Algorithmic trading is responsible for between 60% and 73% of all U.S. equity trading, according to Select USA. Given their digital nature, the rise of algorithmic cryptocurrency trading shouldn’t come as a surprise. Crypto trading bots have become increasingly popular among both institutional and retail traders interested in streamlining their trades.
Crypto trading bots can help remove emotion from the trading process and increase consistency with a rules-based approach. Let’s take a look at why you might want to consider crypto trading bots and some of the best free and paid crypto trading bots.
What Is A Crypto Trading Bot?
Crypto trading bots are computer programs that automatically execute buy and sell orders based on a predefined trading strategy. In particular, they consume data from a variety of sources, make predictions based on a proprietary algorithm, and place trades on your behalf through your crypto exchange’s API, or application programming interface.
Most crypto trading bots are designed for technical users and require some coding knowledge, but there are a growing number of bots that are accessible for non-technical users. That said, non-technical users should beware of black box crypto trading bots that advertise high returns without providing access to the trading strategy or source code.
- Crypto trading bots remove emotion from the trading process.
- They increase consistency with a rules-based approach.
- They find opportunities and place trades around the clock.
Benefits Of Using Crypto Trading Bots
Even though you have to monitor a bot so you know exactly what it’s doing, using an automated trading bot still has many benefits. If you are invested in the crypto world, here are a few reasons why you might want to use a trading bot:
Increased Efficiency & Multi-Tasking
It is true that one can conduct personal research to analyze cryptocurrencies and market conditions, but there’s only so much a human can manually do. With personal research and analysis comes a high chance that you can miss out on many profitable trades because you may be looking at a less relevant crypto asset or cannot multitask.
On the other hand, crypto trading bots can not only analyze market conditions in multiple cryptocurrencies but can also simultaneously execute trades whenever there is scope for making a profit. Automated trading bots can also conduct repetitive tasks like fast periodic rebalances and simultaneous execution of a trade. These features make the trades more effective than if you were sitting there executing the trades manually.
Human emotion can sometimes affect trade decisions negatively in volatile cryptocurrency markets. However, an automated AI bot is pre-programmed and designed to react to market conditions pragmatically ensuring it stays unaffected by human emotion.
The crypto markets never stop, and neither does crypto trading. It is obviously not always possible for you to stay in front of your computer executing trades, but it is possible for a bot to do that for you. By having a trading bot running you can take advantage of trade opportunities 24/7 instead of just when you can make time. This increased ability to seize opportunities results in higher profitability.
Having said that, it’s important to keep in mind that crypto trading bots can be extremely risky since transactions are typically automated. A simple programming error could result in hundreds of misplaced trades that could lead to high levels of losses. Algorithmic traders should diligently test both their technology/platform and strategy to minimize these errors.
Features To Look For In Crypto Trading Bots
The crypto markets never stop, and if your bot goes offline all of a sudden, there's a chance that you could miss out on a big trading opportunity. Hence, it is crucial to choose a bot that has a good track record and is run by a reliable company. You can do this by reading user reviews and testimonies.
Ease Of Use
The whole point of automated crypto trading is to make your trading easier. Even though not all trading bots are easy to use, a bot with an intuitive interface and simpler control settings could be useful for both novice and advanced traders.
Much like reliability, the best crypto trading bots will also have a good track record with security. Your bot has access to your funds, and often the supported exchanges because it has to use a trading platform to carry out the trading strategies that you have programmed. If you pick an unreliable or shady trading bot, you could easily lose a lot of funds.
The best cryptocurrency trading bot also has a transparent and often open-source development process that supports the team. When you choose a bot with a trustworthy developer and reliable company history you can not only make an extra profit but also get help if you need it.
The idea of using a bot is essentially to automate trading and generate better profits, and the best crypto trading bots help generate the best profits for users. Before choosing your trading bot, it is important to do some research on its profitability. Reputable companies provide information on their bot’s profitability statistics online.
Best Crypto Trading Bots: The Top 20 Bots of 2021
1. Superalgos (Free)
If you are a developer or a trader looking to build sophisticated crypto trading bots with your own strategies, Superalgos is hands down the best option for you. Superalgos is a free and open-source platform for crypto trading bots that provides a visual scripting environment that is accessible to non-technical users and optimized for developers. In addition, a visual strategy debugger makes it easy to explore trading simulations to assess performance and fine-tune the bots to maximize performance.
