every member knows where the project is and what problems have been encountered etc.

    Testing has two key functions. Firstly, it is to make sure your bot functions as it should and is able to cope with the kind of data fluctuations that will be thrown at it. Factors such as risk vs. reward and modeling errors such as ‘overfitting‘ should all be evaluated at this stage.

    The second function is in fine-tuning performance. Keep in mind that what I mean by performance is the optimizing the kind of behavior that you want your bot to exhibit.

    By increasing the level of risk that the bot factors in, for example, you increase the chance of higher returns but also decrease the effectiveness of your bot to respond to high levels of price fluctuation, etc.

    1. Live Deployment

    Once you have ironed out any issues, you are now ready to set your new auto cryptocurrency trading bot loose on the markets. While you might dream of making instant fortunes, remember that no platform in history has ever been launched without experiencing teething problems.

    A good trading bot is an evolutionary thing. The more you put into its development the more you will get out. Constant monitoring of your bot’s performance is definitely recommended, at least for the first few months. After that, you should be confident enough to let your bot get on with it without much need for supervision.

    Cut out the hard work: Pay an outsource development team to create your trading bot

    If your company wants to ensure a smooth and easy project development then the best way is to hire a professional development team to do the hard stuff for you. A good dev team is likely to get the project completed in a much faster time and ensure that the bot is the best it can be.

    Since a cryptocurrency trading bot will most likely be handling large sums of either yours or your client’s money, reliability is hugely important. Currency markets are built on trust so your bot will need to be 100% reliable for it to be successful.

    If you have the budget, do yourself a favor and outsource the project to a great development company.

    A word of warning

    While I hope this guide has provided you with a good understanding about cryptocurrency bots and the process of creating one, I feel that I should add a few words of warning regarding trading cryptocurrency in this way.

    Assuming that you have built yourself a world-class trading bot that has no security or reliability issues, traders still need to be aware of the dangers posed by trading in the cryptocurrency markets.

    To start with, cryptocurrencies are still relatively new, meaning the market is largely unregulated. Prices are prone to massive fluctuations, which as I said, does offer the chance to make enormous profits, but inversely also could result in huge losses. Don’t invest money you cannot afford to lose.

    A much better idea, now that you have created such a great trading bot, would be to charge others for the pleasure of using your bot so that you can be assured of making money, and without having to take any risks either. Whatever you decide, good luck in creating a great crypto trading bot.

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