Building Automated Trading Algorithms on Blockchain
Cryptocurrency trading consists of buying and selling BTC, altcoin, stablecoin and other crypto assets on the market to make a profit.
Anybody can make money selling cryptocurrencies, but to make a good income you need to know a few nuances, from choosing assets to working with them safely.
Financial markets have grown significantly thanks to algorithmic trading, and its influence has quickly spread to the cryptocurrency sector. Because algorithmic trading is so fast, frequent and computationally intensive, humans cannot compete with its capabilities. This method eliminates the emotional elements that often compromise trading performance and ensures efficiency in the trading process.
We have prepared a comprehensive guide for you, which will not only explain what to do with cryptocurrencies, but will also help you choose an exchange platform for trading and make money effectively in the digital finance industry.
What is a Cryptocurrency?
The cryptocurrency is electronic money that does not have a physical form and can be used for various transactions on the Internet. In essence, it is a means of payment that exists only in digital space. Cryptocurrencies can be issued by companies, organisations or individuals, but the process does not involve a particular country's central bank or other regulatory bodies.
Cryptocurrency operates on a blockchain system, which is a chain of information blocks. Each block is a record of a cryptocurrency-related action, for example the sale of a stablecoin while trading on a cryptocurrency exchange platform. Thanks to the blockchain, anonymity, security and transparency of transactions are guaranteed. And, most importantly, there is no state control over transactions.
How Does Cryptocurrency Trading Work?
Cryptocurrency Trading
Cryptocurrency trading consists of buying and selling BTC, altcoin, stablecoin and other crypto assets in the market to make a profit. In addition, cryptocurrency trading strategies can be implemented in an interval ranging from a few seconds to several years.
Because cryptocurrency markets are quite speculative and volatile, it is advisable to study the market situation at the beginning, draw up a trading plan and identify the basics of cryptocurrency trading. This information will be part of your strategy. In addition, cryptocurrency trading, both for beginners and experienced traders, includes several basic principles and steps that all participants should consider:
Choose a cryptocurrency for trading
Choose a platform for trading
Create an account on a cryptocurrency exchange, preferably with KYC verification
Deposit funds into the exchange account for trading: fiat or crypto
Inserting trading orders, i.e. requests to buy/sell digital units
Market analysis and defining a trading strategy
Risk management in transactions with volatile cryptocurrencies, e.g. through diversification
Monitoring trading orders and their execution
Securing accounts on exchanges and monitoring transactions
What is Cryptocurrency Trading (Crypto Trading)
Cryptocurrency trading is rapidly gaining ground. In connection with the growing popularity of cryptocurrencies, an entirely natural question arises: what is cryptocurrency trading? It is the buying and selling of cryptocurrencies in order to make profit on the price difference.
Cryptocurrency trading is very similar to traditional trading, but the asset in this case is cryptocurrency, and transactions are made on cryptocurrency exchanges. However, this is not the only feature that the two types of trading have in common. There are other characteristics:
Just like in classical (financial) trading, in cryptocurrency trading participants use similar strategies and tools to earn more money;
To earn more money, they choose suitable coins;
For forecasting, they use charts with different indicators, e.g. the daily trading volume or the accumulation/distribution indicator.
The main goal of any trading transaction is to buy at lower prices and sell at higher prices. This is what guarantees profit. However, cryptocurrency trading has special characteristics due to the parameters of the cryptocurrency market:
Volatility. Prices can rise and fall very quickly, so sometimes you can make more money from trading than from the classic currency or stock market. There is also a downside: a digital currency can first rise in price by 1000% and then fall to zero;
Decentralisation. Cryptocurrencies work with the blockchain. This is a decentralised system for storing and transmitting data, in which data is encrypted and combined in blocks, then stored on the PCs of network users.
Decentralisation allows cryptocurrencies to be sold without any external control. There is no central authority to change the conditions, like the Central Bank, which changes the reference rate to manage inflation.
What are the Types of Cryptocurrencies and How to Choose the Right One?
To learn how to trade cryptocurrencies, you need to know what types of cryptocurrency are the most promising and suitable for making money. Let's take a look at the most popular types of digital assets and talk about each of them.