Having said that, Superalogos is not a simple plug-and-play bot that you can master over the weekend. To help you, they have amazing in-app interactive tutorials, and their system is fully documented.
2. Catalyst Enigma (Free)
Catalyst Enigma is a Python-based bot that features an in-depth dashboard with valuable metrics evaluating each strategy. You can also share data with other users and compare notes to find the most effective options. Catalyst supports live-trading of crypto-assets with four exchanges (Binance, Bitfinex, Bittrex, and Poloniex) and more being added over time.
Catalyst also empowers its users to share, curate data, and build profitable, data-driven investment strategies by providing analytics and insights about a particular strategy’s performance.
3. TokenSets (Free)
TokenSets is a DeFi bot that automates the process of building portfolios and rebalances them based on your preferred strategies. While you can customize the strategies, the trading bot sets make it easy to rebalance based on technical criteria.
While these are some of the best crypto trading bots, there are many other free crypto trading bots out there, including free crypto trading bots for Binance.
4. Pionex (Free)
Pionex is one of the world's first exchanges with 12 free trading bots. You can automate your trading 24/7 without having to always keep a tab on the markets. It aggregates the liquidity from Binance and Huobi Global and is one of the biggest Binance brokers.
5. Trality (Free)
Trality is a premium crypto trading bot platform for technical and non-technical traders to build bots using either the Python programming language or a flexible rule builder. Triality offers some of the best tools to create highly intricate, super creative algorithms within an educational, community-driven infrastructure that promotes learning and development.
You can also use their fast and powerful backtesting tool to optimize bots as well as rent out, follow and share bots with others to generate a follower base and income. Key features include curated pre-defined strategies, a drag-and-drop graphical interface for beginners, and cloud-based live trading. Trality supports exchanges like Binance, Kraken, Bitpanda, and Coinbase Pro.
6. Coinrule (Free)
Coinrule is an automated trading platform that allows you to trade 24/7. This application offers more than 130 trading strategy templates.
The supported exchanges for Coinrule are Binance, HitBTC, Coinbase Pro, Okex, Bitstamp, Bittrex, Poloniex, Kraken, BitMEX, Bitfinex, Bitpanda pro, Liquid, and Binance US. Coinrule offers real-time customer and military-grade encryption.
7. Quadency (Free)
Quadency is a digital asset management application that enables you to customize bots with ease. It provides an automated trading solution for both institutional and retail traders.
Supported exchanges of Quadency are AAX, Binance, Bittrex, Kraken, KuCoin, Liquid, OKEx, Binance US, Bitfinex, Coinbase Pro, Gemini, HitBTC, and Poloniex.
8. Bitsgap ($19/ month)
Bitsgap, a fully automated bot that works 24/7, enables you to manage your crypto assets with ease and is one of the best bitcoin trading bots. This application can analyze 10,000+ crypto pairs and even detects coins with the shortest potential. It allows you to view your trading through a chart and create your bot strategy with a few mouse clicks.
9. Cryptohopper (Free)
Cryptohopper is another popular crypto trading platform that provides a wide range of educational resources, templates, and signals. It allows you to trade for BTC, Litecoin, Ethereum, and more.
With Cryptohopper, you can create your own technical analysis, get trading strategies and bot templates. Cryptohopper's secured protocol also protects your account and keeps all your data private.
The supported exchanges with Cryptohopper are HitBTC, Okex, KuCoin, Bitvavo, Bitpanda Pro, Huobi, Poloniex, Kraken, Bittrex, Bitfinex, Coinbase Pro, and Binance.
10. Stacked (Free+Pro Available At $24.99/ month)
Stacked is a paid crypto trading bot platform that features pre-built and pre-tested bots for traders that don’t want to necessarily build their own from scratch. However, these bots are primarily geared toward the Binance platform.
11. TradeSanta (Free)
TradeSanta, another one of the best crypto trading bots, enables you to easily launch trading bots with a short and long strategy. This application allows you to buy or sell a large volume of crypto without hassle and you can choose the strategy that best suits your trading style. TradeSanta is also available on iOS and Android.
12. Shrimpy (Free)
Shrimpy is a social trading platform. Apart from simplifying your portfolio management, this application has automated trading strategies that can help you improve trading performance and reduce risk. Using FIPS (Federal Information Processing Standards) 140-2, Shrimpy securely encrypted and stores your API key.
