Trading bots are a way to make profits from trading without needing to invest so much time in making operations one after another. So for those who want something more automated it is an excellent option, especially because they can help us get profitability from very fast market movements that otherwise would be impossible to take advantage of.
What types of trading bots can we find?
In KuCoin which is the exchange most focused on trading bots at this moment we can find a quite wide variety, from bots that simply help us make recurring purchases to some focused on simply giving us profits in a very specific range, the available are the following:
- Spot Grid
- Futures Grid
- Spot Martingale
- Smart Rebalance
- Infinity Grid
- DCA
As you can see there are many and each one works differently, both to start working from scratch and to use them in the long term. It is important to keep in mind that they also have their degree of risk, they are not exempt from having losses just for being bots, since if the one we choose goes the market against us we will not get much benefits.
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Bots for short-term strategies
Spot grid bot
Trading bots are a bot that is in charge of buying at specific price ranges, generating a mesh where buy at a lower price and sell at a higher price, making them especially efficient when the market remains lateral, because they have a limit price both in the upper and lower part of the mesh.
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Risks of the spot grid bot
We must keep in mind the following risks:
- In bullish or bearish markets a large amount of capital can be lost.
- If it goes out of the mesh, the price stops making money and may even be lost.
- If the market is bearish it will only help us buy on average, it will not generate income.
Futures grid bot
This futures bot has the advantage that it generates income whether the market is bearish or bullish. The problem it has in counterpart is that it is a futures bot so if the market goes against us in any of the bot's operations we will have losses due to liquidation.
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Risks of the futures grid bot
We must keep in mind the following risks:
- We can be liquidated if the market goes against us and lose all the capital that was given to the bot.
- The limits of the range for the bot indicate liquidation zones.
Spot martingale
The spot martingale uses a form of arch to generate purchases every time at lower prices, the idea of the bot is that the price falls and then rises to sell where the average of the purchases made by the bot is positive giving a profit. Its problem is when the price does not rise again and we get trapped in purchases at very high prices.
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Risks of the Spot martingale
We must keep in mind the following risks:
- If the price does not rise again to an average of where we made the purchases, we will have losses until we manage to exceed the purchase average.
- It does not work for very volatile markets that we cannot predict even a little.
Bots for long-term strategies
Smart rebalance
The smart rebalance is a bot particularly focused on the long term, the idea is to maintain a "Balance" between different assets sold those that rise in price and become unbalanced and with this money buying those that fall in price and lose value to keep an equilibrium in the portfolio.
This strategy is of long-term since we will not see many changes in the first days and to save commissions it is better that the rebalancing periods are long to avoid losing much value with commissions.
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Risks of the smart rebalance
The main risk is that one of the assets we place in our portfolio loses all its value and when we rebalance we buy with our surplus an asset that never revalues so it is best to keep it in cryptocurrencies that are large and known, so that they do not lose all their value overnight.
Infinity grid
This bot is a very useful strategy for bullish markets, it specializes in them because it has a lower price limit that we must always keep in mind, because this price will go up as the bot manages to make operations. The lower price indicates where the bot will run out of funds to make more purchases, so we can determine it as a limit price so that the operations are closed.
It is especially useful in bullish markets because upwards it has no limit it will simply continue operating infinitely while the market continues to rise in price, making us earn money little by little.
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Risks of the Infinity grid bot
The risks in this bot are simple,if the market is bearish it will only make us lose money,if the market is bullish as long as it remains bullish it is one of the best strategies, but as soon as it starts to fall it can close our operations without even letting us blink.
DCA
The simplest strategy of all, recurring purchases at intervals that we indicate, this strategy helps us to have a much better average price than simply making a purchase, making purchases over a long period of small portions until we manage to fill the price that we are going to spend on these purchases.
This long-term strategy usually always comes out winning, but it all depends on how long we are buying and if the market rises above our purchase average, this average moves with each purchase made by the bot.
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Are KuCoin trading bots safe?
KuCoin bots are safe to use since they will maintain the strategies that we place without ever resting until their operation is finished. But it is important to keep in mind that even though they are safe, they will not always make us win money, it is very likely that if our strategy is not correct for the moment of the market we will lose money.
Money we will lose not because of the bot but directly because the strategy we choose to use is not the best. Keep in mind that if the price of the cryptocurrency falls, all bots have a lower limit that will close operations if we indicate it.
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