The trading world is full of confusing concepts that are a bit hard to comprehend for novice traders. One of them is automated trading, also known as algotrading, which means utilizing computer algorithms in order to carry out trading procedures. The computer program includes a set of predefined instructions such as time, volume, and price and automatically generates orders based on this premise.
These robots are built with advanced mathematical and statistical computations as well as modern technical analysis, so they guarantee precise results all the time. Due to this reason, automated trading has become a highly popular method for a lot of traders and they wish to find out more about this process. One of the most frequently asked questions about this subject is whether to use Bitcoin or any other cryptocurrency. Even though it is not easy to directly answer this question, experts are suggesting traders go for BTC for algotrading.
The most obvious reason is that Bitcoin is the most popular crypto in the world and currently, it has the highest value. The market evolves around this cryptocurrency and its price alterations drive altcoins to change as well. Hence, trading robots work well with Bitcoin, and most probably, you will experience the best possible outcome in this case.
Why You Should Choose Bitcoin Over Altcoins for Algotrading
Before we jump on explaining the benefits of BTC over altcoins when it comes to algotrading, we would like to briefly explain what this process looks like. Algotrading, as the name implies, is a way of generating trades utilizing computer algorithms that follow a predefined set of instructions.
The benefits of algotrading are tremendous since you will be able to experience a lot faster income that no human is capable of achieving. Also, this process completely rules out human feelings that might have both positive and negative outcomes, but most importantly, algotrading increases the liquidity of the market.
Given the immense prospect of algorithmic trading, it should come as no surprise that the majority of traders have embarked on this opportunity. The major concern they have is whether it is better to use BTC or altcoins in this process. While the answer is not 100% precise to this question, professionals still recommend choosing Bitcoin.
The first and foremost argument is that the market moves in accordance with Bitcoin. The price movement of this crypto affects every other asset and we can firmly say that the overall market is influenced by BTC. The current crash is a perfect example of this since Bitindex AI states that the price devaluation of Bitcoin has induced significant implications. That’s why trading robots are constructed in a way that they follow Bitcoin and examine its price movement.
It is much easier for them to sell the asset when Bitcoin price hits a certain level compared to other cryptocurrencies since all of them are influenced by this one. For instance, the predefined instructions help trading robots configure when to buy or sell BTC when it hits specific numbers. They might be much better in this process compared to humans since our emotions get in the way most of the time and it brings highly negative results.
As for the altcoins, we have already noted that their values are mainly influenced by the Bitcoin price. Given the fact that Bitcoin has drawn one of the lowest numbers in recent years, other cryptos followed its path as well. Due to this reason, it is recommended to trade Bitcoin with trading robots rather than altcoins.
Future of Algotrading
Algotrading has certainly brought tremendous benefits for the majority of traders from all over the world. Some people even think that trading bots might completely replace human labor and do all the work for us in the future. Despite the fact that more than 90% of trades were executed by trading robots in 2022, there are still some question marks regarding their prospects.
The advantageous side of algotrading is clear since they help to carry out trades even when you are sleeping. However, keep in mind that they are only useful if you wish to trade short-term since robots are generally scalpers operating within a day or two. Also, the lack of human emotions can have both beneficial and disadvantageous effects on traders. While it’s true that robots help to remove the anger, fear, and greed of human traders, sometimes it is crucial to use intuition and your gut feelings in this process.
That’s why a vast number of experts think that algotrading will not completely substitute human labor. However, the benefits of trading bots are immense and they will always be useful if you are willing to carry out short-term trades. Hence, the future of automated trading is extremely bright and every trader should be involved in this task!