What are trading bots

If you are tired of constantly sitting in front of charts and do not have time to react to market signals, it is time to consider switching to automated trading. Trading bots are digital assistants that take over the entire routine of a trader. Unlike a person who analyzes the market on his own, manually places orders and monitors price changes, a trading bot acts instantly and strictly according to a set scenario. It analyzes the chart, checks the signals of indicators, compares the current price with the conditions prescribed in the strategy, and makes a decision to open a deal or not.

What do trading bots do?

Many beginners ask: “Why do I need a trading bot when I can trade on my own?”. 

The answer is simple - cryptocurrency trading bots have much more functionality and convenience than manual trading.

Here are their main advantages:

• Automation of all trading
• Keeping statistics of transactions
• Instant reaction to market changes
• Trading via API
• Comprehensive market analysis
• No emotions

The main function of a cryptocurrency trading bot is the automation of actions. As soon as a suitable signal appears, the bot does not hesitate or hesitate, but immediately places an order to buy or sell. If the market turns around, the bot can quickly fix the profit or on the contrary close the position by stop-loss to minimize losses. Thus, trading with bots becomes not only faster, but also more disciplined, because emotions are completely excluded.

Modern cryptocurrency trading bots can do more than just buy and sell. They can keep statistics of transactions, calculate the risk of a position, accompany open orders, change take profit and stop losses on the fly, react to external trading signals, and interact with other systems via the API of the cryptocurrency exchange. For example, the Veles trading bot receives data directly from the exchange and instantly uses it in its algorithms.

Special attention should be paid to the ability of bots to process dozens of cryptocurrency pairs simultaneously. While a trader can analyze one or two charts, the bot is able to monitor dozens in real time. This makes it almost indispensable in a high-frequency trading environment, especially when algorithmic trading is used.

How trading bots work

The work of a trading bot starts with connecting to a cryptocurrency exchange via the crypto exchange API, which is a special program interface that allows the bot to exchange data with the exchange in real time. With its help, the bot receives quotes, monitors the balance, checks the history of transactions and most importantly, places orders to buy or sell.

Inside any trading bot is an algorithm - a set of rules that determine how to act in a particular market situation. For example, a strategy may say: if the price crosses the moving average from bottom to top and the volumes grow, the bot should open a long position. If the conditions change, the algorithm analyzes it and closes the deal. Everything happens automatically, without human participation.

When the bot is running, it continuously scans the market using technical analysis indicators or cryptocurrency trading signals. This can be RSI, MACD, stochastic, candlestick patterns or even your own signal systems integrated into the crypto-bot strategy - in general, anything you want to use. In turn, the Veles trading bot allows you to use complex combinations of indicators, filter inputs and combine multiple logics within a single algorithm.

Once the bot receives the desired signal, it immediately forms an order and sends it to the exchange. It can also set take profit and stop loss levels, monitor the position and, if necessary, adjust orders depending on changes in market conditions. This allows not only to enter a trade at the right moment, but also to accompany it to the exit, which is especially important in volatile conditions.

However, on the user's side there is an unchangeable task - customization of the trading bot. You need to set the parameters by which the bot will act: risk limits, list of assets, working indicators, profit targets and other parameters. In Veles Trading Bot this process is maximally simplified: a trader does not need to know the code, just choose a strategy and enter the parameters in a convenient form. This is how the bundle works: the user sets the rules, the bot implements them automatically and algorithmic trading turns into a systematic process, free from emotions and errors.

Types of trading bots

The creation of trading bots depends on the trader's goals. Below are the popular types:

• Grid bot
• Trending bot
• Signal bot
• Arbitrage bot
• Customized bot

Grid trading bot

A grid bot builds a “grid” of orders on a certain price range. It places several buy and sell limit orders at a step predetermined by the user. As soon as the price starts moving up and down within this grid, the bot locks in profits at each step - buying on the pullback and selling on the momentum. This approach is ideal for flat markets with pronounced volatility. Veles trading bot allows you to flexibly customize the parameters of the grid, adapting the strategy to different trading pairs and market conditions. Grid trading bots are especially popular on exchanges with low commissions, such as Bybit

Trend trading bot

This bot focuses on market movement in one direction - up or down. Its task is to identify the current trend and open a position in its direction, holding it until the phase change. Cryptocurrency trend trading bots use indicators like moving averages (MA), ADX or price channel. They are good in markets with steady movements, such as when bitcoin is rising or during altcoins falling. Setting up a trading bot on a trend pattern allows you to get the most out of prolonged impulses while minimizing noise from corrections. This approach is increasingly used in trading bots 2025, especially when trading on news and fundamental events.

Signal bot

Signal bots are systems that open deals not based on technical indicators, but on external trading signals. Signals can come from analysts, Telegram channels, paid services or through integration with informer bots. When a signal arrives, the trading bot automatically opens a position, observing the set parameters of risk and capital management. This approach is convenient for those who do not want to build their own strategies, but prefer to follow other people's recommendations. Veles Trading Bot offers connection to internal and external signals, as well as a built-in signal management system.

