Cryptocurrency trading bots function as automated traders, executing buy and sell orders based on predefined strategies. They scan market data, identify opportunities, and execute trades faster than any human. Here's how they work:
Market analysis – bots monitor price trends, indicators such as moving averages, and volume data for decision-making.
Trade execution – when a signal meets the bot's criteria, it automatically places orders, ensuring quick execution.
Risk management – many bots include stop-loss and take-profit settings to limit potential losses and secure profits.
Continuous monitoring – unlike human traders, bots operate 24/7, adapting to market changes.
Bots range from simple DCA strategies that distribute investments over time to complex algorithms using arbitrage or momentum trading. However, while bots eliminate emotional decisions, they still require oversight and proper configuration.