Automated Trading has fast become the norm in crypto markets. However, before getting into it let us understand what it means. Simply put, an algorithmic trading robot is an automated computer code that has the ability to generate and execute buy and sell signals in financial markets. Your bot, when subjected to entry rules, should be able to buy, sell and determine the quantity of your cryptocurrencies. To be profitable, your bot should be able to identify persistent market efficiencies.
Here are the 5 key steps to follow when you start creating your own bot.
1. Getting hold of your APIs
API (Application Programming Interface), is an interface for the trading bot that allows the bot to send and receive data from an exchange. Thankfully, all of the major cryptocurrency exchanges like Coinbase, Bittrex, BitMex, etc.offer APIs to allow access to their currency data. Setting up an account on one of these exchanges is needed. Also while using APIs, if the API has the withdrawal option enabled, you should consider turning it off. This prevents the bot from withdrawing from your account and allows you to make withdrawals manually.
2. Deciding on a Strategy
Trading bots are incapable of reacting to fundamental market conditions such as government cryptocurrency decisions, rumors, or an exchange hack. Therefore, as you write a trading bot, it’s essential to keep these strategies in mind to tweak the bot to suit any current situation. Factors such as, personal risk profile, time commitment, and trading capital are all important to think about when developing a strategy. Your strategy should be such that you should be able to earn more while deploying less capital. Some very popular trading strategies are trend following, arbitrage and market making strategies. Check out this trading strategy using MACD and Stochastic indicator.
There are plenty of codes or programs available using which you can create your own bot. However, the biggest problem novices face is the lack of coding knowledge. If you want to do it hassle free you should check out our simple and easy to use drag and drop Mudrex Strategy Builder. Ensure that you clearly define the type of data that you want your trading bot to interpret. Setting buy and sell signals, making use of technical indicators and blocks and analyzing the bot’s performance and regularly changing/modifying rules is essential. Maintenance is as crucial as creating. Below is how Mudrex Strategy Builder looks like.
4. Back Testing and Optimization
Running an algorithmic trading strategy blind is the best way to lose all your money. To see if your strategy works, you must backtest it against historical market data. In order to simulate a realistic backtest, you must take into consideration latency, slippage, and trading fees. Mudrex Testing console provides all historical data since asset history on an exchange. and twenty-two back-test metrics offered on which you can analyse your bot performance. Understanding of metrics like Sharpe Ratio could take your trades a long way. Use the backtesting console and maximize performance while minimizing the overfitting bias.
5. Live Runs
Now is the time to test your bot with real money. It is very crucial to verify that your bot’s performance is inline with the strategy you had in mind. Be prepared for emotional ups and downs along with technical issues that could come up. While you might dream of making instant fortunes, remember that no platform in history has ever been launched without experiencing problems. Monitoring your bot is recommended at least for the first few months.
Mudrex gives you an option to withdraw your money if your bot under-performs. What else are you waiting for? Start live trading on Mudrex
In conclusion, automated trading could sound super complex and ridden with a lot of technicalities, unless you know the right place to go. Choose the platform that best suits your needs and make astounding profits.
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