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Crypto Trading Bots Vs Copy Trading

Wed, 05/27/2020 - 10:33
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Heewon Jang
Find out what copy trading is, how it compares to ordinary trading bots, and what platform you can choose
Crypto Trading Bots Vs Copy Trading
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Nowadays, technologies like Artificial Intelligence, Machine Learning, or even Deep Learning are used in almost any scope and business. Crypto-trading is not less; You can build your algo-bot, but if you research a little bit, you will find tons of services that give you hundreds of entry signals (some of them even exit signals) per day. 
If you work a little bit on these signals, you could make a good profit from them. The first thing is to measure the quality of them. You should have access to the signals' historic and from there, get your own stats. How much was the higher price in the next 24h after the signal was sent? And after 3 days? Or 1 week, 1 month? How much do they usually go down before reaching the higher price? If you are meticulous enough, you will prepare your reports per market, for example, QTUM/ETH. In the last 3 months (or 6 months or 1 year), how many signals has this provider sent? How much is the average higher percentage from the suggested entry price (if any, if not the market price at the time the position arrived), how much is the average percentage of drop down from the entry price? You need to look for this data in the timeframe that you wanna trade. If you choose 1 week, then look for the higher and lower during that week, and keep in mind that your trades will last 1 week on average. However if you see that usually, the higher price inside the week happens in the next 2 or 3 days, you can play with that timeframe.  
The entry, or even the exit signal, is just the beginning, I would say that it's even less than half, as Dr. Van Tharp proves in this book "Trade Your Way to Financial Freedom" even a random system could work if you know how to manage your risk. Is here where your research has to be put in practice. 
Once you have a system in motion, you can't stop there, you still need to watch your results, see that they are aligned with what you expect and adjust and tune it as many times as it's necessary until you find a system that works for you. 
Additionally with cryptocurrencies there are external factors to watch, what if a coin is gonna be delisted from a big exchange? The market will fall for sure and most of the bot will detect this as an entry opportunity, unfortunately, rarely there is any recovery from it. What if a huge exchange has been hacked? Or a country ban cryptocurrencies? 
If this sounds like a lot of work... it is because it is a lot of work. If it looks like you will need some knowledge about trading and cryptocurrencies.. it is because you will need 
it. And if it doesn't look easy at all, it is because it is not (otherwise everybody would do it, and you know that in this game, for someones to gain, others have to lose). 
And here is where copy-trading shows its higher strength. There are expert traders, sometimes even companies behind these services. Their daily job is to tune and adjust their strategy, automatic or manual, be aware of the news that could affect the markets and make a living from this. 
Some of these copy-traders aren't afraid of showing and sharing their success. Copy-traders take their task seriously because they know that managing follower's capital is a big responsibility. 
They usually only operate in one platform, the one that they consider the best and works. It is difficult enough to be profitable in the long term just trading in normal conditions, so imagine if the platform is not reliable, doesn't replicate the activity from the copy-trader into the followers, or has continuous loss of service. 
The platform is not only crucial for the copy-trader but is also essential for the followers. It has to be a reliable platform; you have to trust it. It has to offer metrics and stats clearly and transparently. Platforms where the copy-traders are allowed to edit their results, manually put the numbers of followers or remove bad trades, are the kinds of platforms where you don't want to be. 
The platform has to be exchange-agnostic, this is very important, exchanges make money when you trade (with a profit or not), also one exchange could not be available in your area, so having alternatives is always good. 
The ideal platform would be the one that earns when you earn, where the copy-trader earns when you earn. 
If you wanna give it a try, create your own bot (with Zignaly you can do this for free, integrating it with TradingView and its alerts system), work with the signals from a provider, start with a demo account until you are comfortable. 
If you don't have time or prefer to invest the time learning other things, or are just looking for some passive income, copy-trading can be your solution. 

So what is copy trading and it's big value?

With Copy Trading, you are getting a replica from the copy trader real account. Basically there is a master account (the one from the expert trader you are copying) and the follower account, the copier. Whenever the master opens, edits, or closes any trade, all the activity is replicated proportionally to the copier account, automatically. 
That means that if he opens a position with 10% of his balance, you’ll use 10% of your invested amount too on the same trade. ​So it’s like a managed account.​ So all the above mentioned tasks that you’ll need to have in consideration when using bots, are not needed when using Copy Trading, this other option really saves you time, being 100% hands free. 
If you feel like giving it a try, these are our recommendations and easy to start guide: 

  • Choose a copy trading platform specialized in crypto​, like Zignaly, that is integrated with trusted exchanges like Binance or KuCoin. Their criteria selection for accepting new exchanges is very strict.
  • Choose based in the long term​, checking the trader results from at least 3 to 6 months of trading. Is easy to get results in the short term, but it is a skill to have them in the long one.
  • Know the expert​, you are gonna put your money in their hands, so get to know him. Zignaly has a great community and you can talk with their copy-traders directly. Ask them about their strategy, how they manage the balance, do they invest 100%? do they keep a remaining for one time opportunities? 
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About the author

Heewon Jang is a freelance journalist and the editor of CryptoGags section.
She is responsible for entertaining crypto content and bitcoin humour