In this article let’s discuss how to automate cryptocurrency trading. We’ll provide examples of Python code and some tips that you can make during the process. It is a useful copy for people who are interested in crypto trading, startups, and businesses who want to automate some routine processes.

 

We’ll describe a bot that collects statistics from the exchange, provides analytics, and gives recommendations, for example, at what point and time which token should be bought/sold. But remember, the trading processes and decisions are still in your hands.

 

Contents:

Cryptocurrency Trading Bot: What Is It & Why Is It Popular?

Strategies & Algorithms

Arbitrage

Trends following method

Market making

Going into the algorithm's details

Steps to Take Into Account When Building a Bot: Part 1

Python Bot Implementation: Part 2

Setting up environment

Adding Portfolio/Index Indicators

Collection of Real-time & Historic Data

Getting a Track of Profit/Loss

Final Takeaway

 

Cryptocurrency Trading Bot: What Is It & Why Is It Popular?

According to statistics, the crypto-development market is extremely profitable today. Last year was a positive year for the crypto market as a whole, with a recorded growth of $1.6 billion in 2021 to an expected $2.2 billion by 2026 with a 7.1% compound annual growth rate. Talking about the market growth, we need to mention the increased demand for automated solutions, and one of them is crypto-trading bots.

A crypto bot is an advanced and automated trading software that aims at extending a seamless trading experience to traders across the globe. Such a bot helps users automatically push the buy/sell buttons to trade. You can apply trading bots via open-source platforms or build them by yourself.

 

Strategies & Algorithms

A bot can trade according to technical indicators, momentum, and basic principles. You can also create a much more advanced trading algorithm that can help you execute orders more efficiently. Here are the top crypto trading strategies to consider.

 

Arbitrage

Arbitrage is the buying and selling of an asset to profit from the difference in the price of an asset between the markets. You can get the advantage of the difference in the price of the same asset across different exchanges. People buy digital assets from one market and then sell them in another, making a profit in the process.

 

Trends following method

The goal of the strategy is to identify the trend of the asset and execute trades based on its hype. You can make a profit by analyzing the momentum of an asset in a given direction. People wait when the cryptocurrency value increases (in a long position), then traders sell it when the trend reverses.

 

 

Market making

The strategy offers to continually buy and sell different digital coins to capture the difference between the buy and sell price. To do this, the trader has to place limited orders on both sides of the order book to profit from the spread. The strategy has disadvantages, concerning low liquidity conditions or during high market competition.

 

Going into the algorithm's details

Let’s start with the crypto exchange options. You can make either intuitive or rational decision-making when choosing one of the current leading solutions like Kraken, Binance, Huobi, Poloniex, Bitfinex, etc.

 

We have no arguments on which one will work better, but you can easily choose any exchange from the popular ones as all the principles of trading are the same. The differences could be in the interface, API, price, identity verification procedures.

 

Note: identity verification procedure should be taken seriously. The procedure is simple, but it may require from you an identity document, webcam, or a front camera to prove your identity, some basic information, and bio. We highly recommend doing this, otherwise, you can face limitations during withdrawal. The next step after registration and verification of an account would be a deposit of money: you can use a bank card, buy virtual assets for real money. 

 

You can start trading and learn the basic mechanism with Finage. The world of cryptocurrencies is volatile. Often transactions are carried out with significantly higher profits and every day. Once you see how you can earn money, see how extremely useful a bot is for collecting statistics, analyzing and recommending buying/selling time, you can move on to the part where we discuss how to automate the process.

 

The improved automated bot that you can create by yourself (opposite to the same Binance) will help you easily track price drops, engage in monitoring assets during the day, so you and your users will not miss good moments of trading. You can write a code that can check the exchange rates for the selected tokens every minute and collect statistics of price fluctuations for the last hour.

