Trading Robot for Encrypted Assets: How to Understand? How to choose?

Foreword: The cryptocurrency is highly volatile, but for traders, this is something you like to see. Will they get a profit through trading robots? How to understand trading robots? If you want to choose a trading robot, how should you choose? The author of this article, Janny Kul, is translated by the "Liao L" of the "Blue Fox Notes" community.

As an asset class, cryptocurrency has volatility and large fluctuations. If it is a buyer or a holder, the volatility may not be what you want. Imagine what it would be like to lose 20% of your total hard-earned money in one day.

However, for traders, volatility is very popular.

When the market is tempering, it is bought at a low price, and when the market is excited, it is sold to unload the risk. This is actually the lifeline of an investment bank market maker.

If you create the algorithm using the same principles and then automate the entire setup, that's great, isn't it?

What exactly is a cryptocurrency trading robot?

The cryptocurrency trading robot is a computer program that automatically performs various cryptocurrency transactions at an appropriate time, with the purpose of generating profits.

This is literal.

It's important to note that not all trading robots can make money. In fact, most of them can't. (Blue Fox notes: So if you really need to choose a trading robot, you must consider it in many ways.)

Well, ideally, the robot can actually generate profits, and the risk-adjusted profit is higher than if you just bought and held the same token.

When I say risk adjustment, it means that your positive return is better than negative income when investing. To prove this, consider the following:

You will choose that one:

l Daily daily income is 1%, and there is no negative income, the final return for the year is 250%.

l +10% return on Monday, Tuesday -5% return, and Wednesday +3% return (and so on), with a full year return of 500%.

I hope you choose the first one.

see it? The first example is continuous. When something is persistent, its risk is reduced.

In fact, even if the second example has a full-year return of 1000%, you should still prefer the continued return of the first example.

The secret here is that the key to it is compound interest: 1.01250-1 = 1103%, but this is beyond the scope of this article. The point here is that, given the persistence (strong) return and the choice of roller coaster, you should choose sustainability, even if the roller coaster can bring you a higher return.

Only high returns are not enough, you need risk-adjusted high returns. This is why it is so interesting to make cryptocurrency trading robots. If a way is found that captures most of the cryptocurrency gains without a regular direct shock, then this would be a more attractive investment proposition than a holder.

How does a cryptocurrency trading robot work?

The most complex trading robots work with 3 mobile parts:

[Signal Generator] -> [Risk Assignment] -> [Execution]

Signal generator

This is part of making predictions. Some data is input to the signal generator to produce some signal output for buying or selling. If you see any robot that uses "technical indicators," then it's best not to try eye contact, just slowly returning. (Blue Fox notes: The author's meaning is that robots that emphasize "technical indicators" are best kept away.)

2. Risk allocation

This requires buying or selling signals and determining the amount of the quantity. For example, should we put all the capital allin this transaction, or only allocate part of the funds to enter? Should we buy it once or on average? Now that we know the direction and know how much we want to buy or sell, the next part is the actual execution of the transaction.

3. Execution

If you need to buy a lot at a time, for example, you must buy $10 million worth of assets for 500 customers, then you may not want to complete it in one transaction because you are unlikely to get the ideal price.

Ideally, you want to spread your order in the market. If you have the same robots as the other 1000 people, and you all run in disconnected instances, that is, they don't communicate with each other, then this will actually give you unfavorable pricing.

All three parts (signal, risk, and execution) require their own different algorithms and optimization processes. If you have a robot that is avoiding any of the above, then you can ignore them and such a robot won't bring you benefits.

What is the difference between trading robots Vs and humans?

1. Activity. Robots can operate 24/7, while humans need to sleep and rest.

2. Speed. Robots operate faster, and human thinking time plus reaction time is slower.

3. No emotions. Robots are not affected by greed or fear. They always make decisions that are more likely to win with statistical probability.

4. Capacity. The robot can process billions of bytes of data per second. It is difficult for humans to process such a large amount of data in such a short period of time.

