Crypto Trading Bots used to be reserved for those with a high degree of technical knowledge. One of the first trading bots to be available, GunBot, required a lot of the user. First, you had to order and pay for it with GUNTHY tokens, then you had to configure software to run on your Windows PC, which needed to remain on and connect 24/7. Then, you had to create and configure your exchange API keys. And then, you would connect the bot to the exchange, and wait while the bot downloaded all the data, which could take a while. All of this process, you would not know if the bot was working at all. Then, when you finally were able to choose pairs, you had to go into menus, submenus, and had to manually type the trading pairs in, hoping you didn’t misspell anything. And THEN, you would have to wait, sometimes days before a trade was made. The algorithms, or strategies (“strats”), were difficult to understand, and they would wait for very specific entry points. And, you could set up a Telegram bot to report your trades, but even that was a pain in the rear. In short, it was not for the faint of heart.

Today, setting up a bot is easier than ever. KuCoin has free bots that you can set up and control in the exchange (check out this article on the KuCoin bots), and other third-party bots, like 3Commas, do require an API key, but once you set that up, there’s often an easy-to-use “SmartBot” that requires zero parameter choices.

So, using trading bots has never been easier. But, in most cases, you still have to decide which coin pairs you’re going to be trading with. This article is designed to help you choose good bot pairs, and avoid making mistakes that will cost you profit.

Let’s start with some general rules/principles, which I will elaborate on below.

1. Avoid memecoins
2. Small profit is better than big loss
3. Bouncy token price is the goal
4. Choose your base currency wisely
5. It doesn’t matter if the token is a popular one or not
6. Slight uptrend is best
7. Slight downtrend is ok
8. High uptrend or high downtrend is not great
9. Avoid newly listed coins
10. Do some price research

Now, let’s explore these one at a time.

Avoid Memecoins

Nothing seems more attractive than a memecoin on the rise. Will the uptrend every stop? Surely, this has to be a great coin for the bot to use, right? WRONG. Take a look at the chart for the latest memecoin craze:

I’m not even mentioning it by name, because I suspect the next one will like just like this one. It had a quick uptick, hitting 30 cents a token, before it crashed down to about 4 cents today. If you created a bot for this coin anytime during the green part, today the bot would be “stuck”, meaning that it’s holding a bag it can’t sell. You would need to either wait for an eventually, and unlikely rise back to green, or you would have to stop the bot, selling for a loss. In short, if memecoins is your game, buy on the way up, sell when you have a profit, and consider yourself lucky.

STAY AWAY FROM BOT TRADING MEMECOINS

Small Profit is Better Than Big Loss

This is a general rule for all trading. You may have purchased a coin and it’s gone up 10%. You may expect that trend to continue. And it might! But, it’s just as likely that it will fall back down again. You will be kicking yourself if you hold and it crashes, taking a loss. Sometimes, it’s better to take the profit, and count yourself a victor for the trade.

Successful bot trading is the same idea. Looking for pairs that will net you a small, gradual profit means long-term victory (if you’re successful). Trying to find a highly volatile coin that has performed really well in the recent past (i.e. BOT LEADERBOARDS) can often a recipe for loss. Don’t rush to try to repeat previous success on a high APR bot. I’d suggest, especially when starting out, that you look for a coin pair that has had modest profit over a long term. You’ll have a victory that you can build upon.

Look for Bouncy Tokens

I’m a big fan of XRP. Yes, it’s emboldened in a court battle with the SEC, but look at the last year:

That is a bouncy coin with a general uptrend (more on uptrends later). Look at how it frequently trades up and down, within a range. This has been a great pair for me, generating 44% APR. It has made roughly 3 trades a day, and continues to generate slow profit on the bounces.

Look for coins that go up and down, within a given range.

Choose Your Base Currency Wisely

Every coin pair requires 2 coins, the volatile coin and the base currency. The base currency is either BTC or USDT. Simply, use USDT if you think the market as a whole is trending sideways or downward. Use BTC if you think the market as a whole is trending upwards.

