While cryptocurrency trading might be relatively new, it hasn’t stopped investors across the world from being interested. Cryptocurrencies are the hottest new investment options today and are being recognized by governments across the world as well.
Since Bitcoins own the maximum market share in the cryptocurrency world (42%), it makes sense to learn about Bitcoin trading. While a cryptocurrency trading course can throw an in-depth light into different trading strategies like algorithmic trading, this blog seeks to introduce you to algorithmic trading for Bitcoins.
Read ahead to learn more about algorithmic trading for Bitcoins and their significance.
How does Bitcoin trading work with algorithms?
In simple words, algorithmic trading refers to the execution of trading orders by writing computer programming codes for them. You code your transaction instructions via a computer algorithm and the system executes your trading orders.
Algorithmic trading has a distinct advantage over manual trading since it can induce little to no errors, doesn’t factor in human emotions, and offer better speed and efficiency during Bitcoin transactions.
For every Bitcoin transaction, algorithmic trading involves three distinct steps:
- Generating the signal: This step requires you to code an algorithm to generate the signal for entry and exit
- Allocating the risk: Risk allocation primarily involves allocating the funds in accordance with the parameters and rules set by you for the transaction.
- Executing the trade: This is the final stage where an actual unit of cryptocurrency is bought or sold.
Why should you consider algorithmic trading for Bitcoins?
Algorithmic trading is one of the most favoured trading strategies among traders across the world when it comes to Bitcoin trading. Here are a few obvious benefits of choosing this trading approach for Bitcoin trading.
- You can trade emotionlessly which allows your trading results to be free from any bias
- You can encounter better and faster decision-making
- You can easily back-test historical data without spending hours on them
- You can experience better risk management
- You can get more accurate predictions of the value of your underlying assets
- You can trade much faster as compared to the conventional paper trading route
What kind of trading strategies should you consider for crypto trading with Bitcoins?
Algorithmic trading of Bitcoins allows you to experiment with most kinds of trading strategies and go with one that suits your transactional style. However, here are some popular trading strategies you can explore via algorithmic trading.
- Market making
- Arbitrage
- Technical analysis
How can you learn more about Bitcoin trading?
There is no dearth of quantitative trading strategies when it comes to Bitcoin trading. While you can follow industry newsletters and read the book on cryptocurrency trading to explore them, it can be a tedious and time-consuming process.
The shortest way to master Bitcoin trading is perhaps through an extensive cryptocurrency trading programme. Such a course not only introduces you to the intricacies and effective strategies for Bitcoin trading, but it can also introduce you to trading with other cryptocurrencies like Ethereum.
Look around for appropriate cryptocurrency trading courses from reputed trading schools around you today!