Bitcoin (BTC)
This is the first decentralised cryptocurrency that stimulated the development of the cryptocurrency trading market. Initially it was used for mining, but today it is unprofitable for the average user. However, BTC has a record capitalisation and the total price of all bitcoins represents half of the global cryptocurrency market.
In the next two years, Bitcoin will no longer be issued, as the limit on its mining will end. This is a necessary measure to ensure that the digital currency does not lose value. Today, it is mainly used as a means of payment and as a means of storing assets. As of 2024, there are more than 19 million BTC in circulation.
Tether (USDT)
This digital cryptocurrency is issued by Tether Limited, so it is centralised. As of 2024, there are more than 83 billion units in circulation. USDT is tied to the US dollar. Usually, 1 unit of the asset is equal to 1 US dollar.
The price of USDT is supported by cash, securities and other crypto assets. The most popular of these is a stablecoin. The price of this coin is tied to fiat currency, i.e. the currency normally used by states.
USD Coin (USDC)
In fact, this is a competitor to USDT, launched by the Circle payment system. The rate of this digital currency is also tied to the US dollar and should ideally be 1 to 1, but sometimes the asset can suffer declines in value in the market.
USDC has received support from large investors and renowned developers, so it has quickly capitalised. Moreover, thanks to its implementation on the important Coinbase exchange, it has acquired many holders. Just like USDT, USDC is a centralised currency.
Ethereum (ETH)
This is a very popular global cryptocurrency as well as a decentralised blockchain platform. Ethereum can be used to create smart contracts, decentralised applications and other similar services.
Like other popular digital assets for trading, ETH is available on most exchanges. The market capitalisation at the beginning of 2022 was $400 billion. As of August 2022, there were 1,121,920 transactions with Ethereum each month.
XRP
This is a cryptocurrency that provides cheap and fast international payments. It can be used in interbank settlements. The liquidity problem of XRP has been solved by using it as a bridge currency to convert different types of currencies in real time. In addition, it has received significant support from regulators in several countries.
How to Buy and Sell Cryptocurrencies?
To trade cryptocurrencies successfully, you need to follow some basic steps:
Research the market, study trading tools, understand trading strategies and principles.
Manage risks, i.e. determine the level of risk and prepare stop-loss orders.
Planning trades, i.e. writing a strategy with all the objectives, goals, orders, etc.
Analyse the market in the past and present, as well as forecasts for the future.
Maintain discipline and control emotions; do not buy/sell out of fear or greed.
Learn continuously and adapt to changing conditions
If you follow all the points on the list, cryptocurrency trading will be painless even for beginners with no trading experience. In addition, for added security, you can start with a training account, which will allow you to practice trading.
The Main Advantages of Algorithmic Cryptocurrency Trading
Advantages of Algorithmic Trading
The main advantages of algorithmic trading of cryptocurrencies:
Efficiency and speed: Algorithms execute trades in milliseconds, working at a faster speed than humans.
Emotion-free trading: Ensures trading decisions are based on strategy and data, eliminating emotional biases.
Market monitoring 24/7: The algorithms are able to keep an eye on the cryptocurrency markets at all times, taking advantage of opportunities as they arise.
Backtesting for strategy optimisation: Traders can refine and optimise strategies prior to live implementation by backtesting algorithms using historical data.
Where To Trade Cryptocurrencies?
Trading transactions for the sale and purchase of bitcoin and other cryptocurrencies mostly take place on crypto exchanges, as there are greater guarantees for the security of transactions. They differ in terms of interface, set of functions, currency pairs, liquidity and the amount of commission for conducting transactions. In addition, when trading cryptocurrencies on the exchange, it is important to find out what data protection measures work during transactions and for accounts.
Before registering, you should check whether the exchange is available in the region you need and whether it complies with the laws of your country of residence.
General parameters for evaluating an exchange:
Reputation and security
Cryptocurrencies available
Cryptocurrency trading volume
Geographical restrictions and availability in the country
A platform suitable for cryptocurrency trading offers ample opportunities for productive trading.
Tools and Platforms for Algorithmic Trading
To start algorithmic trading on cryptocurrencies, you need reliable platforms and tools that can handle the intricacies of tactics. The best-known platforms are:
TradingView: A favourite among traders, TradingView is known for its robust charting tools and community-created scripts. Pine Script is a proprietary scripting language used by TradingView that allows it to design custom indicators and backtest methods.