13. Zignaly (Free)
Zignaly is a 24/7 trading terminal. It has an integrated crypto market monitoring service called Hamster and enables you to split your profit targets. Zignaly supports exchanges like Binance, KuCoin, BitMEX, FTX, and VCC Exchange.
14. 3Commas (Free+Pro Ranging From $14.5 to $49.5/ month)
The 3Commas trading terminal is one of the best crypto trading bots. It offers a wide range of automated trading bots with the ability to configure them for the round-the-clock execution of your preferred strategy. Using its trading platform simplifies the process of trading and expands the opportunities available to traders. It also enables you to create a strategy based on 20+ trading indicators.
15. Kryll.io (Free)
Kryll.io is among the best crypto trading bots that help you create a strategy without any technical skills. The application connects directly with exchanges without needing APIs approval rights. The Kryll.io application can be used from tablets or smartphones.
16. CryptoHero (Free)
CryptoHero, a multiple exchange supporting bot, is a free crypto trading bot powered by AI. It is simple and intuitive for crypto beginners to set up and run. You can automate your trades right from your phone easily without any coding skills.
17. CryptoTrader (Free)
Cryptotrader can be used without installing any software and is a platform where you can buy and sell trading strategies with ease.
18. Botsfolio ($5 to $20/ month)
Botsfolio is a cryptocurrency exchange that enables you to decide your investment goal to trade for digital currency with ease. You can track trading activities from a visual dashboard and connect to your exchange with ease.
19. NapBots ($8.51/month)
NapBots is a cloud-based system that enables you to use automated trading bots using 15 different trading strategies. It is compatible with various cryptocurrency exchanges, including Bitmex, Binance, and Okex. Using the NapBots application, you can buy or sell orders automatically.
20. Mudrex (Free)
Mudrex is a crypto bot that enables you to build a simple trading strategy, and allows you to easily figure out good and bad investments. The Mudrex app allows you to choose between rewards and risks that helps you maximize your ROI. It supports exchanges such as Binance, Coinbase Pro, OKEX, BitMEX, Deribit, and Bybit.
Crypto Trading Bots & Developing Your Own Strategies
Most crypto trading bots require you to develop your own trading strategy. In addition to defining buying and selling rules, you’re responsible for everything from connecting to exchanges to placing buy and sell orders to backtesting strategies to ensure that they perform well across a variety of different market conditions.
The best crypto trading bot strategies tend to fall into a few categories:
- Trend following strategies involves the use of technical analysis to identify and capitalize on price trends in different crypto markets.
- Arbitrage strategies involve taking advantage of the price differences between different exchanges (often with the use of leverage).
- Market-making strategies involve providing liquidity to illiquid cryptocurrencies in exchange for income from an exchange.
Once you’ve decided on a platform and strategy, you have to connect to the exchange via an API and build the strategy. Small mistakes in trading algorithms can prove to be extremely costly when a trading bot goes live, which means that it’s important to use proven mathematical models and backtest them to ensure that they perform in life-like environments.
If you’re not comfortable developing your own strategy, you may decide to use someone else’s bot or subscribe to a service. You should carefully consider a trading bot’s track record and history in the market when deciding while keeping in mind that black box algorithms could be manipulated to make past performance look exceptional.
Crypto Trading Bots & Tax Considerations To Keep In Mind
Cryptocurrencies are taxed as property by the IRS, which means that traders must determine the capital gain or loss for each transaction and aggregate those transactions each year. In most cases, traders incur short-term capital gains that are taxed at their ordinary income tax bracket, but they may be able to deduct some trading-related expenses.
Algorithmic traders using crypto trading bots may have an even more complex tax situation given the high frequency of transactions. Since bots are trading 24/7 and may use high-frequency strategies, it can be challenging to compute the cost basis for each transaction and accurately report taxes each year to the IRS.
ZenLedger simplifies crypto taxes by interfacing with your wallets and/or exchanges, computing the capital gain or loss, and auto-filling popular tax forms. You can even account for DeFi and other complex crypto transactions while ensuring that you’re not overpaying what you owe using features like tax-loss harvesting and a robust audit trail.
Best Crypto Exchange API Links of 2021
The Bottom Line
Crypto trading bots automatically execute trades on your behalf using predefined strategies in order to remove emotion from the trading process and increase consistency. While most bots cater to technical users that know how to code, the best crypto trading bots provide a rules-based platform to help anyone build and automate their trading strategies.