In the field of finances, two main methods of portfolio management are widely recognized and include all techniques associated with overseeing capital. You can be a passive investor and an active investor. The former usually follows a strategy that many call “buy and forget” while latter focus on adjusting portfolio composition and participating in the market systematically.
The crypto ecosystem is quite large despite attracting less capital than conventional markets. Nevertheless, a cryptocurrency trading bot is something that both active and passive investors will greatly benefit from. Here are some reasons to employ fully automated trading systems regardless of your management preferences and risk style.
Conservative investors rely on the innate value of assets and their potential for growth. Many early adopters of Bitcoin who held onto their tokens through the last decade are enjoying massive returns higher than any S&P500 investor could hope for in their lifetime. Despite reaching unimaginable highs, Bitcoin still has a strong potential for appreciation.
Passive investors are buying Bitcoin while planning to hold tokens for indefinite amount of time. Such conservative investors are called “hodlers” among crypto enthusiasts. This approach is a legit investment strategy that assumes continuous price increases of mainstream coins.
Usually, passive investors acquire Bitcoin using the DCA approach. Distributed Cost Average is a time-tested method of reducing average asset prices by splitting a single large purchase into a series of smaller market positions. It is a good way of buying close to the bottom instead of trying to time the market which is often a doomed endeavor.
The DCA method can be easily automated using tools provided by automated trading platform WunderTrading. You can launch a DCA bot and adjust the settings to prevent it from liquidating positions. It will simply make purchases at opportune moments allowing you to gradually increase the size of your Bitcoin holdings.
Here are some advantages of automated DCA cryptocurrency trading:
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Lower overall costs of acquiring assets resulting in better returns in the long run.
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It is a safe asset acquisition method that can be easily controlled by an investor.
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DCA bots do not require any human oversight and can passively increase your portfolio size.
Automated trading techniques are commonly used by retail traders and institutionalized investors. According to market surveys, roughly 65% of all individual traders use bots to some extent. Over 99% of all trades made by institutional investors are assisted or fully conducted by automated trading systems. Note that many large institutions engage in market making and high-frequency trading meaning that the vast majority of their trades are short-term, small-scale operations.
It is important to pick the right automation for your portfolio if you plan to stay active in the market. Currently, the industry of automated cryptocurrency trading offers a wide range of interesting solutions. We won’t be covering custom automated trading systems as they are often uniquely tailored to work for specific portfolio compositions and risk styles. Instead, we will talk about some established products for automated trading.
Here are options to consider when actively managing a portfolio:
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GRID bots. The Grid system is quite simple. It uses the DCA approach to open market positions and accompanies each new acquisition with an individual liquidation order. With all delayed orders strategically placed, market positions form a grid on the price chart giving these bots their iconic name. Grid is an excellent strategy used by many active crypto trading bots for day trading since you can employ the method on shorter intervals.
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AI-assisted statistical arbitrage. Recently rolled out by WunderTrading, this innovative system is designed to autonomously buy and sell assets as it sees fit. The system adjusts the portfolio composition in real time and makes corrections to market positions depending on the current market situation. The expert AI system managing bots is created by a powerful machine learning algorithm trained on massive volumes of historical market data.
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Arbitrage bots. Creating intramarket arbitrage systems can be quite tricky, but you also can rely on the method called triangular arbitrage allowing retail traders to capitalize on price differences within a single spot market platform. Arbitrage is often considered a very safe way of actively participating in the market with risks often mitigated by quick execution and well-written scripts.
There are many other interesting automated trading systems that you may find interesting. However, it is important to choose something that works well with your portfolio composition. For example, statistical arbitrage or market making require you to have a sizeable capital. Only then, relatively small returns will feel significant.
Another important point to consider is the price of automation. While some think that it is possible to automate a portfolio using free crypto trading bots, the sheer volume of technical issues and hardware limitations that an ordinary retail trader will face by attempting to set up a free app will decimate any chances for success. Minimize expenses by selecting the right subscription plan and the scale of your operations.
Automated trading systems have become quite reliable and cheap over the last decade. It is possible to create a powerful portfolio management system on a tight budget. However, we strongly recommend experimenting with various bot types before completely removing human factor from the equation.
It is hard to avoid using automated trading systems since so many individual retail traders are implementing automation rapidly. By using tools such as Strategy Tester on TradingView and back-testing features at WunderTrading, you will be able to identify good bot settings and achieve better results.
Go to the WunderTrading website right now and start working with the most advanced trading automation instruments. You can start with a free plan that allows users to familiarize themselves with the interface, trading terminal, portfolio tracker, and many other features of the platform. It is a great destination for investors interested in automating their portfolios!