11:26 28/04/2023
How to Build a Crypto Trading Bot
www.devteam.space /blog/build-a-crypto-trading-bot/
How to Build a Crypto Trading Bot
Aran Davies ⋮ 18-23 minutes ⋮ 14/4/2022
Since the beginning of the cryptocurrency boom that started in early 2017, people all around the world have
been clamoring to trade in bitcoin and other altcoins. The problem with any commodity in the global
marketplace is traders cannot be at their station 24 hours a day, 7 days a week.
Apple co-founder and tech guru Steve Wozniak recently admitted that he had sold his entire holdings of
bitcoin because he had grown tired of constantly looking to see what the price was. Even the most
dedicated trader will not want to spend their entire life staring at cryptocurrency price charts either.
Trading in cryptocurrencies is particularly addictive because the market is highly volatile. Bitcoin prices can
and have dropped by as much as 25% in a day. While investors who are in for the long term might not worry
about taking advantage of such fluctuations, cryptocurrency traders can make huge amounts of money from
such volatility.
The solution to this problem is the trading bot. Such bots have been used by companies to set
buy/sell commodities on global stock exchanges for decades. Trading bots help to automate the process
and thereby relieving pressure on companies and traders.
Trading bots are software programs that use API’s to interact with financial exchanges. They actively
monitor exchanges around the clock and will react in accordance to whatever predetermined criteria they
have been programmed with.
How do crypto bots work?
To give a basic example, if a trading bot has been told to buy a commodity once the price hits $1 or lower,
and sell once it hits $2, it will act in accordance with these limits, hopefully making a profit.
A cryptocurrency trading bot operates on these exact principles to facilitate the buying and selling of bitcoin
and other cryptocurrencies.
Different bot trading strategies
Crypto trading bots rely on algorithmic trading in order to run and process complex mathematical formulas
and automate and accelerate the trading process.
So, how do you do algorithmic trading?
Trend Following Strategy
This is the simplest trading strategy in which the bot responds to direct market changes. Trend following
doesn’t require complex algorithms that need to factor in such things as predictive analysis etc., and so are
very simple.
Arbitrage
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The arbitrage model involves cryptocurrency bots exploiting the difference in prices between the numerous
cryptocurrency exchanges throughout the world.
Since there is no one centralized exchange to determine the price of a cryptocurrency – a role that with fiat
money is filled by the central banks – for this reason, prices vary from exchange to exchange.
South Korean exchanges, for example, have historically had a higher price than U.S ones, so offering good
potential profits for anyone trading between the two.
Trading bots help traders take advantage of this differential by allowing them to trigger trades when certain
price differentials are met.
Market Making
The market-making strategy allows traders to buy and sell high volumes of currency and profit from the
spread. In order to be able to trade such volumes, market-making traders rely on trading bots.
For a complete list of the main types of trading strategies, you can read this list.
List of the best cryptocurrency trading bots:
BTCRobot
Gekko
Zenbot
CryptoTrader
Haasbot
Finally, let’s tackle the most important question – how to build a trading bot.
How to build a crypto trading bot
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How to Build a Crypto Trading Bot
Do it alone: Download an exisiting open-source bot
There are several ways that you can build a crypto trading bot. The cheapest and easiest approach is
simply to find an open-source crypto bot that you can download and use straight away. This requires only a
minimal amount of technical knowledge and helps to keep costs and development time to a minimum.
However, in order to build in your own features, continue development, and fix any bugs/security issues,
etc., you will need to retain at least one expert software programmer. Since the bot has already been
developed, the downside is that this approach often makes it harder to build in your unique features or
adapt its trading algorithm.
Best open source crypto bots:
Gekko
Zenbot
Start from scratch: Get a great dev team together and start coding
Cryptocurrency trading software development can be both a personally and financially rewarding thing for
those people who are able to be successful at it. The most important part of this approach is ensuring you
have a team that is filled with passion and dedication, as well as all the relevant skills and experience, of
course.