If you trade with USDT as your base currency for 1 year, and you earn 50% APR (not bad!), and BTC rises 60%, you would have made more money if you just held BTC. But, if you were trading with BTC as your base currency, and you had 60% APR from the bot (not bad), AND BTC rose 60%, you’d have a total APR gain of approximately 150%.

But, if you’re trading with BTC, and you earn 60% APR with the bot, and the price of BTC falls 60%, you’re going to cancel out those gains. But, if you were trading with USDT as your base currency, then you would retain the 60% gains even as the market declines.

Choosing the base currency is one of the most important decisions you can make while bot trading. For more information, check out this article.

Don’t Seek Out Popular Coins….Necessarily

You may be inclined to only use popular coins as your volatile coins, and that may be just fine. But, often, popular coins have price trends more tied to social sentiment, rather than gradual adoption or utility. Check out Cardano over the past year:

There are some ups and downs, to be sure, but the bot might be “stuck” (waiting patiently for a selling opportunity).

Now, let’s look a WOO Network’s WOO coin:

I’ve never heard of it either, but the price chart would have a much better bot result. Any bot started in the past year would be in profit, and there would be no “stuck” trades.

Look for coins that are consistent, regardless of if you’ve ever heard of them or not.

Slight Uptrend is Best

You might be thinking, isn’t significant uptrend best? Not necessarily. If a coin is in high uptrend, the bot will probably not do much buying, because it’s waiting for a dip.

Look at this short-term chart:

There would be few dips, and it’s unlikely that the bot would find any buying opportunity. So, it would be waiting for the dip.

Now, check out this uptrend:

There are tons of local dips that the bot would be able to buy. And, the price keeps going up, so it would be a regular “winner”.

Slight Downtrend is OK Too, Probably

You might think that any downtrend would be bad to trade with. However, when you look at how the bot acts, you can see where profit could be found. Check out this chart:

There has not been a single low that was not followed by a sell opportunity:

Of course, the actually performance of the bot is highly dependent on the parameters that you provide, so it’s far from guaranteed that you would get every single profit opportunity (the bot never really knows that the bottom has been hit in real time). But, don’t fret if you’ve chosen a slight downtrend, or even a slow downtrend, as long as there are sell-opportunities in the longterm.

High Uptrend and High Downtrend is Not Great

It’s not great, but it’s not horrible.

Downtrends

The bot is designed, simply, to buy low and sell high. And often, it has bought at a dip, and then the dip continues. So, it looks more like this:

And, if your bot’s purchase budget is maxed out, then it will simply hold and wait until the next sell opportunity.

So, if it’s a coin with decent fundamentals, with a real purpose, and not a memecoin that is crashing, or not a coin involved in a targeted pump and dump, then the sell opportunity will hopefully present itself eventually. But, while you’re waiting for the sale opportunity, the bot is sitting idle, not generating profit on more frequently bouncing coins. Patience is required.

Uptrends

Earlier, I discussed why pure uptrends can present no buying opportunity to take advantage of the increase.

It’s probably ok in the longterm, but the profits might be slower.

Avoid Newly Listed Coins

When an exchange first lists coins, there is a lot of price action, usually positive. And, these coin pairs usually show up high on leaderboards of the bot menu. But, newly-listed coins often fall after initial buy-ins, and just like in the high downtrend section, you’ll be holding that bag. Except, there may not be a natural price increase coming, or coming soon. In short, newly listed coins should be avoided just as much as memecoins. The price action is not going to be consistently cycled, and your bot will likely get stuck in a buy, waiting a while for a sell.

Do Some Research

If you’re a cryptocurrency investor, you’ve heard this over and over again. DYOR — Do Your Own Research. And, it’s super important. Use the above tips to choose your coin pairs, and you’ll likely have more success than choosing pairs at random or simply following the leaderboards.

Just remember, unless the coin price crashes, patience will probably produce a profitable trade. But, you might be waiting for a while.

If you’re trading with USDT as your base currency, there is a silver lining here. If in a bull market, the coin price will perhaps rise with BTC over time, just because of the nature of the bull run. But, if you’re trading with BTC, it’s possible that choosing the wrong coin could leave you in the dust.