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What is Auto Trading – How Does it Work, Advantages and Disadvantages

One of the biggest advantages of cryptocurrencies is the fact that they are always on. The cryptocurrency market literally never sleeps, as the coins and tokens are being traded 24/7, all day and everyday. There are no vacations, weekends or holidays.

This means that cryptocurrency markets can also bring countless trading opportunities. However, as everybody definitely knows, it is impossible to be trading all day every day. Humans are just not built that way. But crypto auto trading bots are.

What is an auto trading bot?

Let’s start with an introduction of what a bot is. Simply put, a bot is an automated programme that usually is designed to do a specific task. In most cases, the job or the task of the bot is related to activity on the internet and the main goal is to be more effective, whether time-wise or energy-wise as humans.

Automated cryptocurrency trading bot is thus only a piece of software that has one main task to do. Trade. Obviously, there are also other tasks connected to it such as execution of the trade, risk assessment or portfolio rebalancing in some cases, however, the main goal of the auto trading bot is to be trading the account of the owner 24/7.

Cryptocurrency markets are not only open all day, every day, but they are also very volatile compared to other asset classes. That means that in general, trading of cryptocurrencies can bring vast numbers of opportunities that the traders can capitalise on. But since no one is able to trade 24/7, the bots are put in charge of doing this.

Depending on the trader or programmer who is setting up the bot, the goal of the auto trading crypto bot could be to buy into undervalued cryptocurrencies based on some criteria, enter and close trades quickly in a high-frequency trading (HFT) style, or buying and holding for longer time periods. Those are just a few examples of how the bots can behave solely depending on how they are programmed and set.

How do crypto auto trading bots work?

Most crypto trading bots are simply connected to a trading account via API keys (Application Program Interface). Thanks to that, the bot can be trading your trading account on an exchange without your interference in the process, since the bots are communicating directly with the exchange about the trading orders.

However, before connecting any auto trading crypto bot to an exchange, one must ensure that the bot is developed and programmed in the correct way, and that it does what it is supposed to do. When broken down, bots are supposed to work in four different stages:

  • Data analysis – data is the new king and the most expensive commodities these days and that applies to trading as well. Bots are able to not only generate, but also gather around and analyse huge amounts of data and cluster or allocate them accordingly much faster, smarter and better than any human being.
  • Signal generation – once the data is analysed, the bots can start “snooping” around. In this step, the bot is simply trying to find the trades based on the preset conditions and rules. This is the part which is the most similar to actual trading analysis that the human traders do on a daily basis. In this stage, the auto trading bot can for instance use some technical indicators to look for trading signals.
  • Risk allocation – once the trading bot has found the trades that are potentially executable, the next step is to make sure that the allocation to the trade is right. How much of the overall portfolio or trading account actually goes to the trade depends mostly on the riskiness of the trade as well as the overall risk appetite of the owner of the account. Risk appetite is in most cases clearly stated in the criteria for the trading of the given auto trading bot.
  • Execution – last step, but extremely important, is the execution of the trade. At this stage, the robot actually generates the signals and trading orders, communicates them with the exchange over the API and finally executes them.

Advantages of auto trading bots

Using an auto trading bot has several advantages that, especially in the cryptocurrency world, are more exaggerated and visible than in any other sector. Here are just some of them:

Trading without emotions

One of the main advantages of letting the bots trade your Bitcoin or crypto accounts for you is the absence of emotional mistakes. Anyone who has tried trading knows that psychology plays one of the key roles in the decision making of the traders. No matter how hard they try to make sure that their trades are as rational as possible, seeing your portfolio or trade losing money can affect your decisions.

However, when using Bitcoin auto bot trading, the emotions are absent. The bots only decide based on the rules you have given them which means that they will never act based on how much the open position has gained or lost, or how many successful trades it has already done today. The absence of emotions is one of the major upgrades of auto trading bots over humans.

Trading 24/7

Another major upgrade is the fact that the bots can be trading all day. While humans need to eat, sleep, rest or live their lives as such, the bots are constantly up and running, looking for trades. That means that they can generate and analyse many more trading opportunities and trade more positions than any human being possibly can.

Saving time

Using a Bitcoin auto trading bot has another clear benefit – it saves time. While the programmers or account holders of the auto trading bots should occasionally check whether the bots are doing what they are supposed to, in general, bigger involvement is not necessary once all the conditions are preset.

Other than that, the bots are able to operate completely by themselves, which means that the account holders are free to do whatever they want and do not have to monitor the markets all the time. And if their bot is set up in the right way, it can generate a relatively nice passive income for them.  

Speed and execution

Another huge positive for using bots is their trading speed. Auto trading bots are programs or pieces of software that are capable of executing and trading much faster than any human being. While human beings would need to execute and enter any trading order manually, the bots can do it automatically.

This has two significant advantages. The first one is that it is highly likely that the trading bot will enter the trade at a better price. The second is the fact that bot has the ability to enter multiple trades at once, which is something that would take much more time if executed manually by any trader.  

Disadvantages of auto trading bots

Obviously, not everything is all peachy when it comes to trading using auto trading bots. There are some clear disadvantages or negatives that this strategy can lead to.


First and foremost, using an auto trading bot means that the account holder needs to have his/her capital on the exchange or the trading platforms. These are often subject to hacks and other security threats that can lead to loss of capital.

Thus, only a capital that is being traded actively should be kept on an exchange. Everything else should be safely stored in preferably hardware wallet, where the keys are in possession of the owners.

Difficulty or technical advancement

The second drawback of this form of trading could be its difficulty. While it seems now that there are platforms that want to ease the entry into Bitcoin auto bot trading, most of them are still very complicated or technical.

The users of these platforms often need to study the given parameters and indicators. That can get more complicated and can sometimes lead to over-complication of the trading strategy of the bot, leading to unsuccessful trading strategy.

Trust and fake promises

Since most of the users of these platforms will not be the ones developing them, they need to trust the programmers who are creating these softwares. This brings one more layer of trust that is needed, which is something that is not very popular in the crypto world.

It is however important to know that many of these programs and bot strategies will be mostly making money from selling the product and service. That means that oftentimes they can lead to unrealistic promises.

Do auto trading bots actually work?

No matter the disadvantages, the cryptocurrency trading bots can definitely enjoy rising popularity even in the bear markets. The financial markets as such are very fond of this softwares. And so is the cryptocurrency industry, because auto trading bots simply offer way more advantages than disadvantages.

The effectiveness, however, of each of the trading bots depends mostly on the strategy and settings that the owner of the account sets in. Therefore, it needs to be tested, backtested and analysed, but if the account holder does well in setting out the rules for the Bitcoin auto trading bot, there is a high probability that in the long run, the bot should lead to some profits.


Auto trading bots are popular in the cryptocurrency world for a reason. In a world that never sleeps, people try to take advantage of software that never sleeps as well. Crypto trading bots are probably the best way to do so, which is why BingX also offers these services.


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