The most basic trading bot can be built in a matter of weeks. One such example is the arbitrage crypto
trading bot built by Carlo Revelli. His bot allows for the trade between two exchanges, Etherdelta and
Bittrex, and was created using his “own python etherscan API wrapper and pythereum to create the
transactions and etherscan to publish them”.
You can read more about how he created his bot in his article How to make your own trading bot.
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How to Build a Crypto Trading Bot
To create a more sophisticated trading bot, which can trade on multiple exchanges, will naturally take more
time. More time will also be needed for creating the algorithm and ensuring that there are no obvious
security flaws that can be exploited by hackers.
Key steps to creating a trading bot from scratch
1. Decide on the programming language you will use.
It is a good idea to select a familiar programming script to write your bot with. Python, Javascript, Perl, and
C are the most commonly used languages for crypto bot development. The advantage of using such wellknown programming languages is the ability to easily bring in other developers to help write/fix the code
should you need to.
Finding a reliable Python trading bot tutorial, for example, can make things much easier for you.
2. Getting hold of your APIs
Before you begin coding you will also need to get hold of the APIs that allow your bot to access whichever
exchanges you want your bot to trade on. The good news is that all of the main cryptocurrency exchanges
offer APIs to allow access to their currency data.
API links for main currency exchanges:
Coinbase
Kraken
Bittrex
CEX.IO
Poloniex
3. Create accounts with all the exchanges you will use
Account creation is a relatively straightforward task. Please keep in mind that different exchanges have
different procedures for setting up new accounts. Some exchanges require personal information to be
vetted and approved while others allow for anonymous trading. Vetting takes more time, so factor this in
when project planning.
4. Pick a bot trading model
Trend following, Arbitrage or Market Making etc.? Keep in mind that more complex trading models will
require more development time.
5. Architecture
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How to Build a Crypto Trading Bot
Your bot’s architecture will have massive implications as to how it functions and performs. Key to a how a
bot operates is deciding on the algorithms it will use to interpret data. Algorithmic trading is a massive
industry that makes billions of dollars each year in profits.
For any algorithm, the mathematical model on which it is based must be solid. If it is not then it is likely that
the bot will either prove to be unreliable or will end up losing money. You can read more on the topic of
mathematical modeling via this link.
Part of the process involves clearly defining the type of data you want your algorithm to interpret. For more
complex trading models you will need your bot to be able to identify such things as market inefficiencies etc.
This means it will need to be able to analyze historical trends as part of its function.
All of these things need to be considered before you get down to create a trading bot.
6. Creation
Once you have outlined your bot’s architecture you can get coding. Naturally, this will be the most timeconsuming part of the process. If you have a team of developers working on different parts of the bot then it
is vital to make sure that you have good project management/communications procedures in place.
Start by opening a group chat on Slack or a similar program where every member of the team can talk to
one another. Hold weekly meetings to make sure each and every member knows where the project is and
what problems have been encountered etc.
7. Testing
Testing has two key functions. Firstly, it is to make sure your bot functions as it should and is able to cope
with the kind of data fluctuations that will be thrown at it. Factors such as risk vs. reward and modeling
errors such as ‘overfitting‘ should all be evaluated at this stage.
The second function is in fine-tuning performance. Keep in mind that what I mean by performance is
optimizing the kind of behavior that you want your bot to exhibit.
By increasing the level of risk that the bot factors in, for example, you increase the chance of higher returns
but also decrease the effectiveness of your bot to respond to high levels of price fluctuation, etc.
8. Live Deployment
Once you have ironed out any issues, you are now ready to set your new auto cryptocurrency trading bot
loose on the markets. While you might dream of making instant fortunes remember that no platform in
history has ever been launched without experiencing teething problems.
A good trading bot is an evolutionary thing. The more you put into its development the more you will get out.
Constant monitoring of your bot’s performance is definitely recommended, at least for the first few months.
