So let me preface this article by saying this is not intended to be financial advice and that I am not a financial advisor. You should always do your own research to decide what the best investments are for you. These are only my own personal thoughts and opinions.
Now one of the reasons that I was even interested in bots in the first place is because I've annoyed with trading myself--buying low and selling high--with certain cryptocurrencies that I found consistently fluctuating between different prices. Using regular limit orders, I would just put a new order in after I'd sell off or buy in. But I am certainly no day trader, so I started looking for different ways to make this process easier and more efficient. Thus, trading bots.
Trading Bots, what the hell are they and how do they work?
Trading bots are essentially an automated way of doing a crap-ton of trades really quickly. Now when I mean a crap-ton of trades, I'm talking about up to a 100 different buy and sell orders running constantly, trying to capitalize market fluctuations of a particular asset. Before really doing my homework on trading bots, I conceptualized them completely differently. I had just assumed that I was going to put money into a trading bot and then it was going to continue to buy low and then sell high...hopefully a lot of different times. Well...they do sort of do that, but on a much more hyperbolic scale.
On KuCoin, they'll take your initial principle, let's say 100USDT and then immediately buy into a portion of your selected Cryptocurrency(ies) and then tabulate whatever your designated number of allowed orders is. Or in other words, let's say I'm doing a trading bot for USDT/BTC, half of my USDT will buy into BTC, the other half being left for future buy orders when BTC fluctuates. There's a total of 5 different bots to choose from, all with a different type of investing strategy:
Although they do have small transaction fees (~0.08% I believe), One of the best things about the bots is that they're completely free to use. From what I saw, trading bots on different platforms usually have fees, but KuCoin's are free for anyone to try out.
The Volatility Killer
Now I'm not going to go into all of the different bot options that Kucoin has, and instead only the Spot Grid (aka the "Volatility Killer"). This is simply because 1) It's perhaps the simplest one to use, and 2) Because all the settings are automated. You of course can customize your own settings but being a newbie myself with this, the simpler the better. The investment strategy for the Spot Grid bot was the easiest for me to understand--buy low, sell high.
I did do some brief reading on the other investment strategies, and none of the other options were really that attractive because I really was only looking to try this short term. If I wanted to do this long term, I don't think it'd make that much sense to do a bot, because I'd really would just want to hold on to my asset and wait for it to appreciate. And in fact, this was a common theme of what I read in a lot of different reddit posts and comments--the gains that people made from the trading bot were comparable or sometimes even worse than what they would have earned if they just held on to or staked the cryptocurrency to begin with. In other words, let's say if I bought 100 dollars worth of dogecoin in the trading bot and gained 10% in profit. Well that's all fine and dandy, but the actual value of dogecoin may have gone up 20% in that same time frame!
This leads me to my next point: I found it better to invest in something relatively stable, rather than something that's volatile. This might make absolutely no sense because of the whole "volatility killer" theme, but it's true. You are essentially hoping that something goes up and down around the same price, but not necessarily something that keeps trending up or something that keeps trending down. This is fundamentally a different way of thinking when it comes to cryptocurrency prices, because generally (as I think most people do), you want the prices to continue to keep going up, up, and up. The more time the price goes up and down, the more opportunity for arbitrage (buy low sell high).
Copying trades
So apparently eToro wasn't the only ones to think of this, but the trading bots allow you to copy the same trades/parameters as someone else. Therefore if you see someone that's making insane returns you can essentially just copy the both that they do and hope to reap in the same return. And some of these people are getting some pretty good returns, even if it's in APR and not APY:
I actually saw the APR rates as being a bit disingenuous because they really don't show a realistic picture of how an investment does in the bigger picture. Just because a token goes up today by 20%, that doesn't mean it's going to go up 20% over the course of the year. Or in other words, if I started with $1 and then in an hour I had $1.20, this would give me an APR of 7,305.02%. That number looks fantastic and all, but does that mean I should go and copy someone's bot after those gains have already been made? Maybe not. These APR figures are essentially just snapshots, and I'd steer away from looking at those numbers as long-term sustainable figures.
So How'd I make out?
Well I did an initial investment of 400USDT/PRE, and gained a total profit of 10.714 USDT, or in other words a gain of about 2.7%, this is all over the course of about 5 hours. Now you might think this is awesome, but honestly its really not, because during this same 5-hour period, had I simply bought and held 400USDT's worth of PRE, I would would have gained 5%, for this was the amount that the token appreciated in value. So would I do this again? Maybe, and only because it was actually kind of fun to do. Like I said before, normally when I'm thinking about the market, I'm constantly thinking about it going up so that I can realize more gains. With bot trading, it actually made it more exciting for me to watch the price go up AND down.
Has anyone else had any experiences with trading bots? Perhaps other bots than the ones on KuCoin? And also, if you're not a member of KuCoin yet, feel free to use my referral link: https://www.kucoin.com/ucenter/signup?rcode=r3GKBZX
