2. How do they know what to do?

The trades are based on analysis rather than emotion, and this can be beneficial for traders susceptible to the odd bout of panic buying.

Off-the-shelf bots usually work on the basis of set algorithms which are often configured by developers. As such, their success often hinges upon the creator’s understanding of how the crypto world works. These tools can often be frustrating for advanced traders who have their own interpretations of the market, as some pieces of software have a limited scope for personalization. Bots can’t buy from a hunch like humans can. They buy at the hands of technical indicators. If your chosen indicators indicate a buy opportunity, it will follow them blindly if configured to do so. Unless you link your bot to another professional trader (which is possible) you must learn how to conduct technical analysis yourself.

When it comes to selling the coins trades can be triggered when the profit target is met, or a “stop loss” – where cryptocurrencies are automatically sold if they fall beyond a set value, or by a pre-defined number of percentage points. They also use other features like “trailing stop-loss,” which track the price of a position upwards. If after a certain degree of profit, the coin begins to decline, the bot will automatically sell it in profit.

In the end, the benefit of the bot is that it can both scout new opportunities using professional indicators, and, at the same time, keep a tight and rational look at all the current investments. Greed often stops a trader from selling on time, this is can be prevented with a bot.

Their ability to successfully turn around profits has however been limited by the fact that market movements often hinge upon developments in the news and even single tweets from crypto influencers. Given how bots are relying on raw data and historical performance, expecting these tools to act upon current events can be something of a tall order.