For most people, the first tip that they have received from another investor is not to put all your eggs in one basket. In the world of finance, this means that one should diversify his portfolio in order to reduce risk and maintain stable profitability.
In slow markets like stocks, manual diversification is entirely possible, and there is no doubt about it. You might need help from a more experienced investor when it comes to picking the right assets, but the mere act of diversification is easy and takes so little time.
But what about the crypto market? Here, investors do not have an entire weekend to take a breath and figure out their next steps. Exchanges run 24 hours all seven days of the week, and for most, the word ‘break’ is not even in the dictionary.
How do you diversify or even trade in such an environment when all the odds are stacked against you, and real professionals move and act much faster than everyone else? It might almost seem as if you will never ‘make it’ with crypto and that the swift tides of volatility and crashes are just too much.
For both trading and diversification, you can find solace in crypto portfolio automation. But what is crypto portfolio automation, and how do traders consistently make money with it?
What is crypto portfolio automation?
Portfolio automation is the act of automating your investment portfolio either for the purposes of trading, diversification, or rebalancing. To help you better understand what crypto portfolio automation is, we will explain each use case individually:
Trading bots
The most common approach to crypto portfolio automation is selecting a crypto trading bot and having it perform on the market under your account. Basically, the trading bot is a piece of computer software that executes trades and commands under certain preselected market conditions.
What kind of market conditions, you may ask? Anything that you can imagine! Let’s say that you are an incredibly risk-averse trader and that you dislike opening a position when volatility reaches groundbreaking levels. You can ‘tell’ the crypto trading bot to pause any trading activities or to even close existing trades if the market starts moving quickly and an avalanche of trading volume hits the market.
Or maybe you are confident that once Bitcoin breaches a certain price level, prices will keep pushing in the respective direction. For example, BTC has a crisis, and revisiting $20,000 is imminent. The entire day has passed, but you are still anxious that there is a chance for the crypto market to crash. What can you do in this situation?
Well, if you do not want to stay awake the entire night, you can order the bot to track prices during that time period. Additionally, you can order the bot to open a leveraged short position in the case that Bitcoin stays under $20,000 for longer than 5 minutes. You will then ride a wave of red candles while everyone who was previously too afraid to open a short will not be online to open the same position that you did.
These are just a couple of strategies that you can utilize with a crypto trading bot. With support for so many technical indicators, risk strategies, and candle patterns, it might seem crazy why not everyone uses bots to trade.
Diversification
Certain portfolio automation platforms enable you to automatically diversify your portfolio with the click of a single button. Diversification is necessary because if you go all-in on an altcoin and the project fails, the market will leave you penniless. If you hold 5, 10, 15, or even more assets, your risk exposure is severely reduced.
In this case, the platforms that we are talking about today help you by automatically diversifying your portfolio. Oftentimes this will be done by exchanging your existing asset for a number of cryptocurrencies from various categories. Platform X might replace your original holdings with governance tokens, utility tokens, store-of-value assets, synthetic assets, speculative assets, etc.
You can also follow another investor’s investments and copy his portfolio, or even buy assets from a crypto index. By doing so, no time will be wasted by researching the best cryptocurrencies or finding out which combination of assets suits you the best.
Rebalancing
Rebalancing is pretty much the same as diversification, except that your portfolio is changed from time to time. Based on recent market trends and asset performance, a portfolio automation tool will periodically adjust your holdings.
We call these periods rebalancing cycles. You can set the cycles in any way that you want. Most often, investors rebalance their portfolios on a weekly or monthly basis. It is even possible to rebalance portfolios every 4, 8, or 12 hours but most experts do not recommend that.
Why use a crypto trading bot?
Diversification and rebalancing are tools used by the more patient investors who are confident in holding long-term. But what about the day traders that constantly battle others in the market? As we have previously shown, crypto trading bots are the key.
A trading bot helps in more than one way. Here is a list of reasons why both beginners and experienced market participants should use bots.
Have more time for yourself
No serious full-time trader can waste hours on leisure when the market calls for action. Cryptocurrency trading is a 24/7 job, no matter how much time you personally spend. You might trade only during the North American or European session, but if you do not set precautionary measures for the Asian trading session, you are bound to regret it later.
By setting up a crypto trading bot that trades when you are offline, it is possible to be active in the market even when you are asleep. Moreover, you can also create extra time for yourself during the day by having the bot trade instead of you. If anything extreme happens and your phone starts buzzing with notifications, know that you will be covered.
Strike precisely and fast
No matter how you look at it, there are indeed moments when you have to make a split-second decision. If your reactions are a bit slower and that you tend to overthink everything, a crypto trading bot could undoubtedly help.
Timing is critical, and in a highly volatile market such as crypto, all seconds count. Trading bots are faster, and they can execute an order faster than the eye can see. So if you find yourself regularly failing to get your orders filled, why not try them out?
Trade emotionless
Human psychology has a fascinating influence on the market. Emotions affect prices both on the macro (the entire market) and micro (your personal trade) scale. Many opportunities are lost simply by the act of analysis paralysis, a state in which an individual cannot make a decision since he fears that an error will be made.