There are many benefits to running a robot. It all comes down to the fact that they have different skills than humans. The robot is consistent and monotonous. In order to make a profit, you need to be consistent, and frankly, you must do everything "anti-humanity."

However, it is worth noting that robots, any robot, will only be as good as the human beings who created it. The old proverb is right, the input is rubbish, and the junk is still coming out.

Some methods humans will win, here is mainly subjective thinking.

If a particular piece of information does not have a specific result attached and requires horizontal or secondary thinking to understand its meaning, then you'd better do it by humans. I am not too worried about this problem, because whenever the robot reaches a fairly subjective state, it can choose not to invest.

What are the different trading algorithms for trading robots?

Not too technical, in fact only used two algorithms. These algorithms will be disguised in different ways and will be packaged into different things, but in fact they are mainly two algorithms.


Prices rise, as we think they will continue to rise = buy, and vice versa. From the statistics, most momentum strategies don't always win, but when they win, their returns are considerable. The profit-loss ratio is about 55%, and the profit-loss ratio is equivalent to 70%, which can also make money.

2. Mean regression

Prices rise, as we think they should call back = sell, and vice versa. In contrast, most mean regression strategies win more times than failures, however, profit and loss are relatively small. The win/loss ratio is around 70%, and the win/loss ratio of around 55% is quite common and can make money.

Yes, it's that simple.

A factor that is often overlooked is the cost, which can greatly affect your profitability. Your processing costs (paid to the exchange) and transaction costs (bids) can have a huge impact on your robot. Whether the robot is the recipient of liquidity (passive) or the creator of liquidity (active), the transaction costs will vary.

The best algorithm manages its trading order ratio and can also dynamically trade on multiple exchanges based on optimal transaction costs. If every transaction is aggressive, the robot can barely maintain a small statistical advantage, which may be completely swallowed up by transaction costs.

Can cryptocurrency trading robots make money?

Now, I have not tested too many robots. However, we can find good friends on reddit and other blogs to see what other friends who have used trading robots have a common opinion.

“No matter how you set up the robot, all the commercial trading robots I tried had a loss compared to buying and holding.” —intertron

“If the trading robot is effective, everyone will use it. Not including those private robots, they are used by BlackRock and other large trading companies. We can never get the data and their development team.” – Vibrate

“It’s safe to say that the best robots have never been heard and will never be offered to you.” —Kai Sedgwick via Coin Trellis

“This is a great way for people to lose all their money… if people don’t know what they are doing in the market, I can’t expect them to be able to…set the robot” – Person51389

Unfortunately, the reality that trading robots are available to the public is currently taking place. Algorithmic trading can be very profitable.

However, the problem is actually that there is a huge disconnect between the knowledge of professional investors and the hackers who build these algorithms, and they are made available to the public.

In fact, many public-facing forums still view technical analysis as a viable investment tool, which allows you to understand the scope of the problem. Not even let me start over-fitting.

What should you pay attention to when choosing a trading robot?

Ask yourself three questions before buying/using/investing in any trading robot:

1. What is the level of professional experience of senior leaders in the company? If they don't manage assets that are more than $100 million in size and don't have a good investment record, you should think carefully.

2. Are their algorithms widely known and made available to everyone? If they give you transaction-level data, their algorithms are easily copied. If this is the case, no matter how many "advantages" their robots have, they will soon be exhausted.

3. Are their successes consistent with your success? If you lose money, are they willing to cut costs? If you make money, will they also get a profit? If they just give you a platform and let yourself solve the problem, unless you know exactly what you are doing, this is definitely not a good thing.

Unfortunately, choosing a trading robot is not as trivial as answering these three questions. In my opinion, it ultimately comes down to people. Forget about the company's marketing, but ask yourself, you are investing with money, do you really believe this person?


Risk Warning : All articles in Blue Fox Notes can not be used as investment suggestions or recommendations . Investment is risky . Investment should consider individual risk tolerance . It is recommended to conduct in-depth inspections of the project and carefully make your own investment decisions.