MetaTrader: MetaTrader is a popular platform for stock and forex trading that also facilitates cryptocurrency trading. It has strong backtesting capabilities, automated trading via Expert Advisor (EA) and sophisticated graphical functions.
Coinigy: Coinigy is a comprehensive platform created specifically for cryptocurrency trading, which interfaces with several exchanges and offers numerous trading tools and real-time data. It enables sophisticated algorithmic methods and supports a number of trading bots.
Criteria-for-choosing-a-cryptocurrency-to-buy
Before we tell you how to start trading cryptocurrencies, we will give you some tips to help you choose them.
Look at historical data on the volume of purchases and sales of coins and the changes in their prices. Create a chart, e.g. in the form of a 'candlestick' to study the price dynamics over a given period of time, e.g. 30 seconds, a month or a year.
Invest in more than one type of coin. This will reduce your risks when buying and selling digital currencies. So, if you lose money on one, you can make it better on another.
If you are attracted to safe investments, take a closer look at Bitcoin. Although it does not guarantee a 100 per cent profit, it still beats many cryptocurrencies as large investment funds invest in it more frequently. In fact, in the period from 2010 to 2020, Bitcoin's value increased by 11,500,000%. If you are ready to take risks, take a look at other types of coins as well. To reduce risk, use the stop-loss or stop-market technique. It works as follows: the participant places a pending order in advance. If the asset falls in price, the market participant loses no more money than the set limit.
Algorithmic trading of cryptocurrencies offers a powerful means to quickly and accurately seize market opportunities. Traders can improve their trading performance and reduce risk by understanding how these algorithms work and applying the appropriate tools and techniques.
In Italy, but actually often also abroad, people go mining using VPN networks. Why, however, is this so important? There are several reasons: let us explore them together.
Anybody can make money selling cryptocurrencies, but to make a good income you need to know a few nuances, from choosing assets to working with them safely.
Financial markets have grown significantly thanks to algorithmic trading, and its influence has quickly spread to the cryptocurrency sector. Because algorithmic trading is so fast, frequent and computationally intensive, humans cannot compete with its capabilities. This method eliminates the emotional elements that often compromise trading performance and ensures efficiency in the trading process.
We have prepared a comprehensive guide for you, which will not only explain what to do with cryptocurrencies, but will also help you choose an exchange platform for trading and make money effectively in the digital finance industry.
What is a Cryptocurrency?
The cryptocurrency is electronic money that does not have a physical form and can be used for various transactions on the Internet. In essence, it is a means of payment that exists only in digital space. Cryptocurrencies can be issued by companies, organisations or individuals, but the process does not involve a particular country's central bank or other regulatory bodies.
Cryptocurrency operates on a blockchain system, which is a chain of information blocks. Each block is a record of a cryptocurrency-related action, for example the sale of a stablecoin while trading on a cryptocurrency exchange platform. Thanks to the blockchain, anonymity, security and transparency of transactions are guaranteed. And, most importantly, there is no state control over transactions.
How Does Cryptocurrency Trading Work?
Cryptocurrency trading consists of buying and selling BTC, altcoin, stablecoin and other crypto assets in the market to make a profit. In addition, cryptocurrency trading strategies can be implemented in an interval ranging from a few seconds to several years.
Because cryptocurrency markets are quite speculative and volatile, it is advisable to study the market situation at the beginning, draw up a trading plan and identify the basics of cryptocurrency trading. This information will be part of your strategy. In addition, cryptocurrency trading, both for beginners and experienced traders, includes several basic principles and steps that all participants should consider:
What is Cryptocurrency Trading (Crypto Trading)
Cryptocurrency trading is rapidly gaining ground. In connection with the growing popularity of cryptocurrencies, an entirely natural question arises: what is cryptocurrency trading? It is the buying and selling of cryptocurrencies in order to make profit on the price difference.
