Trading in the world of cryptocurrency can seem like a daunting task. With thousands of cryptocurrencies being traded every day, it can be overwhelming to keep up with the latest news, trends, and fluctuations in price. Fortunately, there are two primary methods of trading that can make the process easier for beginners and experts alike: using trading bots or manual trading strategies. In this post, we will take a deep dive into both of these methods, comparing and contrasting their benefits and drawbacks and providing factual, unbiased information to help you decide which method is best for you.
Trading Bots
Trading bots are automated programs designed to buy and sell cryptocurrencies based on pre-programmed algorithms. These algorithms use market data to identify trends and execute trades in real-time on behalf of the user.
Pros & Cons
Pros:
- Trading bots can operate 24/7 without interruption.
- They are highly efficient and can execute trades much faster than humans can.
- They eliminate emotional decision-making, which can lead to more rational trading decisions.
- Users can backtest their strategies using historical data for maximum profitability.
Cons:
- Trading bots can be expensive, with premium bots costing as high as $1000 per month in some cases.
- Some bots can be complicated to set up, requiring a significant investment of time and effort before profitability is reached.
- Bots can be vulnerable to hacking or glitches, which can lead to significant losses for users.
Performance
A study published by CryptoRank.io in January 2022 of two popular trading bot platforms - Cryptohopper and 3Commas - found that both bots had profitable strategies with CryptoHopper achieving a profitability rate of 72.7% and 3Commas achieving a profitability rate of 69.4% between 2017 and 2022.
Manual Trading Strategies
Manual trading strategies are methods of buying and selling cryptocurrencies that rely on human analysis and decision-making. This method requires traders to study market trends through various tools, research news, and keep an eye on the market constantly.
Pros & Cons
Pros:
- Traders can respond to market changes in real-time and make decisions based on unique circumstances.
- No setup costs or recurring fees are required.
- Traders can have more control over their investments.
Cons:
- Humans are prone to making emotional decisions, which can lead to irrational trades.
- Trading decisions can take longer as the trader needs to process information.
- Humans can only operate during waking hours and can experience burnout from constant monitoring.
Performance
According to a report from eToro, only 31% of traders using manual strategies made a profit, with the other 69% experiencing losses throughout 2017.
Conclusion
In conclusion, both trading bots and manual trading strategies have their pros and cons. Trading bots can offer consistent results and eliminate the need for manual monitoring, but they can be expensive and require significant investment to set up correctly. Manual trading strategies can offer more control and can be freer to experiment on, but they require human decision-making, which can lead to mistakes and emotional trading.
Ultimately, the best option for you will depend on your trading style, goals, and resources. It is vital to research and backtest any strategy before committing to it, whether that is through a trading bot or manual trading methods.
So whichever method you choose, remember to stay vigilant, stay informed, and above all, stay patient.