The Impact Automated Trading will have on Cryptocurrency

June 11, 2019

Cryptocurrency is digital money; it is not generated by any central bank, it exists only in the digital world. This makes it the ideal financial medium through which online transactions flow.

This currency has steadily grown in popularity. It is so popular it now trades on its own exchange much like other currencies. It has traded briskly since it became available to retail traders.

What Is a Retail Trader and How to Become One?

Anyone with money to open a trading account with an online broker can trade this currency. If you have a phone and a reliable internet connection, you have the technology to become a retail trader.

Being technologically able however, does not make you automatically savvy enough to jump right in and start risking money.

If you are wise, you will take the time to learn trading fundamentals. Practice trading is the best way to master the craft of retail trading.

What Is Practice Trading?

Nowadays, every online trading exchange has a practice trading platform. These platforms mimic the real, live trading platforms in every detail.

You simply open a demo account, study and learn the platform. As you orient yourself, gradually enter practice trades. These trades risk no real money since it is all practice trading with broker practice money, not your own.

Continue practice trading until you understand the basics of trading transactions. Once you understand platform basics, you need to develop your plan of attack. To do this, choose which of the two approaches you prefer.

Are You a Technical or Fundamental Trader?

Every trader must learn to analyze the market. Market analysis is absolutely essential if you are to make the best trade decisions. To blindly guess market direction is irresponsible. It is a waste of time and your money.

The market can only do three things. It can go up, go down, or go sideways. Your mission is to use analysis to best determine which it may do next.

To do this, most traders adopt either one of two trading approaches. Some use a hybrid of both. Using a hybrid approach can be tricky sometimes.

If technical indicators are saying one thing and fundamentals are saying another, you have a decision to make. It is much easier to choose one or the other. From time to time, check one against the other for confirmation.

Fundamental Trader

Fundamental traders evaluate market events and how these events may influence market moves. They go by market calendars and wait breathlessly on the next Federal Reserve pronouncement.

If the news is good, they tend to trade the market as if it is going up. If the news is bad, they trade it like it is going down.

There is one major flaw with this strategy. The markets do not always obey the basic rule. The market may go up on bad news or down on good news. Trading strictly on fundamentals is somewhat riskier than the technical approach.

Technical Trader

Technical analysis evaluates the market based on its history and the current conditions of that history. This market assessment uses what are called indicators.

These are methods of tracking what the movement not only has been but what it is doing right now.

They generally measure market direction, the momentum of that direction, and how much further the current move may have. Learning to use these indicators instead of relying on what we think or feel is critical to trading success.

How Automated Trading Impacts Crypto Markets

If all the above seems a bit intimidating, relax. There is an app for that too. Seriously, trading success is available with a lot less aggravation.

Your trading can be automated. Automated trading has come to crypto trading. It has dramatically increased this market’s trading volume.

Increased volume generally brings with it increased volatility. Volatility creates market movement. Market movement is how traders make money.

What Exactly Is Automated Trading?

Simply stated, automated trading is basically computerized trading. You may see it referred to as ATS (Automated Trading System). The computer executes the trades for the trader on their exchange.

This computerized trading operates via algorithms. These algorithms contain the criteria for entering and exiting trades. They are automatically triggered when the data of the algorithm matches a market condition.

The trader is more or less freed up to live life instead of staring at a computer screen all day. As the performance of the algorithm proves itself, the trader only needs to check the trade results for a given day.

What Is an Algorithm?

Algorithm is a fancy math term which roughly translated means recipe or formula. Just like the ingredients in a cake, the algorithm contains all the parameters for executing trades on the trader’s behalf.

The computer only acts when these trade ingredients are matched for trade entry and exit. The trader needs to monitor the algorithm’s performance. From time to time, with changing market conditions, it has to be adjusted.

Different traders have different personalities. These differences also apply to individual approaches to the skill of trading. Programmable algorithms can accommodate these differences.

Advantages to Automated Trading

The single biggest advantage of automated trading is that it removes trader emotion. Sitting in front of your computer looking at all the data makes trade entry and exit nerve-racking.

You are sitting there using your money to earn money. The big downside to that is that you can also lose money.

You must understand that the market is not there to earn you money. It exists to make money, and it will go where the most money-making potential is irrelevant to your current trade position.


Do you think the smartest strategy to trading is doing it on your own? Why not use all the technology available, remove yourself as much as possible and trade automatically.

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