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Bitcoin trading bots: good idea? bad idea?

Last update: June 18, 2016

You cannot help but notice how many people are searching for Bitcoin trading bots nowadays.

Let me get one thing clear right from the start: Bitcoin bot is not an automagical tool that will just be making money for you. Bitcoin trading bot, as any other trading bot, is a piece of code executing commands.

Automated Trading: Your Own Bitcoin Bot

Ideally you code the bot yourself so that you know what exactly it does.

A lot of work. You see automated Bitcoin trading is not quite passive income.

Bots from Strategy Markets

Another option.

You may use someone else’s strategy so as to avoid the coding. That’s possible indeed. But remember that people usually don’t sell perfect strategies. When a strategy works, having everyone use it will make it stop working.

The opportunity for trade gets exhausted when everyone starts using it.

Another point is you shouldn’t run a bot without having the understanding of what it does on the inside.

If you still want to test it, there is a strategies marketplace at Cryptotrader. These are strategies that can be run at Cryptotrader itself for a monthly fee of $8 - $80, based on your trade volume. You will see the paid strategies on Cryptotrader are quite sophisticated, but - that does not mean these bots cannot make mistakes.

In the long run it is a bad idea to run someone else’s strategy without check when you don’t understand what exactly it does. Long term, you will lose money doing so.

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Here’s why: The caveat is that Bitcoin price doesn’t behave in the same way through all times. All trading bots need to be optimized for a specific kind of behavior. That’s what the backtest section of all automated trading platforms does (see image above).

The thing is each bot can do very well if you use it in the right kind of situation.

Trading bots cannot do the figuring for you: You need to know when it is the right time to use which bot.

Trading bot is a good idea for you if you …

Simply put, in most cases it will be better to simply keep up to date with the price and use limit orders. Sorry folks, there ain’t no free lunches. Bitcoin bots are not here to make you money while you spend a few years sipping capirinha on the beach unaware of the rest of the world.

HaasBot of HaasOnline

If you’ve never heard of the Dutch company HaasOnline and their trading bot you are not alone, not by a long shot. There is a good reason for that though.

HaasOnline bot targets serious traders who are willing to put in the hours and learn how to configure and use the software. There is a version 2.0 currently online but version 3.0 shall be released soon.

The possibilities are many, you can indeed configure bots for Bitcoin long, short, arbitrage or any altcoin trading schemes.

Even the interface itself can save a lot of headaches. Take a look at price levels across exchanges to do arbitrage trading:

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Such a thing makes it easy even to execute trades manually (with some HaasBot plans, the number of bots to run is limited anyway).

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When it comes to a basic trading bot setup without testing, that can be done quite fast. See the video below.

It shows how to set up a very basic bot (HaasOnline) to do margin trading on Bitfinex. It uses the DoubleMargin setup which means the bot will do both long and short trades as the opportunities come. (So, if you want to hodl Bitcoin and are not interested in fiat profit, you should opt for the SingleMargin and only allow shorting.)

All knowledge you need to set up this bot untested is basic working knowledge of technical analysis as you have to choose your indicator.

Be careful though, a correct set up might require a combination of indicators that depend on if you want to go long or short. Remember, pump and dumps occur every now and then - the market is manipulated. Some indicators react on this too late and so will a bot relying on them.

You can also set a few other things that are not compulsory. Quite a popular feature of HaasBot is what they call “insurance”, for instance “Only execute trade if the profit pays the fee”.

HaasBot is available as a web app or on desktop for Windows, in beta for Linux and OS. The license runs out every three months, as for the cheapest one costs 0.22 BTC… For anyone who trades at least a little such an amount is generated quite easily.

Get HaasBot License Here

Where to run a Bitcoin trading bot

The HaasBot runs primarily on Windows.

The minimum requirements to run HaasBot are quite high, running the bot on a VM on your laptop will consume a lot of resources.

It is generally better to get a Windows VPS and run the bot from there. Windows VPS are more expensive than Linux equivalents since you need to pay for a proper license too. You will be able to get some good deals with annual billing. This way, expect to pay about $8 monthly for your VPS.

