Crypto Automated Trading

Why Algorithms are so important for trading Cryptocurrencies

As we know here at Coinrule, trading is a tough discipline. Algorithms are just one part of cryptocurrency trading which everyone should know about, especially for traders focused on day trading crypto.

Once one of the most experienced traders I know told me that becoming a good trader also means becoming a better man. That sounded like quite a forced statement, and maybe it was indeed, but one thing that is 100% certain is that Trading needs attitude, commitment, discipline, and a lot of study and research.

Nonetheless, every day people all around the world trade financial assets with only one simple goal: BUY LOW, SELL HIGH! And the number of people pursuing this ultimate object is growing fast, thanks to the rise of the new fascinating asset class of Cryptocurrencies. Why?

Because Cryptocurrencies represent the future of Finance and very likely they will disrupt most of the business industries as we know them. Apart from the innovative and revolutionary ideas backing the surge of Cryptocurrencies, this new asset class offers to traders very peculiar features compared to “traditional” financial assets. Modern Financial Markets can be analyzed from two opposite points of view: the Fundamental and Technical. Some traders use only the former, some only the latter, and some others use a mix of these two approaches.

Cryptocurrencies are a totally new asset class, there are not enough models or frameworks that can help assign to them not even an estimate of a “real value”, it’s almost impossible to analyze them using classic Fundamental Analysis just because in most cases the economics behind them are too different from traditional companies, and even if there would be similarities in the level of public information about them, it would be often not fully reliable or too weak to formulate a complete assessment of them.

On the other hand, the very same Crypto asset can trade on many different venues and exchanges so that traders can have plenty of price-related data to analyze. Some could say that just from analyzing how a price moves in time, we can infer about the development of the balance of forces between Demand and Offer, which are the ultimate drivers of any price movement. And there comes the great useful implementation of Technical Analysis to trade crypto assets.

The importance of this aspect is often not underlined enough. Since most of the people who trade Cryptocurrencies involve Technical asset-backed strategies, this makes the likelihood of the unfolding of a price pattern higher. Simply put, most of the time, price goes in one direction only because most of the traders think that it will go in that very direction. If the major part of the traders in one market will start to buy, the price will go up. DEMAND AND OFFER, seen in this way, trading isn’t that difficult, is it?

So what makes trading so difficult? The human nature, emotions, and feelings can be the worst enemies of a trader. Every cryptocurrency trader can have a different reaction in front of the same price movement: fear, euphoria, greed, and disillusion are feelings that a trader can experience even on the same day and that will have a pretty negative effect on his or her capabilities of making rational decisions.

That’s why a trading bot has the potential of improving significantly your trading results if you are already an experienced trader, or it can provide an easy way to get into trading as a beginner.

"The market does not know if you are long or short and could not care less. You are the only one emotionally involved with your position. The market is just reacting to supply and demand and if you are cheering it one way, there is always somebody else cheering it just as hard that it will go the other way." Marty Schwartz

This is Coinrule main goal, to make cryptocurrency trading more effective and easier. The markets run 24/7, all around the globe so it’s impossible to fully exploit its potential without a trading algorithm that takes care of your positions, even when you sleep!

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