After that, you should be confident enough to let your bot get on with it without much need for supervision.
Cut out the hard work: Pay an outsource development team to create your trading bot
If your company wants to ensure a smooth and easy project development then the best way is to hire a
professional development team to do the hard stuff for you. A good dev team is likely to get the project
completed in a much faster time and ensure that the bot is the best it can be.
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How to Build a Crypto Trading Bot
Since a cryptocurrency trading bot will most likely be handling large sums of either yours or your client’s
money, reliability is hugely important. Currency markets are built on trust so your bot will need to be 100%
reliable for it to be successful.
If you have the budget, do yourself a favor and outsource the project to a great development company.
A word of warning
While I hope this guide has provided you with a good understanding of cryptocurrency bots and the process
of creating one, I feel that I should add a few words of warning regarding trading cryptocurrency in this way.
Assuming that you have built yourself a world-class trading bot that has no security or reliability issues,
traders still need to be aware of the dangers posed by trading in the cryptocurrency markets.
To start with, cryptocurrencies are still relatively new, meaning the market is largely unregulated. Prices are
prone to massive fluctuations, which as I said, does offer the chance to make enormous profits, but
inversely also could result in huge losses. Don’t invest money you cannot afford to lose.
A much better idea, now that you have created such a great trading bot, would be to charge others for the
pleasure of using your bot so that you can be assured of making money, and without having to take any
risks either. Whatever you decide, good luck in creating a great crypto trading bot.
Gathering important ideas: A few relevant apps to study
It helps if you study a few relevant apps and get a few ideas. You can gather some important ideas before
you undertake the software development project. E.g., you can analyze the features that these apps offer.
Study the following apps:
1. 3Commas
3Commas offers a smart trading terminal and auto trading bots. It supports a wide number of cryptocurrency
exchanges. This includes popular exchanges like Binance, Bitfinex, Bittrex, BitMEX, Coinbase Pro, Bybit,
OKEx, Bitstamp, etc.
3Commas supports various trading algorithms, furthermore, it helps in portfolio management. This app
supports paper trading. Apart from automated bots, 3Commas offers public APIs. Developers can integrate
them with their apps using the API keys provided by 3Commas.
2. Shrimpy
You can review Shrimpy, a cryptocurrency trading platform. It supports all popular exchanges in the crypto
market like KuCoin, Binance, Coinbase Pro, Gemini, etc. Shrimpy calls itself the social trading platform for
cryptocurrencies.
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The company helps you to incorporate automation in your trading strategy. Shrimpy offers all the relevant
features that you would expect in a comprehensive tool for the cryptocurrency market. Finally, the platform
has an impressive presence on social media channels like Telegram, Discord, Reddit, etc.
3. Gunbot
Among the trading bots in the cryptocurrency market, Gunbot is a prominent one. It supports all popular
cryptocurrency exchanges.
As other such platforms do, Gunbot helps you to analyze historical data. You can understand market
conditions better with the help of market data, furthermore, Gunbot helps you to manage your trading. It
helps you to with technical analysis.
You can analyze the effectiveness of your own strategies better with a platform like Gunbot. This platform
provides the required trading tools so that you understand profitability in real-time. You can then rebalance
your portfolio accordingly.
4. Cryptoshopper: A prominent choice for managing arbitrage, backtesting, etc.
Cryptoshopper is among the more popular crypto trading bots. Whether you want to backtest your trading or
manage all your exchange accounts, this platform can help. Automation apart, Cryptoshopper helps you to
understand the technical indicators.
Cryptoshopper helps you to judge when you can take profit. It helps you in rebalancing your portfolio,
managing your stop-loss orders, and any other relevant functionality. Cryptoshopper supports all key
cryptocurrency exchanges.
You might prefer trading pairs involving Bitcoin (BTC), Ethereum (ETH), or Ripple (XRP). Customizable
platforms like Cryptoshopper can help you to manage their preferences well.