 

Steps to Take Into Account When Building a Bot: Part 1

When creating a bot, you have to solve some standard tasks. You can make a sort of a checklist to see what tasks you have to cope with:

• For example, you have to choose the programming language. Usually, the top two languages for creating a crypto bot are Python and Java.
• Further, you need to choose the exchange platform, create a profile to access their API.
• After, you need to parse and implement the arbitrage situation search algorithm from the API of the cryptocurrency exchange. You have to implement an architecture in which one thread parses the API and creates separate threads that look for arbitrage situations for different currencies.
• You need to implement a strategy and choose whether it would be arbitrage, trend, or market following.
• Based on the above steps, you can build, test and deploy your bot.

 

Let’s look at the bot implementation by using the Python programming language.

 

Python Bot Implementation: Part 2

Start with the preparation: set up API by using a ready-made library and documentation from the exchange platform, for example, Finage allows you to get a ticker from the exchange.

 

Let's move on to the algorithm itself. Initially, you can load a list of currency pairs which the bot will monitor using the coin pairs function. Since the API only provides pairs in one format, you need to form asset values ​​relative to other assets. You can create an associative array of pairs, which contains another associative array by using a dictionary. As a result, you can get information about the pair simply by calling the dictionary.

 

Setting up environment

By using Python, you have to set up the development environment. First of all, you need to use:

1. PyCharm: it is an integrated environment that is applied to develop programs and build software in Python.
2. All Libraries & Dependencies: these collections will assist you to do lots of actions without writing loads of code. Installing all the dependencies at PyPI manually may take some time, you can create a script to help you out. Here is a quick guide to help you out: https://www.youtube.com/watch?v=4fRhNd22io0
3. Python Exchange Library (you can find it on Github) to get the source code and install it.

 

Adding Portfolio/Index Indicators

You have to add portfolio functionality to your bot. You can get a ready-made Python project with great functions:

• Make portfolio functionality of cryptos with deposits/withdrawals/buy/sell-denominated in the smallest unit of the cryptocurrency (Daily/Weekly/Monthly P&L reports).
• Make ‘play money’ portfolios, meaning you implement advanced portfolio tasks such as indexing crypto profiles (Hodl bot).
• Save all data to .csv which will be easier to edit in Google Excel Doc.
• Get Matplotlib & Pandas Data Structure for Data Visualization, including Data Analysis.

 

Collection of Real-time & Historic Data

You need to know how to get and use real-time and historical data. You can use services and widgets to get data. You can get different widgets:

• Ticker: Widget is used for your website's top or bottom navigation bar. It is a horizontal bar with symbols, last prices, daily changes, and daily percentage changes.
• Tape Ticker: it’s a stock market classic widget that simply displays symbols (prices, daily changes, and daily changes of percentages ) with a sliding cursor that stops when your cursor stops in a position it will stop too. Simple, fancy, and useful.
• Single Ticker: it's a simple one-symbol-sized ticker.
• Converter: this widget works best on the right or left sidebar of your website with a fast, useful currency converter with the latest updates and unit prices.
• Mini Converter: it’s also a simple and beautiful converter best for mobile websites.
• Historical Chart: you can view the historical data details for a single symbol with the Historical Chart Widget.

 

Getting a Track of Profit/Loss

You have to apply code that could be found on Github as ‘Portfolio Tracker’ and a great project as ‘Cryptrack by Herschel’’. It should be modified for tracking crypto portfolios. By using them, you can pull from Coinmarketcap so you may know the hourly, daily, and weekly profit. You can use a more detailed guide, by checking the following link: https://www.youtube.com/watch?v=RMpzRAQ-mPI

 

Final Takeaway

The bot is extremely useful for collecting statistics, analyzing, and recommending good times for buying and selling. You can experiment on relatively small amounts after you finish the bot, especially if it is a new area and you are afraid of some pitfalls.

 

It is important to understand that cryptocurrencies are a high-risk (even very profitable) investment area. So sooner or later, the rapid growth of the market could end, so the main thing is to have time to enter or get something more reliable in time.

 

You can build a Crypto Trading Bot with Real-Time Cryptocurrency Data. Get a free API key.

Build with us today!

Start Free Trial