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Top Tips for Success in Bitcoin Automated Trading

Bitcoin is a massive digital asset that commands a mind-boggling 44% share of the total market cap for all cryptocurrencies. It is also the most well-known and reliable financial instrument for everyone. Experienced traders prefer engaging in Bitcoin automated trading instead of relying on outdated manual methods of investing.

The crypto industry is a novelty domain that has its own rules and customs. One of the staples is that retail traders entering this market try to automate their trading strategies. The reason for the proliferation of trading bots in this particular financial market is that it operates around the clock creating a perfect environment for never-sleeping automatons to improve the efficiency of your investments.

Since automated trading is such a big thing in the cryptocurrency world and everyone does it, we believe that it is a good idea to talk about some tips that will help you elevate any automated trading system to the next level.

Tip #1. Focus on risk management

All investors have different risk tolerance levels. Some can sustain heavy losses or keep a market position even when it goes deep into the red. Others may start panicking quickly whenever volatility exceeds the limits within their comfort zone. Both types of investors can succeed with bots if they focus on algorithmic optimization of risks and rewards.

An algorithm is a set of rules and actions that must be performed to reach a certain goal. In our case, we are talking about risk reduction or increase depending on your tolerance.

Here are some rules that you should implement in your investment practices:

  • Do not dedicate more than a certain percentage of your total portfolio to automation. You should never forget about portfolio diversification. Automation can be a hedging tool or your main money-maker depending on the chosen style, but it should never be used to manage your whole portfolio.
  • Look at take-profits and stop-losses as a range. If you lower your gain expectations while also making stop-losses safer, it will be a reliable strategy that won’t bring you huge rewards. Expanding this range will increase profits, but also the likelihood of trades going south.
  •         Choose consistent tools like arbitrage and GRID bots to hedge against risks that may be associated with custom strategies that perform inconsistently but can generate large profits when market conditions are perfect.

Tip #2. Contemplate exchange selection

CEX platforms are very different and offer exclusive perks to their clients. Depending on which features and qualities you consider hugely important, the best exchange can be Binance or KuCoin, or OKX, or any other centralized platform.

Below are some features that you should consider:

  • Focus on technology. Companies with better designed API and faster servers will help automated systems work as efficiently as possible. Binance and OKX are two examples of companies that focus strongly on the technological aspect of their service.
  • Safety and confidentiality. Many crypto investors love their privacy and confidentiality, but not every exchange provides them. OKX or KuCoin are good choices for privacy reasons. However, they both suffered from cyber-attacks and security issues.
  • Liquidity. All centralized exchanges that are somewhat popular have strong trading volumes for mainstream coins. Bitcoin trading is sufficiently fast and reliable on all of them. However, some companies may have liquidity issues with less popular tokens.

Tip #3. Pick the right technical analysis strategy

The vast majority of retail traders use TradingView as their main charting platform. It is a good analytical website with a wide range of standard and unique technical indicators, custom trading systems, and other tools.

What many investors do not know is that the platform has a vibrant community consisting of expert analysts, experienced retail traders, theorists, and power users. You can find advanced analytical strategies that can be effortlessly deployed on any TradingView chart.

The best thing about it is that you can also talk about any strategy with users who have likely tested them and can give it a review. Use a strategy that can generate reliable trading signals based on the user feedback.

Tip #4. Use the historical data

Another bit thing that many retail traders ignore when trying to automate a trading strategy. Financiers earning millions conduct a thorough market research to identify optimal assets to work with. It is a tedious process that usually involves reading a lot of balance sheets and price charts. The combination of technical and fundamental analysis makes it possible for analysts to make informed investment decisions.

Experts often try to focus on identifying very specific things about assets and their prices:

  • The correlation between price actions.
  • Actual and implied volatilities.
  • Entry points for new market positions based on that data.

The easiest way to collect this information is by studying the historical data of the market. The TradingView platform has a massive catalog of price action histories that you can use for backtesting and theorizing. Always backtest your automated strategies against the market history.

Tip #5. Do not try to customize everything

Some people believe that they must create their tools themselves and make them unique. However, it is not necessary to always tweak every single instrument before applying it to the market. Instead of trying to come up with a unique trading system try working with preset solutions offered by advanced automation providers like WunderTrading.

  • DCA buying is great for investors looking to either trade carefully along the current trend or accumulate assets.
  • GRID is an impressive new instrument that creates a series of market positions and protects each with take-profits and stop-losses.
  • Arbitrage is a great bot that reacts to very specific alerts and trades only when conditions align perfectly. It can be incredibly consistent and reliable, but don’t expect huge returns.

These preset products are great on their own. You can still modify them to your liking, but they will work with default settings just fine. It is not necessary to be ahead of the whole market with your unique and special system that nobody knows about. You don’t have to be a pioneer to make money in the crypto industry!

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