Most movies describe robots as ruthless machines that will complete any order. The same stereotype is applicable to crypto trading bots as well! You can stop ruining your own trades by ordering a bot precisely what to do under certain market conditions. Once these conditions are reached, the bot will execute the trade without any second thought.
Automate redundant tasks
Are there any repetitive and redundant tasks that you regularly perform during the day? Perhaps you plan to scalp an altcoin at a certain price level for the next 5 hours. Would it not be wise to hand over this simple job to a bot?
Crypto trading bots can do the same actions that a human can do. If you want to spare yourself from laborious and monotonous tasks, we recommend that you check out a trading bot.
The best crypto trading bots in 2023
Are you interested in using portfolio automation software? In that case, we have prepared a list of the five best crypto trading bots in 2023.
#1 Coinrule
Looking for an easy way to automate your crypto trading?
Coinrule is the perfect solution for beginners who want to get started with crypto bots.
Coinrule allows you to build automated trading strategies visually, without needing to write any code. It offers pre-made templates and a drag & drop builder to create your bots in minutes.
Some key features that make Coinrule great for beginners:
- Intuitive Bot Builder – The visual editor lets you set up trading rules and conditions using pre-defined blocks without programming. You can easily customize strategies.
- Backtesting – Test your bot’s strategy on historical market data to fine tune performance before real trading.
- Inbuilt Market Indicators – Indicators like RSI, SMA, EMA etc are included to further refine your bot’s triggers and actions.
- Free Trading Account – Practice and run your bots risk-free using Coinrule’s virtual trading account stocked with 100k USD for testing.
- Portfolio Tracking – Link exchanges like Coinbase and Binance to monitor your portfolio in one place.
Getting started with Coinrule is super quick and they have great tutorials and support docs for beginners. Their starter plan is free for basic usage, with paid plans starting from $29/month for advanced features.
If you’re new to crypto bots, I highly recommend giving Coinrule a try! It’s the easiest way to put your crypto portfolio on auto-pilot and take the emotion out of trading.
#2 3Commas
3Commas is a popular crypto trading bot that is mainly aimed towards advanced users who know what they are doing. Setting up both an account and a bot takes more time than usual, but after you are done, 3Commass will help automate all of your trades.
The platform focuses on minimizing losses, which is why most of its strategies are, in fact, risk strategies that limit your exposure to trades that might require a bit of luck. Apart from that, 3Commass provides highly detailed interfaces that provide a more comprehensive overview of portfolio statistics and analytics.
We do note that most within the community consider 3Commas to be more expensive compared to other solutions. If you are tight on money, it might be better to look for something else.
#3 HaasOnline
HaasOnline is definitely one of the more intriguing crypto trading bots. Unlike certain cloud-based platforms, this trading software runs natively on Windows, macOS, or Linux computers through the HaasOnline Trade Server. For those who find it bothersome to use such tools via a web browser, this might be a unique advantage.
Another cool thing about the project is that it offers its own scripting language. Again, this is designed for developers and more technical traders who want to add all kinds of options to their trading strategies. Nevertheless, even beginners could attempt to utilize this feature as HaasScript has an easy to use drag-and-drop designer for crypto trading bots.
#4 Mudrex
Mudrex is another prominent crypto trading bot which we simply had to mention in this list. The platform offers a free version where users can, instead of building their own bots, access a gigantic marketplace of curated trading bots and strategies designed by the very best traders.
Those who wish to create custom strategies of their own will have to subscribe to a premium version of the platform. Just like in the previous case, Mudrex features a drag and drop interface that offers technical indicators, candle patterns, and other neat trading tools.
#5 Cryptohopper
Last but not least, we have the cloud-based crypto portfolio automation software called Cryptohopper. It is a well-known platform in the crypto market, frequently used by those who seek an engaging and active community of traders.
The platform is targeted towards all skill levels. Although it features a minimalistic and intuitive interface, Cryptohopper provides users with access to a wide range of features. Users can design strategies and select more than 90 candlestick patterns and 30 traditional technical indicators.
However, Cryptohopper is in the same boat as 3Commas. Its services are vastly more expensive compared to the standard trading bot subscription. While the project is definitely worth the money, it would be wiser to select a cheaper option if you are merely starting out.
Final Word
Do you ever find yourself in a pickle and wish that you had a virtual assistant that could help you with organizing and executing trades? No matter how lavish investing is portrayed by the media, the ultimate truth is that the crypto market takes a heavy toll on both your mind and body. If you do not find a way to save time and live healthier, you will regret trading in the first place.
Crypto portfolio automation software is a proven solution designed to help you trade better, faster. The best part? It requires no action from your side once the needed strategies are initiated.
Reading this guide to portfolio automation, you might better understand why there is so much hype around crypto trading bots. If it provides exactly what you need at the moment, we suggest that you check out a couple of solutions from our list of reviewed crypto trading bot platforms.
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