August 10, 2022

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Is it worth to use trading robots during the crypto market crash?

The cryptocurrency industry has had a major winter in 2022 as prices of most coins have plummeted by over 50%. Bitcoin, the biggest coin in the world, has dropped from an all-time high of almost $70,000 to less than $20,000. In total, their market cap of all coins has dropped from over $3 trillion to less than $1 trillion.

Subsequently, most Holders have lost more than $2 trillion. At the same time, many short-term cryptocurrency traders have made a lot of money by taking advantage of short-term price movements. In this article, we will assess whether it is worth to use robots during a crypto market crash.

What is a crypto robot?

A crypto robot is a tool that is designed to analyze the market and identify potential market opportunities to buy or sell assets. These bots are built to mirror popular manual trading strategies like trend following, reversals, candlestick analysis, and grid trading strategies. 

Bots were originally designed and used by large algorithmic hedge funds, which employed sophisticated computer programmers and mathematicians. These days, however, anyone can build a robot using the relatively popular free builder platforms. 

Still, many people are afraid of using these bots to trade. The worry with crypto trading robots is that they can be seen as a scam, but this is not always the case. A very popular Cryptocurrency site (CryptoMonday.de) suggests Bitcoin Era is legit.

Their Bitcoin Era review states “Bitcoin Era ist seriös, das System arbeitet mit seriösen Brokern zusammen und ermöglicht es Benutzern auch, mit den führenden Kryptowährungen zu handeln.”

This translates to English as “Bitcoin Era is legit, the system works with reputable brokers and also, it allow users to trade the leading cryptocurrencies”

How to manage risks when using bots

Trading using robots can be a bit complicated for most people. In fact, many people who start trading using them fail within a short period. As such, there are several approaches to manage risk when trading using robots. Also, as a trader you have to consider how is the market performing, specially right now when the Bitcoin price is hitting $20,000.

Some of these risk management strategies are:

Backtesting the bot

A simple way to reduce your risk is to use historical data to see how the bot performs. Fortunately, you can do that in a few steps. Most trading platforms like MT4, MT5, and TradingView have a free strategy tester, which you can use to test the performance of a bot. Some of the platforms have tools to forward tests. Taking time to backtest the software will help you see whether it is a good one or not.

Start small

In addition to backtesting, we recommend that you start small and add to your account progressively. Therefore, if you have $100,000 to trade, you can allocate $20,000 to a bot and see its performance. If it is a good one, you can add another $10,000. 

Diversify

Another risk management approach is known as diversification. Here, you can divide your funds and then allocate them into several accounts. For example, if you have $100,000, you can divide the funds into 4 and then allocate them into several bots. In this case, an account that underperforms will be offset by one that does well.

Stop-loss and take-profit

Always ensure that the trading robot has risk management features like a stop-loss and a take-profit. A stop-loss will stop a trade automatically when it makes a certain loss while a take-profit will stop it when it reaches a certain level of profitability. 

Crypto trading robots examples

Bitcoin Era

Bitcoin Era is a popular trading bot that uses several strategies to make money in the crypto industry. While it was designed with Bitcoin in mind, it can be used to trade other cryptocurrencies like Cardano and Bitcoin Cash. It is a highly effective bot that makes money in all market conditions, including during the current bear market. Bitcoin Era is a free bot that any trader can use.

Bitcoin Code

Bitcoin Code is another popular trading bot that works in all market conditions. It was built by combining multiple technical strategies. A user just needs to sign up and then implement it on their side. It will then analyze and execute traes. The bot works on a 24/7 basis, making it highly effective. 

Immediate Edge

Immediate Edge is a trading bot that analyzes and executes trades in the cryptocurrency industry. It is a free tool that anyone can sign up to. The bot was created using a number of technical tools. You can start using it by just providing your email address and phone number.

Summary

With cryptocurrencies in a strong bear market, there are concerns about whether using bots is a good idea. It depends on the type of bot that you are using. Some bots are designed to make money when an asset is in uptrend. Others are built to be successful in a range-bound market. Therefore, you just need to read the guidelines of your bot and test it in a demo account to see its performance. 

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