5. HaasBot: Another famous one among Bitcoin trading bots
HaasOnline, also known as HaasBot, is another famous crypto trading bot. HaasOnline offers more though!
You can also use it as a tool to develop and deploy such bots.
HaasBot supports backtesting, notifications, reporting, paper trading, etc. This offers you a feature-rich
trading bot.
On the other hand, you can quickly develop a custom trading bot using the framework offered by
HaasOnline. It offers scripts, templates, and relevant tools for that. You can include support for the
exchanges you want.
HaasOnline supports on-premises deployment, which will help your data privacy requirements. You can also
opt for HaasOnline cloud, where you don’t need to manage the IT infrastructure. You can focus on software
development efforts.
Key considerations to remember when developing a crypto trading
platform or bot
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How to Build a Crypto Trading Bot
We talked about the key steps involved in creating a crypto trading platform or bot. You also need to keep
several considerations in mind. We now talk about them, which are as follows:
1. Creating a robust development approach
You need a sound approach when you undertake a software development project, and that’s true for
developing a crypto trading bot too. Your development approach should cover the following:
Identifying the appropriate technology stack to use;
Choosing the right set of open-source tools and frameworks;
Identifying the appropriate cloud platform;
Formulating the right application security solutions;
Deciding on the testing and DevOps tools to use.
2. Preparing a comprehensive project plan
Success in this project requires effective planning. Your project planning needs to cover various aspects,
e.g.:
Managing the business and non-functional requirements;
Choosing the right SDLC methodology;
Creating the project schedule;
Planning key aspects like risk management, communications management, quality management, etc.
Hiring and onboarding the right developers;
Metrics and measurements;
Stakeholder management.
3. Hiring the right developers
Hiring the right people is important in any software development project. You need to do that in this project
too. The first step is to choose the right hiring platform.
You can hire freelance developers on a freelancing platform. However, managing a project with part-time
freelancers can be hard. You might not get enough effort from freelancers. They might leave your project in
the middle, and you will need to hire replacement developers.
Choosing a software development company might help when you undertake a complex project. Developing
a crypto trading bot involves complexities since this involves niche skills. Software development companies
provide full-time developers. They also provide replacement developers if the original developer leaves the
project mid-way.
You need to interview the shortlisted candidates. Look for the appropriate skills, which would depend on
your project requirements. You might need developers with the following skills:
Thorough knowledge in programming languages like Java, Python, JavaScript, etc.;
Good knowledge of relevant tools, frameworks, libraries, etc.;
Expertise in appropriate cutting-edge technologies like “Machine Learning” (ML), etc.;
Sound knowledge of cloud computing platforms;
Good knowledge of popular relational database management systems (RDBMSs), NoSQL databases,
etc.;
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In-depth knowledge of RESTful API development;
Deep experience in developing scalable applications;
Sound knowledge of building secure applications.
4. Forming an effective team
We talked about the technical skills, however, forming an effective team is important too. You need
developers with the following competencies for this:
Problem-solving;
Communication;
Collaboration;
Passion for excellent;
Commitment to the project objectives.
Form a team that fosters collaboration and delivering tangible values to clients. You might need to form a
“Scrum team” since the “Scrum” technique facilitates teamwork.
Focus on following the appropriate processes for this project. This includes project status reporting,
resolving issues, etc. Remember to include code review in your project schedule, which helps to detect
defects earlier.
Frequently Asked Questions
What is a crypto trading bot?
It is a software application that allows automated trading in cryptocurrencies. The most simple crypto trading
bots simply buy and sell currencies according to preset pricing changes while the advanced bots use
artificial intelligence to improve their trades to maximize profits.
How do you code a crypto trading bot?
Define programming language
Define APIs
Set up infrastructure
Define trading bot strategy and architecture
Onboard developers
Outline sprints
Start building
What is the best trading bot for Cryptocurrency?
Cryptohopper is a great cryptotrading bot.
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