In August, the cryptocurrency exchange OKX introduced a bot that enables integrating signals from TradingView and trading according to other users’ strategies.
We cover this and other trading bots, and explain how to profit from studying them.
Why trading bots are useful
Trading bots are programs that automate trades based on defined market parameters and indicators such as RSI.
Trading with bots is common in both traditional and cryptocurrency markets. Bots offer traders the following advantages:
- they can monitor and execute trades across several instruments;
- they allow monitoring of various cryptocurrencies and trading around the clock;
- they demonstrate higher execution accuracy, as well as place large orders without significant impact on the asset’s price;
- unlike human traders, they do not experience emotions.
However, bots have drawbacks:
- Configuration requires knowledge of trading strategies and cryptocurrencies in general. Because of volatility and constantly changing market conditions, you must periodically monitor the bot’s profitability;
- Bots directly manage assets, so it is important to study the platform that provides access to them.
Developers create bots as standalone programs connected to a trading platform via the API, or embed them directly into the cryptocurrency exchange interface.
For example, to access trading bots on OKX go to the “Trading” section and click the “Trading Bots” button. In November the exchange published an instructional video about these tools and launched the “Back to School” campaign with a prize pool of 5000 USDT.
The organizers will distribute:
- 500 USDT for watching the video, subscribing to the YouTube channel “OKX Academy” and completing the test;
- 1500 USDT for launching bots that execute trades totaling more than $500;
- 3000 USDT for trading volumes up to $25 000.
The promotion runs until December 1, 2023. Users will be able to study Grid, DCA, split bots, arbitrage and signal bots. Below we describe them in more detail.
Grid bots — for trading in a market without a clear trend
Grid trading is a strategy in which the bot places a grid of orders within a defined price range.
When the asset rises to one of the upper grid lines, the bot executes a sell order. Conversely, it buys crypto when the price falls to the lower boundary of the range.
OKX offers four types of grid bots:
- Spot — for buying and selling crypto assets without leverage;
- Infinite grid — does not require setting an upper price level. Allows buying and holding cryptocurrency in a rising market;
- Moon grid — a variant of the spot bot with a wider price range and no stop-loss and take-profit levels;
- Futures — for opening long and short (long and short) positions with leverage up to 50x.
DCA bots — for averaging positions
Dollar-cost averaging (DCA) — a strategy that involves gradually buying or selling an asset in small portions to build a position. A DCA bot automates this process.
OKX offers three types of DCA bots:
- Spot — buys or sells assets at regular intervals, “averaging” the entry or exit price;
- Futures — enables gradually building long and short positions using leverage;
- Recurring purchase — buys one or more assets for a predetermined amount.
Arbitrage bots — for profiting from price differences
These bots earn when there is a price discrepancy between instruments on the trading platform.
OKX offers three subtypes of arbitrage bots:
- Smart portfolio — sets a specific mix of cryptocurrencies in the portfolio and conducts automatic rebalancing;
- Dip hunter — buys cryptocurrency below the market price;
- Peak hunter — sells the asset above the market price;
- Arbitrage — creates delta-neutral positions, which lock in profits when prices diverge between different trading instruments, for example, spot and futures markets.
Split bots — for opening large positions
A split bot helps optimize trading by reducing slippage when executing large orders. It breaks them into several smaller ones to reduce market impact.
OKX provides two subtypes of split bots:
- Iceberg — splits a large order into several smaller ones within an acceptable slippage level;
- Time-weighted average price (TWAP) — executes large trades over a pre-defined period of time.
Signal bot — for trading based on indicators and scripts
With such a bot you can trade on indicators and scripts on TradingView, and also buy signals from other users on a dedicated marketplace.
Users can sort signal bots by three metrics: 30-day returns, assets under management and number of subscribers.
To integrate a bot, click the ‘Subscribe’ button and choose a subscription plan — profit share (the bot creator earns a percentage of profits) or a fixed monthly fee. Some users offer their signals for free.
How to subscribe to a signal bot
We tested signal bots on OKX in demo trading. For this:
- we selected the items ‘Trade’ and ‘Demo trading’ in the side panel on the homepage;
- in the demo account we went to the ‘Trade’ section, then to ‘Trading Bots’ and ‘Marketplace’.
We chose the Okq bot, studied profitability metrics and supported trading pairs. We clicked ‘Subscribe to signal’.
After subscribing, we set the bot’s parameters: selected trading pairs, leverage and margin. We clicked ‘Create’ and confirmed the order.
The bot appeared in the open positions menu, where you can monitor PnL, and quickly stop it with the ‘Stop’ button.
Clicking ‘Details’ reveals the bot’s trade statistics.
Conclusions
Trading bots can help avoid emotional decision-making when placing trades. They can also help open and close positions at optimal prices around the clock.
DCA bots gradually build a position on pullbacks or safely enter shorts at highs, while Grid bots profit from volatility during periods of market uncertainty.
Arbitrage bots rebalance the portfolio, and split bots open large positions at market prices.
Signal bots trade based on indicators and scripts, allowing traders to adapt to various market conditions and trading styles.
However, no strategy guarantees profits. Before engaging in real trades, test bots in a demo account and do not invest more than you are prepared to lose.