Arbitrage Bot

An arbitrage bot makes money on the price difference of the same asset on different exchanges or markets. For example, if Ethereum costs $1,850 on Binance and $1,870 on Bybit, the bot will buy cheaper and sell more expensive, recording a profit for each round. Such a bot requires high speed and stable API connection, as well as instant response. Bybit arbitrage trading bots are usually used in tandem with other exchanges where price deviations are observed. However, you need to take into account commissions, transaction delays and exchange limits - they can eat up all the potential profit. Nevertheless, competent customization of a trading bot allows you to benefit from such opportunities without human involvement.

Bot by indicator or custom strategy

This is the most flexible option, when the creation of trading bots is based on its own rules and logic. The user chooses which indicators to use, how exactly they should interact and what actions to perform when receiving a signal. For example, it is possible to create a cryptobot strategy that opens a trade only when the moving average is crossed simultaneously and confirmed by stochastics. The Veles trading bot provides a visual builder where such strategies can be assembled without programming. The user can also backtest the strategy to make sure it works before launching it into the market.

Can trading bots lose money?

Despite all the technological advantages, a trading bot is not immune to losses. It is not a magic “earn” button, but only a tool that operates strictly within the set parameters. And if the market conditions change too quickly or the strategy is set up incorrectly, the trading bot can not only fail to bring profit, but fix a series of losing trades. However, let's understand why this happens and what is the power of automation.

The main reason why cryptocurrency trading bots can lose money is market volatility. Sharp news, whale manipulations, sudden liquidity spills can break any, even the most precise strategy. That is why the setup of a trading bot should be as clear as possible, taking into account all possible risks. 

Another important factor is the quality of the strategy itself. Even the most advanced trading bot will not be able to show results if the algorithm on which it works is unprofitable or built on outdated logic. That's why it is important to conduct a backtest - testing a strategy on historical data - before launching it into the market. This helps to identify weaknesses before the strategy is used in real trading. Without this testing, algorithmic trading turns into a blind game, and the chances of losing your deposit increase dramatically.

One should not forget about technical risks - internet problems, failures on the exchange side, errors in the API or in the logic of signal processing can also lead to unexpected consequences. Although many bots, including Veles Trading Bot, already have protection against most of these failures, it is impossible to completely exclude them.

Trading bots and strategies

The combination of a trading bot and strategies is the foundation on which all automated trading is built. The bot does nothing by itself. It is just a performer, precise and unemotional. And what exactly it will do depends entirely on the trading logic that was put into it. That is why choosing and setting up a strategy are important moments for any trader working with automation.

Each cryptobot strategy is a set of conditions under which trades are made. These conditions include entry signals, exit rules, risk levels, profit targets, limits on the number of open positions, and even behavior in case of a flat market. Depending on how all this is set up, the bot can be aggressive, conservative, trend-following, scalping or grid trading. Creating trading bots with different strategies allows you to adapt to any market phases - from growth to deep correction.

For example, with the Veles trading bot, traders can choose ready-made strategies and have the opportunity to customize their own. Here you can choose a model by type: “follow the trend”, “work from the channel boundaries”, “use RSI + MA” or “enter on level breakdown”. Also, do not forget about the available function in the form of backtests - runs of the strategy on historical data. Thanks to this tool, you can understand how the strategy would have behaved in the past, what drawdowns it could give and how many trades were profitable. Without such a test, launching any strategy in the real market is a lottery, especially on volatile assets.

Modern cryptocurrency trading bots can work with multi-strategies - this means that one bot can monitor several trading signals at the same time. For example, when moving averages cross - open a position, and if RSI enters the overbought zone, then partially fix the profit. Trading bots are able to combine classic indicators and custom conditions, which makes the behavior flexible and accurate.

It is important to realize that one strategy cannot work forever without adjustments. The market is still dynamic - what worked in a bullish cycle can be detrimental in a sideways or down-trend period. That is why successful traders use portfolios of strategies and update them periodically. You should also keep an eye on cryptocurrency trading signals, which can complement or correct bot behavior, especially at times of news, halving, listings or liquidity drain.

And if you're not sure where to start or which strategy to choose, you can always contact our technical support. Veles team will help you with choosing, launching and customizing the right trading solution. And, of course, don't forget that when you register on the platform you can get a $5 bonus, which will be a good start to get acquainted with the world of automated trading.

FAQ

1. How to choose a trading bot?
Evaluate: whether there is a backtest, support, integration with exchanges, simplicity of the interface. Try Veles trading bot, it is great for beginners.

2. Do I need programming knowledge?
No. Modern trading bots are customized through a visual interface.

3. Can I start with a minimum deposit?
Yes. Many cryptocurrency trading bots work even with $5-50.

4. Can I run multiple strategies?
Yes. You can run parallel trading on Veles with multiple assets and algorithms.

5. What should I do if I don't understand how it works?
Just contact support - she will help you set up the trading bot and explain all the steps.