Want to learn how to build a crypto trading bot to automate your trading strategy & maximize your gains while you sleep? Find out more in our how-to guide 🤖
Want to learn more about what crypto trading bots are and why investors use crypto trading bots before you dive in? We’ve got you covered with our best crypto trading bots guide.
How to build a crypto trading bot
There are two options for building a crypto trading bot:
- Build your own crypto trading bot from scratch: This requires technical knowledge of coding language(s), as well as APIs.
- Use pre-built crypto trading bots: Far less technical knowledge is required, but you may be limited in how much you can customize your bot.
Fortunately, we’re covering both!
What skills do you need to build a crypto trading bot?
There are a few technical skills you’ll need before you can consider building a crypto trading bot from scratch, including:
- API understanding and access: An API (Application Programming Interface) allows two computer programs to communicate with each other. Most crypto exchanges allow you to generate API keys easily, but you'll need to make sure you have the right permissions in order for your crypto trading bot to execute trades correctly.
- Knowledge of trading strategies: It’s not much use having a crypto trading bot without a clearly defined trading strategy to execute on your behalf. There are many trading strategies to pick from, such as arbitrage trading, technical trading, and leverage bots.
- Analytical skills: Not all crypto bots are made equal. The best-performing bots are made by developers who analyze market data and create effective trading algorithms.
- Historical market data access: Testing your bot before you let it loose with your crypto is vital and it’s where backtesting comes in. Backtesting refers to giving your bot access to historical market data to see how your bot performs and make improvements or fixes.
How to make a crypto trading bot from scratch in 5 steps
- Pick a trading strategy
- Define the architecture of your bot
- Write your bot
- Backtest your bot
- Connect crypto exchanges & deploy
1. Pick a trading strategy
There are many different kinds of bots - so you'll need to start by selecting what kind of bot you want to build. Some popular bot strategies include:
- Arbitrage bots: These bots spot price discrepancies over different exchanges and buy from one and sell to another in order to make a gain from the price imbalance.
- Market-making bots: Market-making bots buy and sell assets at given price points in order to make a gain on the difference between the bid and ask prices (AKA the spread).
- Technical trading bots: Technical trading bots use predefined technical indicators in order to predict future price movements of a given coin to make a profit.
- Margin trading bots: Margin trading bots use leverage in order to execute larger trades to multiply gains. Beware though, leverage goes both ways, so it can also multiply your losses.
- Coin lending bots: Coin lending bots loan out assets in order to earn a return, and save you time by automating the loan process.
You’ll need to have a clearly defined trading strategy before you can move on to creating the architecture of your bot.
2. Define the architecture of your bot
In this context, architecture refers to all the processes involved that make up how your bot works, including the market data or indicators it uses, trading algorithms, the API it uses, the script it uses to execute, and more. You can think of it as the metaphorical nuts and bolts of your bot.
You need a clearly defined architecture before you can begin writing your code.
3. Write your bot
With everything clearly defined and planned, it’s time to get writing your code. There are plenty of GitHub pages available to help you get started with the foundations of your robot with open-source code, or you can do it from scratch.
4. Backtest your bot
Once you've created your bot - it needs a pilot run to test the code works as you want it to, or to optimize the code even further to get the results you desire. Backtesting lets your bot use historical market data to identify any bugs, as well as tweak your bot for performance. Generally speaking, the more testing you do the better, so take your time on this step.
5. Connect crypto exchanges and deploy
With your bot ready to go, it’s time to move it into the live environment and deploy it by connecting your crypto exchanges. This involves collecting all the API keys for the crypto exchanges you're looking to use your bot with.
We've actually got instructions for how to get API keys for hundreds of crypto exchanges on our integration pages - but for our crypto tax calculator, we only use read-only API keys. For your bot, you'll need different permissions, like the ability to trade assets, as well as the ability to transfer and withdraw assets if you have an arbitrage bot. So if you use our instructions, you’ll need to make sure you’re changing the permissions to the correct ones for your crypto trading bot.
Once you've connected to your crypto exchanges, you can deploy your bot and start trading. Although you should have tested it already, it's always wise to start with small funds and build up, as your bot may need further optimization in live market conditions.
How to build a crypto trading bot without coding
Not all of us have coding knowledge, nor the time to learn how - which is where pre-built crypto trading bots come in, and there are hundreds of existing bots to pick from.
While you’ll often pay a fee annually to use your bot, it’s not always the case, many crypto exchanges including Pionex and Binance offer free trading bots to encourage you to use their platform.
Choosing the right crypto trading bot depends on your trading strategy, technical skills, and the exchanges you want to use. You can find loads of helpful information to help you find a bot in our best crypto trading bots guide.
Once you’ve chosen the crypto trading bot you want to use, deploying your bot is usually as:
- Signing up for your chosen trading bot platform.
- Setting up your bot. Most tools have step-by-step on-screen prompts to help you do this.
- Explore the simulated funds step. This is a simple backtesting option many crypto trading platforms offer to users to help them customize their bot correctly before deploying with live funds.
- Connect your exchange(s). Most crypto trading bot tools have single-sign on with exchanges, or instructions on how to get the API keys you need with the correct permissions.
- Launch your bot. Make sure you monitor its performance carefully and start with a small amount of funds to make sure it’s working as desired.
More questions? We’ve got you covered.
Is it possible to create a crypto trading bot?
Yes! No matter your knowledge of programming languages, you can create a crypto trading bot. You can either create your own bot from scratch or use a crypto trading bot platform to skip some of the more technical steps.
Is building your own crypto trading bot worth it?
It really depends on your coding skills and free time. If you have the skills and free time to code a bot from scratch, it's a great option that will help you automate your investment strategy for free. If you lack the programming knowledge and don't have the time to learn, a crypto trading bot platform can help you get a trading bot live in a fraction of the time.
What is backtesting?
Backtesting is a modeling method that allows investors to see how well a given strategy may have worked in historical market conditions. It can give you valuable insights to allow you to optimize your strategy, or identify any bugs with your trading bot.
What's the best language to create a crypto trading bot?
Python is generally regarded as the best programming language for crypto trading bots thanks to the large GitHub directory of existing open-source code, and community. This said, if you know another programming language that you're more confident in, this may be the better option for you.
Are API keys for crypto trading bots safe?
Your API keys are as safe as you (or your platform) are. API keys need to be properly secured and stored as if a hacker gains unauthorized access to your API keys, they may be able to steal your funds or other sensitive information. This is why it's really important you use a trusted crypto trading bot platform and secure exchanges, as you're trusting both with your funds. In fact, following the collapse of FTX, many users with active APIs on the exchange claimed there were unauthorized trades potentially due to a database leak relating to API keys.
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