If you have little expertise in crypto trading, you can either use bots or try a copy trading strategy. From this article, you’ll learn the pros and cons of both variants.
Copy trading and trading bots are equally popular among novice crypto traders. Thanks to both variants, you can earn money with minimum skills and effort. All you need is a certain amount of crypto and a trustworthy bot or platform. From this article, you’ll get to know the pros and cons of both alternatives and will be able to decide which one suits you best.
How Do Crypto Copy Trading Platforms Function?
You create an account on a crypto copy trading platform. You choose the assets and strategy that you would like to copy or a trader who you want to follow. The platform will provide you with exhaustive information on each trader and his strategy. You will get to know the following details.
- How long they have been in this business
- Which profit they have made by trading
- How many signals per day do they use
- What trading strategy risk level is
- What their overall rating is
- And so on
You automatically copy all the activities that your trader of choice carries out on an exchange. Every trader wants to maximize their profits. They will go to great lengths to boost their income — and yours as well. To control your risk you’ll be able to stop copying at any moment.
Alternatively, you might buy a subscription to copy from a third-party trader who is not linked to any particular platform. No matter whether you follow a trader or join a platform to trade on your own, you’ll be able to combine these actions. You’ll be able to buy and sell coins on your own as a trader or copy strategies as an investor.
Educational Opportunities at Copy Trading Platforms
Such platforms normally don’t offer courses for novice traders. Their knowledge databases typically contain only the information that explains the functionality of the platform. However, there are platforms that have blogs to teach their users or drive new audiences. In spite of the lack of narrow technical information, many users become trading experts without any theoretical courses because they learn from everyday practice.
Most social trading platforms share valuable information with their users at no cost. They can send you notifications about price fluctuations of the assets that you’re interested in. You’ll be able to check graphs and detect deals with the maximum spread. You’ll gain expertise and will prepare yourself for independent trading. This will be a very pragmatic approach to education.
What Are Trading Bots?
Bots are tools for automated trading. You buy a bot and transfer a certain sum of coins to it. You fine-tune the bot then it begins to buy and sell the asset on the exchange, just like a human but 24/7. Your bot will act according to a certain strategy and rules that you’ll be able to set up in advance.
These are the most popular varieties of trading bots.
- Arbitrage bots. They analyze prices across exchanges and take advantage of variations. They will buy an asset at an exchange where it is cheap and sell at another exchange, where buyers are ready to pay a high price for it. Exchanges tend to update their prices too slowly — while bots act quicker and make a profit for their owners.
- Bots that use historical price data to test out trading strategies. They try to predict fluctuations of prices relying on historical evidence.
- Bots that react at particular signals, such as trading volume or price.
All these types of bots can help you to get only marginal returns. They are not yet capable of carrying out more complex strategies. And this is their primary shortcoming.
The second is that bots might stop functioning because of technical breakdowns. This doesn’t happen too often — but you should know what to do in such situations.
Third, bots are useless if you lack a strategy. To be able to modify their settings, you should have a rather deep knowledge of markets which in turn will be a serious problem for beginners
As for the advantages, bots can work round the clock. They respond to market signals nearly instantly. Unlike humans, they never make mistakes because of emotions. Bots are a powerful and reliable trading tool and thousands of people successfully make money on them.
Copy Trading or Bots: Which Is Better?
To answer this question, we should analyze the similarities and differences of both methods.
What Do Trading Bots and Copy Trading Have in Common?
These are the most important merits of both methods
- You don’t need to stay glued to your computer 24/7
- You can earn money in spite of having little skills and experience
On the flip side, you should be ready to lose money occasionally. Even the most genius traders and the best bots make mistakes sometimes. Of course, they will try to make up for the losses. But still, it would be wise to entrust them just a part of your savings — normally, from 10% to 20%.
In Which Aspects Do They Differ?
| Copy Trading Platforms | Trading Bots | |
| Ease of use | Very easy — you can get started nearly instantly | Not too easy — you need to know how to adjust their settings |
| Pricing | Certain strategies might be available at no cost | Hardly anything is available for free |
| Security | The trading platform or third-party trader won’t get access to your funds | You’ll need to entrust your funds to an algorithm |
| Learning opportunities | You can analyze the activities of the trader that you follow and gain experience | A bot can hardly do anything that you don’t know yourself |
How to Choose a Reliable Bot or Copy Trading Platform?
You need to be very careful when choosing a trading bot, a trader whose strategy you would like to copy, or a trading platform. You should read their terms and conditions carefully. If you have a chance, you should discuss the variants that you consider with a more experienced trader whom you trust. Plus, you should pay attention to expert reviews and users’ comments.
Final Thoughts
If your experience in trading is not too large yet, you can either rely on copy trading or try bots. Both can come in handy if you’re interested in crypto trading. Yet if you are a beginner trader you might opt for copy trading because in this case, you’ll be the only person who can access your assets. Also, you’ll be able to copy certain strategies at no cost (while bots don’t offer any services for free). Additionally, the most experienced traders use bots while trading, and you can get profit from this implementation.
Remember, that using bots requires more profound technical knowledge than copying someone’s trading strategies. Feel free to try copy trading or bots, сhoose a reliable software or trader and start earning on crypto!
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