Many of you have probably heard about people exploiting the crypto market by using bot softwares around the clock.
They’re all the rage now.
Although this may seem like an exciting opportunity, you need to know what it entails first.
This is not as easy as some make it out to be. As a matter of fact, if you don’t know what you’re doing, you could wind up losing money.
Let me give you some insight into how crypto bots can actually bring you profits from the markets.
1. Understanding Crypto Market Basics – Meaning Of Support & Resistance Levels
Most people who get into bot trading think it’s as simple as clicking a button and watching the profits roll in. That’s not actually true.
You first need to have a bit of knowledge in the markets to begin with. Not as much as you think, but some.
For example, you should be able to tell support and resistance levels. If you don’t know what those are, support is simply an area that the market isn’t selling below and resistance is an area that the market isn’t buying above. Like this:
This may be a basic concept, but it’s very important when it comes to using bots. Because you want to make sure you’re starting your bots at the best possible price so you can make the maximum profit.
Which brings us to our next point:
2. Time-Frames For Crypto Trading Charts
One common mistake that people make when using bots to trade is looking at a lower time frame based chart.
This only tells a part of the story.
When you’re thinking of using a bot to trade, you’ll want to use higher time frames such as a 4 hour, 6 hour, or even a daily chart.
Why? Because the higher the time frame, the stronger the support and resistance is going to be on those time frames.
So you could be starting a bot at a price looking at a 15 minute chart that looks like support, but on a daily chart it’s at an area of resistance.
3. Understanding Your Grid Bot Trading Software & Its Limitations
This is one of the biggest components that you must understand. Currently, most bot software only profit from grid trading. That means it buys low and tries to sell those orders off at a higher price.
This is fine when the market is in a range or trending upwards. But what do you do when the market is trending downwards?
Unfortunately, a lot of people lose money here because the bot goes outside of their range and/or the coin doesn’t recover to where they started the bot.
And while there was some money to be made from the micro profit transactions, they still end up with a net loss if they decide to close the bot.
So Are Bots A Good Way To Profit From The Market?
Absolutely. The only thing is that you can’t expect a bot to do all the thinking for you. By arming yourself with some knowledge of how the markets work, you can translate into using the bot for maximum gains.
P.S. – It’s always best to get an understanding instead of being tricked into all the A.I. automated talk. When you know how it works and what makes it all work, you then put the odds of success in your favor.
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