By the way, running Windows or Wine on cheaper Linux servers tends to be forbidden.

Windows hosting companies to check out (they accept Bitcoin):

Requirements to run the Windows HaasBot:

If you are looking to get a VPS get more than the minimal requirements to avoid future issues. Not all companies will return your payment if they cancel your account due to too-high usage (see TOS of RockHoster).

Gekko, the free Bitcoin trading bot

Gekko has been around for a very long time and is still in active development/improvements. Yet you won’t hear about it very much in trading communities, perhaps apart from occasional mention on Reddit.

If you are looking for a bot that is not a full-feature trading platform with fancy charts and the like, Gekko will be the right thing for you. It is just a command line node.js application.

As with every good algo trading software you cannot simply download Gekko and run it. To use Gekko as a true Bitcoin trading bot you first need to configure it.

The basic configuration is simply declaring which exchanges you want to trade on.Gekko currently supports Bitstamp, Kraken, Bitfinex, Btc-e, Poloniex and BTCC (formerly called BTCChina).

Configuring an exchange will only watch your selected market. What you need to trade with Gekko is enabling plugins, or writing your own. All the trading functionality depends on Gekko plugins.

Both to run Gekko as an advisor or as a trading script needs a plugin - here is the list of them. One of the Gekko plugins, paper trader, is for live strategy testing - it reports profits and losses it would make if it wasn’t a dry run.

Here is the Github link to Gekko and to the docs:

Arbitrage bots

Using Bitcoin arbitrage bots is generally a simpler strategy. In the link you will find two free arbitrage bots. One is an Android and iPhone app. The other is a piece of Python code. You can use it as a sniffer for reference or it can actually do the trade for you.

Your own Bitcoin arbitrage bot

If you are thinking about writing your own bot, you probably can figure out that arbitrage bots are both easier to code and to use since the only thing they evaluate is price difference across exchanges. The need to adapt the bot for a trend is not the most important bit here.

That also makes automated Bitcoin trading with them somewhat safer, even long term.

You can be sure though they are getting used more and more since the arbitrage opportunities are getting poorer over time: It won’t work as soon as everyone starts doing it.

Still: It might seem old-fashioned but if you are not quite seasoned executing trades manually is less risky if you are not a programmer willing to be immersed in code all day long.

It is important to realize no profit comes without effort. Either keep taking care of the code/bot or keep taking care of the opportunities as they happen.

You can configure the mighty HaasOnline trading bot for altcoin arbitrage too.

Opportunity sniffers

Using an arbitrage or opportunity sniffer is risk-free. Sniffers will inform you but will not execute trades for you.

They are simply an app that will detect a possible opportunity.

You then decide yourself whether you want to trade or not.

The most convenient way is to set up basic text (SMS) or email notification.

Once you get the notification, go check out the situation in some good mobile trader app.

We have already recommended TabTrader in the Bitcoin Trading Basics post. You can feed the TabTrader app your API keys too to trade real money from your mobile. There are more apps like this, for example zTrader with Bitfinex-ish interface. (Bitcoin Trading Basics / Mobile Trading)

TabTrader is so good because its charts are quite fine. It lets you see all common indicators so that with a bit of practice you will not need to double check on a laptop screen.

On the image below see the default TabTrader screen with data from a few Bitcoin exchanges. You get the chart by clicking one of the tabs in the default screen. You can then choose your favorite indicators, you see the typical MACD here.

TL;DR - Bitcoin trading bots

Bitcoin trading bots need maintenance.

Additionally, you need to either buy or build one and you might need to rent server space for it to run.

If you though of it as of long-lasting income with no investment and effort, you should forget it.

If you decide to do the work yourself.

If you are experienced in technical analysis and want to run bitcoin trading bots.

There is no doubt bots can execute tasks much faster than a human would ever be able to. But it is also true that bots need to be configured, tested and adjusted from time to time. If you are a good trader chances are trading bot will help you, if you really learn how to use it.



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