Why Do Crypto Bots Fail? 

As crypto market trading is not regulated by any authority, it might appear like a risky proposition. But it actually makes trading more appealing to investors who want to invest in volatile markets. 

Volatile and risky markets are ideal for implementing automated trading bots, which may act autonomously and faster than humans. However, not all automated crypto trading bots fail. In fact, there are many success stories associated with them. 

If you’re thinking of implementing a crypto bot in your trading strategy, here are some reasons why other traders have failed and how you can avoid making the same mistakes.

Misconfiguring the Bots

The main reason crypto bots fail is an improper configuration of the bot settings. When you connect a bot, it provides a list of functions that you need to understand.

If you make a mistake by omission, this could lead to irreversible consequences. That’s because a bot follows the commands given to it. Think of it like, “garbage in, garbage out”. 

Undertaking Insufficient Research

It is critical to undertake adequate research before trading in any market. This will allow you to comprehend the market dynamics better, recognize patterns and make informed trading decisions.

The cryptocurrency market is unregulated, with few trustworthy data sources. This makes conducting research and obtaining information difficult. Following the market’s top and most experienced traders is the most dependable way to acquire information.

Ignoring Risks

You need to understand that automated trading systems are inherently risky. However, they might be worth the risk if you have a diversified portfolio and can afford to lose some capital. 

There are numerous risks linked with employing cryptocurrency bots—because the market is unregulated, the hazards of utilizing crypto bots are substantially more significant.

Furthermore, crypto trading bots use mathematical algorithms that are impossible to forecast. Crypto trading bots don’t allow you to use fundamental analysis or any other market research tools.

Do You Have An Understanding Of Algorithmic Issues?

It’s critical to understand how crypto bot functions and consider its design before selecting one.

If you’ve traded in the equity markets, you’ll understand that the software used to run algorithmic trading systems is complex. Algorithms used in crypto trading bots are even more complex and need to be programmed with extreme accuracy and precision.

Ineffective algorithms cause crypto trading bots to fail. The cryptocurrency exchange industry has yet to connect with established trading platforms like FIX, and the market is not as developed as the equity markets. It is challenging to construct a cryptocurrency bot that pulls data from many exchanges if you aren’t a programmer. 

To avoid algorithmic difficulties, use a ready-made algorithm. However, be cautious because scammers pose as crypto trading gurus, but all they want is for you to sign up for their platforms. To avoid falling into the trap, you should read review articles written by crypto traders or visit Scammerwatch.

Non-Trading Platforms Like Bitcoin Formula

Several non-trading platforms are just scams designed to steal your money. Many scammers operate in the crypto trading bot space, promising the moon but delivering nothing. 

How do you identify a fraudulent crypto bot? One telltale sign is that the scammers promise unrealistic returns and use language that cannot be verified. This happens with Bitcoin Formula and Immediate Profit crypto trading bot, a scammy companies that promise 10% returns every week for a period of six months. 

Another sign that a crypto bot is fake is that it doesn’t possess a functional website, which should contain all the necessary information about the services, including the price. If a crypto bot doesn’t have a website, it is a sure sign that it is fake and a crypto bot scam.

Incorrectly Calculating Stop Losses and Take Profit Limits

Crypto traders that utilize automated trading bots fail because of improperly calculated stop-loss and take-profit limits.

A stop-loss is a price at which you join the market to finish a deal in order to prevent a significant loss from accruing. If you use a cryptocurrency bot to execute trades automatically, you must manually establish your stop-loss level to ensure you do not lose too much money.

A take-profit level is a price at which you profitably quit a trade. When trading with a crypto bot machine, you can employ auto-take-profit levels. However, you must also manually set the price at which you want to profit.

Final Thoughts

The cryptocurrency market is thrilling to trade in. Investors should seek to automate their trading to get more out of it, given the market’s volatility and higher possible profits. However, not all automated systems, whether crypto bots or other automated trading methods, function.

If you intend to include a crypto bot in your trading strategy, you must ensure that the system is appropriately programmed. Crypto trading bots might fail due to erroneous stop-loss and take-profit limitations, algorithmic flaws, or non-trading platforms.

Author: Kong Lu

Certified blockchain and front-end developer.