Cryptocurrency trading is very similar to traditional trading, but the asset in this case is cryptocurrency, and transactions are made on cryptocurrency exchanges. However, this is not the only feature that the two types of trading have in common. There are other characteristics:
The main goal of any trading transaction is to buy at lower prices and sell at higher prices. This is what guarantees profit. However, cryptocurrency trading has special characteristics due to the parameters of the cryptocurrency market:
Decentralisation allows cryptocurrencies to be sold without any external control. There is no central authority to change the conditions, like the Central Bank, which changes the reference rate to manage inflation.
What are the Types of Cryptocurrencies and How to Choose the Right One?
To learn how to trade cryptocurrencies, you need to know what types of cryptocurrency are the most promising and suitable for making money. Let's take a look at the most popular types of digital assets and talk about each of them.
Bitcoin (BTC)
This is the first decentralised cryptocurrency that stimulated the development of the cryptocurrency trading market. Initially it was used for mining, but today it is unprofitable for the average user. However, BTC has a record capitalisation and the total price of all bitcoins represents half of the global cryptocurrency market.
In the next two years, Bitcoin will no longer be issued, as the limit on its mining will end. This is a necessary measure to ensure that the digital currency does not lose value. Today, it is mainly used as a means of payment and as a means of storing assets. As of 2024, there are more than 19 million BTC in circulation.
Tether (USDT)
This digital cryptocurrency is issued by Tether Limited, so it is centralised. As of 2024, there are more than 83 billion units in circulation. USDT is tied to the US dollar. Usually, 1 unit of the asset is equal to 1 US dollar.
The price of USDT is supported by cash, securities and other crypto assets. The most popular of these is a stablecoin. The price of this coin is tied to fiat currency, i.e. the currency normally used by states.
USD Coin (USDC)
In fact, this is a competitor to USDT, launched by the Circle payment system. The rate of this digital currency is also tied to the US dollar and should ideally be 1 to 1, but sometimes the asset can suffer declines in value in the market.
USDC has received support from large investors and renowned developers, so it has quickly capitalised. Moreover, thanks to its implementation on the important Coinbase exchange, it has acquired many holders. Just like USDT, USDC is a centralised currency.
Ethereum (ETH)
This is a very popular global cryptocurrency as well as a decentralised blockchain platform. Ethereum can be used to create smart contracts, decentralised applications and other similar services.
Like other popular digital assets for trading, ETH is available on most exchanges. The market capitalisation at the beginning of 2022 was $400 billion. As of August 2022, there were 1,121,920 transactions with Ethereum each month.
XRP
This is a cryptocurrency that provides cheap and fast international payments. It can be used in interbank settlements. The liquidity problem of XRP has been solved by using it as a bridge currency to convert different types of currencies in real time. In addition, it has received significant support from regulators in several countries.
How to Buy and Sell Cryptocurrencies?
To trade cryptocurrencies successfully, you need to follow some basic steps:
If you follow all the points on the list, cryptocurrency trading will be painless even for beginners with no trading experience. In addition, for added security, you can start with a training account, which will allow you to practice trading.
The Main Advantages of Algorithmic Cryptocurrency Trading
The main advantages of algorithmic trading of cryptocurrencies:
Where To Trade Cryptocurrencies?
Trading transactions for the sale and purchase of bitcoin and other cryptocurrencies mostly take place on crypto exchanges, as there are greater guarantees for the security of transactions. They differ in terms of interface, set of functions, currency pairs, liquidity and the amount of commission for conducting transactions. In addition, when trading cryptocurrencies on the exchange, it is important to find out what data protection measures work during transactions and for accounts.
Before registering, you should check whether the exchange is available in the region you need and whether it complies with the laws of your country of residence.
General parameters for evaluating an exchange:
Popular exchanges:
A platform suitable for cryptocurrency trading offers ample opportunities for productive trading.
Tools and Platforms for Algorithmic Trading
To start algorithmic trading on cryptocurrencies, you need reliable platforms and tools that can handle the intricacies of tactics. The best-known platforms are:
Criteria-for-choosing-a-cryptocurrency-to-buy
Before we tell you how to start trading cryptocurrencies, we will give you some tips to help you choose them.
Algorithmic trading of cryptocurrencies offers a powerful means to quickly and accurately seize market opportunities. Traders can improve their trading performance and reduce risk by understanding how these algorithms work and applying the appropriate tools and techniques.
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