Crypto trading bots have become an increasingly popular tool for experienced bitcoin traders. Trading bots enable users to execute trading strategies in a fully-automated fashion, which takes emotions and market timing attempts entirely out of the equation. As a result, seasoned traders often prefer bots over manual trading.
In this guide, you will learn how you can build your own crypto trading bot so that you can execute exactly the type of trading strategies that you want to deploy.
Building a Crypto Trading Bot
Choose an Open-Source Trading Bot
Coding a trading bot from the ground up is very time-intensive and may require you to bring additional developers onboard. Hence, it is advisable to use the code of an open-source trading bot as a starting point.
There are several open-source bitcoin trading bots from which you can choose, including Gekko and ZenBot, two of the most popular bitcoin bots in the market.
Once you have downloaded the trading bot software of your choice, decide on the features you want, the exchange execution access you will need, and what trading strategies you want to be able to execute. A lot of these properties will already be available through the open-source bot you have downloaded but, to add features, you will have to do your own coding.
Choose a Programming Language
Javascript, C, Perl, and Python are the most commonly used programming languages for the development of bitcoin trading bots. You will need to choose which language works best for you and your programming skills.
Having said that, if you choose to work with an already existing open-source bot software, you would be advised to use the language with which it is written to continue development. Otherwise, you would have to re-write the entire software in a different language.
Choose Your APIs
You will need price APIs and live execution APIs from a number of digital asset exchanges. APIs can be accessed for free from the world’s leading exchanges, such as Coinbase, Kraken, and Poloniex.
Setup Exchange Accounts
The next step will be to set up accounts on all exchanges on which you want your bot to execute trades. Registering a new trading account should not be much of an issue but can take up to several weeks during bull market times if you are looking to get fully verified on trading platforms. Therefore, it is best to get set up while you are still developing your bot so that you are not faced with a delay in trading once you launch the bot.
Choose a Trading Strategy
The main reason for building your own crypto trading bot is to be able to execute a trading strategy that is not being provided by other bots. The choice of trading strategy or strategies is, therefore, a vital part of the bot development process.
Choose an Architecture
Equally important as the trading strategy is the bot’s architecture. Choosing the right algorithms that will determine the bot’s behavior is crucial. Moreover, the mathematical models on which the algorithms are based must be solid. Otherwise, you will run in all sorts of issues relating to functionality, usability, and security.
Build the Bot
The actual development of the bot, i.e. writing the code, is what will take most of your time. To speed up the process, it would be advisable to hire a team of developers. Also, developers can help you to audit your code for bugs that could lead to security flaws.
Test the Bot
Before you can go live with your trading bot, you will need to test it. Testing will involve using the bot on historical data to see how the strategy it deploys would have performed in the past. This process is also known as backtesting.
Go Live
Finally, you go live with the bot and try it out “in the wild” to find out how well it performs. At this stage, you will see whether your hard work has paid off or whether you will need to go back to the drawing board.
Once you start to see results in the form of trading profits, it would still be advisable not the dump all your hard-earned digital assets into the bot to trade for you.
Starting off with a lower amount of funds is advisable and increasing it incrementally as the bot performs over time would be a good risk management strategy for bot trading.
How Long Does it Take to Build a Crypto Trading Bot?
There is no fixed timeline for how long it will take to develop a fully-functional, bug-free trading bot with all the bells and whistles you want.
Simple trading bots, such as an arbitrage bot that only trades on two exchanges, for example, could take as little as a couple of weeks to build.
Software developer Carlo Revelli detailed in a Medium post how he built an arbitrage bot that trades unidirectional between Etherdelta and Bittrex, and focused on ETH digital currency pairs. It only took him 400 lines of code and two weeks to develop the bot, get it up-and-running, and start generating a trading profit.
More complex trading bots that enable users to deploy a number of different technical analysis-based bitcoin trading strategies will take months to develop and can potentially take years to fine-tune. It is, therefore, impossible to say how long you would be working on your trading bot, should you decide to develop your own.
Should You “BUIDL” or Buy a Crypto Trading Bot?
Currently, there are over a dozen crypto trading bots available in the market. Some are free and open-source, while others can be purchased for a one-off fee or on a subscription basis. Unless you are looking to deploy very specific trading strategies, you will probably be better off acquiring an “off-the-shelf” trading bot than developing your own.
The time involved in developing a bot and the cost involved in hiring developers to build one may be better spent on trading using an existing trading bot on offer, especially since you will not know for sure whether your bot will really work.
However, if you are an experienced developer and have a particular trading strategy in mind to which existing bots do not cater, you may be onto something. A crypto trading bot that can generate a regular profit in an automated fashion can be an excellent tool to generate digital asset investment returns over a long period of time.
Related Articles:
- What Are Cryptocurrency Trading Bots and Should You Use Them?
- Best Bitcoin Trading Bots, Rated and Reviewed 2019
- How to Use a Bitcoin Trading Bot for Swing Trading
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