Crypto Margin Bot
Crypto trading is already complex, and when you do so with margin, the complexity increases even further. However, Margin Bot can help you in turning this complexity into simplicity.
Wait, you don’t know about the margin trading bot? Well, if you are a leverage trader, then knowledge of margin bots is a must. Being a leading education provider, Market Investopedia can help you in that.
In this blog, we will learn about margin trading bots, how to use them with pros and cons. It will help you in deciding whether to use them or not.
Introduction to Margin and Crypto Trading
Crypto trading is all about buying and selling digital currency with the aim of making a profit.
However, trading or investing in cryptocurrency requires significant capital, and not every trader has that. Thus, low-capital traders use the leverage facility.
Leverage is a kind of loan that a crypto trading platform provides traders to engage in trades, much more than their capital, and earn high profits. However, to get leverage and trade smoothly, a trader needs to maintain a margin amount in their account.
Confused?
Let’s understand crypto margin trading with an example.
Suppose a crypto trader has a capital of $100, and the broker platform offers a leverage of 1:100 on crypto trading.
Now with leverage trading, traders can open a trade worth $10,000. However, for doing so, the trader needs to maintain a margin of $100 in the account.
Failure to maintain the margin amount leads to a margin call, account blowing, and the open trade will close automatically.
A quick glance
Margin calls and bot liquidations are crashing crypto, and overleveraged traders create selling pressure in the market due to price drops.
Yes, trading bots can give you a significant profit, but only if used correctly.
The profitability of margin trading depends on the leverage ratio you are using.
Yes, margin trading is legal in the US, but it should be according to the guidelines of the US financial authorities.
What is Margin Bot?
Margin bot is a software or robot designed based on highly advanced algorithms to automate margin trading.
Basically, traders can identify trading opportunities, buy or sell cryptocurrencies using leverage and maintaining margin, and get key margin alerts.
Margin trading is complex; it can amplify both gains and losses. Thus, continuously watching the trades and adjusting them according to market conditions is a must.
And not every trader has time to stick with their trades. Hence, they can use the margin grid bots. These automated bots can do most of the tasks on behalf of traders with little supervision, based on predefined rules.
Crypto Margin Trading Bot Example:
Popular crypto margin grid bots include 3Commas, Pionex, Bitsgap, Cryptohopper, HaasOnline, TradeSanta, and Shrimpy. Traders can visit their respective websites and subscribe to these tools.
And if you are looking for a free margin bot, you can use Pionex. You can also go for 3Commas and Shrimpy’s free version, but they have limited features.
How to Use Crypto Margin Trading Bot
Want to use margin trading bots? Follow the step-by-step procedure to efficiently use the automated trading bots:
Get a basic understanding of the Market and Leverage:
The crypto market is vast and unpredictable; beginners may find trading hard, especially for new traders.
So the first thing you need to do is grasp an in-depth knowledge of the crypto markets, factors affecting crypto trading, with all essentials. Also, leverage is like a double-edged sword, and using it in a highly volatile crypto market is risky. Thus, practice leveraging trading on a demo account first before starting.
Select an ideal bot:
Numerous grid crypto margin trading bots are available; now you need to choose one according to your needs. Consider the bot cost, features, performance history, success rate, and your trading style for making an ideal choice.
Determine Leverage Ratio:
Traders can use different leverage ratios using the bot. So, here you need to determine what leverage ratio you will be using. In crypto trading, do not go for high leverage such as 1:100, nor use very conservative leverage such as 1:5. Trade with a decent leverage with a balanced approach.
Make Necessary Settings:
Trading bots are developed considering a large number of traders. However, to make it suitable according to individual requirements, you need to make changes.
Go to the margin bot setting, define your trading time frame, leverage ratio, maximum drawdown limit, risk per trade, and other crucial trade criteria.
Start Trading:
Once you have done the necessary changes, you can start placing trades using margin trading bots. Start with a demo trial and then begin with small real trades. Timely analyze the trade results and the tool’s working after placing some trades.
Pros
Automation: You don’t need to stick to the computer screen all day. The margin trading bot will analyze the market, identify trade opportunities, use leverage, and adjust your trades automatically.
Diverse options: Generally, margin bots are made considering the broader market aspects. So, with crypto, traders can even spread their money in other financial markets.
Boost Efficiency: Margin trading requires logical decision-making and rule-following. Human emotions become an obstacle to using leverage efficiently. However, bots work on predefined rules and logic, which ultimately boosts trading efficiency.
Margin call alerts: The biggest fear with leverage is significant losses and account blowing. However, automated bots not only provide margin call early alerts, but they also make trade adjustments accordingly, protecting your account.
Cons
Expensive: High success rate margin bots are quite expensive and can reduce your profit.
Performance Dependency: Two people using the same bot can achieve different results. And that is because the results depend on how effectively you have used and customized the trading bot.
Highly Volatile and Choppy Market Conditions: Margin trading bots may not work well during highly volatile and choppy market conditions. Also, they work based on predefined rules, so they are less flexible to current market conditions.
Tips for Choosing the Best Margin Bot
- Choose a bot applicable for diverse markets and strategies. Like a bot that you can use for trading in forex, stocks, and the indices market. Also, a bot that works well with both short-term and long-term strategies.
- Consider the trading cost. Bots are designed on advanced technologies, so it may cost a large amount. So when selecting, consider the cost. Also, it is better not to go with freebies as they have limited features.
- Analyze the features. A margin trading bot offers numerous features for risk management, backtesting, and smooth trade execution. So, check whether the features you are looking for are available or not.
- Do not purchase a margin bot directly; first, get a demo trial and subscribe only when you are satisfied with the demo trial.
Final Words
Leverage and margin trading involve significant risk with the possibility of making potential returns. Margin bot gives automation, accuracy, and speed.
The tool can reduce the overall risk associated with margin trading by making the necessary changes in trades. However, even using a trading bot is an art. So first learn it and then earn from it.
Also, to enhance your crypto market knowledge, visit our blog sections and read some exclusive blogs on crypto trading.