With cryptocurrency getting bigger and bigger, it makes sense that people would want to capitalize on the opportunities that come with its growth. Automated trading is one-way individuals have been leveraging technology to make money, allowing them to build profit around the clock.
Of course, for every reputable trading bot, there are a ton of fake ones designed to con gullible traders out of their hard-earned cash. So how can you tell if a trading bot is real or not? Below, we’re going to take a closer look at automated trading bots and how you can figure out whether you’re dealing with a legitimate platform.
What is a crypto trading bot?
If you weren’t already aware – crypto trading bots are platforms built with the purpose of making trading decisions automatically, without human interaction. Most crypto trading bots follow all of the same rules – buy low, sell high. Others are more complicated, with certain bots created for arbitrage purposes; some have even more complex functions than this.
Trading bots can be used with any kind of exchange, but they’re most often used on popular ones such as Binance, Bitfinex, Bittrex, etc. You can also find trading bots on commonly used popular chat platforms, including Telegram or Discord.
Crypto trading bots have become popular due to the increased success of crypto traders across the internet. The advent of this technology has shown that the trading signals on these platforms are able to display high accuracy rates for predicting the price movement of cryptos. It is also easy to emulate successful trading behavior by simply having a trading bot follow all of the market moves made by top influencers.
The allure of trading bots means that scams have become prevalent, too. Fake trading bots are now spreading faster than ever before and they’re easy to become a victim of since the people behind them look legit. That is, until you buy said ‘software’ and can’t get a response from support after you’ve done so.
The rise of fake crypto trading bots
The main problem with trading bots is that there is a huge abundance of them in the crypto world. It’s easy for just about anyone to pretend they have created a trading bot when in reality they’ve just taken an existing open-source bot and modified it slightly, released it as their own product, and then tried to make money off of naive traders. If you don’t know what to look for, it’s extremely hard to tell the difference between what is real and what is fake.
Three big perils of fake trading bots
You’ll lose money – not just once, but each time you trade. It can be easy to lose your money entirely, with nothing to show for your efforts. Becoming a victim of fake trading bots can destroy your finances, and in the worst cases, lead to depression.
You won’t learn how to trade, or build your own bot – this is very important. Having a legitimate bot can help you to not only secure good trades but learn about the art of trading itself. Building your own bot also teaches you how the nuances of trading bots work, even if it doesn’t do everything you want it to.
The cryptocurrency community suffers – this is not good for the future of crypto. The knock-on effect of this in the crypto community can mean people develop a distrust of the crypto world as a whole, as the prospect of being scammed makes them feel unsafe and fearful about trading or investing in cryptocurrencies.
How to identify a scam bot
With all of these bitcoin scams on the internet, what should you look for when choosing a trading bot? We’ve listed a few things below to help you identify a scam quickly and easily:
Don’t be fooled by websites with unrealistic promises
Many fake trading bots use their website to make big promises, such as doubling your money or making you rich in a short space of time. They will even provide some calculated statistics on the profits they ‘made’ for their clients (usually just pulled out of thin air).
Fake trading bots lack a real support team
Many of the fake trading platforms will provide a phone number and/or email address, but when contacted, you will receive a message that they are ‘out to lunch or on ‘holiday.’ Sometimes their support team does not even reply to emails at all – often because there is no support team!
Real trading bots are open source
All of the best cryptocurrency trading bots are open source, so anyone can verify that they work as advertised. Use this to your advantage and find the creator of the trading bot on social media. You can also take a look at their GitHub account to see how often they update the bot.
Real crypto trading bots provide live data
You should always check if a trading bot provides live data. If not, it’s pretty much moot, as your trades will be based on irrelevant information. It doesn’t matter how great a bot’s backtesting results are – with old information, chances are high that any strategies aren’t going to work. So make sure to look out for real-time pricing data, good graphs, and anything else that can give you insight into what is happening currently with your money.
Real crypto trading bots will have terms and conditions
Many fake trading bots don’t even bother to provide terms and conditions. It should go without saying, but make sure to always read the fine print of any crypto trading bot before you invest your money. If they claim no responsibility for your financial losses, you can bet that something is up!
Trustworthy developers are active in the community
You can check if a developer is trustworthy by simply taking a look at their online activity. A well-known developer will be willing to help you with any issues you might have and will carry themselves with integrity online, too.
3 Good examples of trading bots
It’s not all doom and gloom though. Among the scams and dishonest developers, there are in fact some great trading bots that can help you fulfill your trading goals. We’ve picked out three of our favorites which we think you should give a try:
Trality’s powerful API means that Python-savvy traders can develop trading bots using a code they’re familiar with. Bots can be coded in-browser, plus integrated backtesting features make Trality a powerful tool in an experienced trader’s arsenal. This newer platform also includes detailed documentation on how everything works, so users are able to make heads of complex bot building in no time at all.
With Shrimpy, you can expect portfolio rebalancing and performance monitoring across exchanges. There is also a social feature available to users, allowing individuals to copy winning strategies from top traders. Get good enough at trading yourself, and you may find yourself on the platform’s leaderboard, with the opportunity to develop additional income. This community aspect alongside a long-term view has made Shrimpy one of the premier automatic trading platforms.
TradeSanta is an online crypto trading bot that can automate your trading strategy. The platform’s distinctive feature is an easy yet powerful user interface, which is great for anyone who has ever tried to use trading bots before. TradeSanta’s advanced capabilities will also delight professional traders.
3Commas is the perfect choice for crypto traders looking to take their game up a notch. With plenty of sophisticated options available in an affordable package, 3Commas suits traders looking to try out new tactics. Interested in options trading? 3Commas interface is a visual delight, making it easy to understand new strategies with ease. Their blog is also a handy resource, coming full of insights and analytics.
Choosing the right trading bot
It’s important to stay wary of fake crypto trading bots. If you’re looking to invest in cryptocurrency, then you should be wary of diving right into the unknown without doing your due diligence first. With so many scams out there waiting for unsuspecting victims, keeping the above tips in mind can help you to avoid being scammed and start investing safely.
By being careful when choosing a trading bot, you can avoid scams and make sure you are using a bot that will both suit your investment goals and help you to turn a profit.
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