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How to Build a Crypto Trading Bot

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Swen Keller
In the crypto world Swen has consistently found success through his effective communication skills and the unique ability to navigate the details.
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To build a crypto trading bot, start with gathering ideas and resources. You’ll need to collect a talented and capable development team, adequate funds, and a roadmap. Building a trading bot requires commitment and dedication, with the support of an excellent development team, whose support is required even after launching the bot.

Build your own crypto trading bot with the help of this guide, covering essential questions like deciding on relevant trading strategies, programming languages, an API key, and more.

What is a Crypto Trading Bot?

As the name suggests, a crypto trading bot is an AI-based tool, designed to help traders take their crypto venture to the next level.

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    As seen in the past, investors have been known to make thousands of dollars overnight by making sound and lucrative decisions by studying the market data. However, doing it all is a tedious task that not only takes a lot of time and effort but can also take an emotional toll on the investors. A crypto trading bot does exactly this, without needing human assistance. A good trading bot can execute trades based on market sentiment, market conditions, and a specific trading strategy with parameters set by their owners.

    Operational Principles Behind Trading Bots

    Like any other autonomous AI technology, Crypto Trading Bots work based on certain guidelines and instructions upon which its limitations and boundaries are set. This acts as a safeguard against the cryptocurrency trading bot from going rogue and working against your trading strategies. While many fundamentals are behind a crypto trading bot, we’ll address the most common and important ones.

    Algorithmic trading: These bots rely on pre-defined algorithms and strategies within their system which are beyond the understanding of human capabilities. How they’re designed is beyond the scope of this guide, but it is important to note that these complex trading models in a trading bot are built by another bot.

    Data Analysis: A fundamental aspect of any trading bot is its ability to take enormous amounts of abstract data and interpret and process it to piece out real-time, valuable trading decisions.

    Technical Analysis: Bots are designed to study patterns in the market data, price charts, and other technical indicators as well as other factors like changes in the overall volume to formulate promising trading plans meticulously.

    Risk Management: Trading bots are laden with countless tools and features to reduce loss of investment like stop-loss limits, and take-profit to ensure financial gains.

    Back Testing: Before they execute trades, bots run them through a simulation to see how it would play out in both the long term and short term, and whether the transactions would add up to a profit. Only if a certain positive outcome is projected would it proceed with the trade.

    Real-Time Monitoring: Bots are continuously on the lookout for any discrepancies in the financial markets, ready to leverage any situation for the benefit of their investors.

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    What Can Crypto Trading Bots Do?

    While there are virtually limitless applications for trading bots, we will narrow them down and mention their most popular and common use-case.

    Automated Trading Bots:

    The most obvious reason a crypto trading bot is used for. Automated trading is a highly dynamic feature of this technology. It can be as simple as performing straightforward trades based on pre-defined conditions or adding layers to these transactions by integrating them into complex trading models. Some sub-types include the following:

    Machine Learning Bots (AI): Currently most trending in the crypto landscape, these novel bots use machine learning to analyze market data and predict price movements. Additionally, they can adapt their trading strategies based on their own performance, showing self-correction and capacity to learn from market dynamics.

    Arbitrage Bots: These exploit differences in the price of the same cryptocurrency between two distinct exchanges to make a profit. (Take advantage of the lower price to buy and sell it for a higher price over the following exchange).

    Market Making Bots: These bots add liquidity to the market, and work simply by buying and selling the same asset based on bid vs ask price. Learn more about this phenomenon here.

    Trend Following and Scalping Bots: These take advantage of bullish and bearish market sentiment and make profits over price movements (usually small). Trend-following bots are some of the most commonly used trading bots in the crypto world.

    Mean Reversion Bots: These trading bots operate on the idea that prices will return to their mean values, and purchase assets if the price drops below the mean value or sell it if it rises above.

    Portfolio Management Bots:

    Portfolio management refers to maintaining a solid presence in the crypto ecosystem, which is accomplished by diversifying your assets to solidify your net worth, ensuring that your finances aren’t significantly disrupted if a single or a few blockchain networks begin fluctuating.

    Since it is much easier for a bot to keep track of so many different blockchain networks and currencies, this task is much better suited for a trading bot.

    Market Analysis Bots:

    A trading bot can be used to constantly monitor and observe market conditions to find any gaps to get a competitive edge in the ecosystem. While you are the one who’s going to make the final call, it is a nice alarm system that goes off whenever a trading opportunity arises.

    Simulate Trading Strategies

    Many platforms like Trading View and Kraken Paper Trading offer a form trading bot that allows you to implement your trading strategies in a simulated market. The bot mimics the market trends and behavior as closely as possible and plays out your strategies, helping to distinguish between what’s profitable and what isn’t. Here, the trading takes place in a demo account type environment.


    This trading bot is designed to mitigate transaction risks using sophisticated techniques and tools. Converting investment into stablecoins, utilizing stop-loss orders, and implementing option contracts are a few ways it does this.

    Asset Protection

    A trading bot can enhance the security of your assets by transferring them to cold storage once they are no longer needed for transactions. This deters any security breach that could compromise the integrity of your assets, like unauthorized withdrawals or thefts.

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    Build a Crypto Trading Bot: Step-by-Step Guide

    Building your very own crypto trading bot can seem like a daunting task, but with us pointing you in the right direction, it’ll be a piece of cake. The secret behind building a working crypto trading bot is simple: stay focused and don’t let yourself astray from your goal.

    Step 1: Establish Your Objectives.

    Before starting with the layout of your bot, answer some questions, as these will help you focus on your project with a clear picture of what the final product should be.

    • What do you want this bot to do? Define these features meticulously.

    • What do you think this bot will help you achieve? Is it gaining profit, or is it risk management? Or is it something entirely different from the norm?

    • How much money can I risk? (To set safeguard parameters)

    • Do you have the funds to design it? Have you secured any funding for it?

    • What picture do you have in mind? Long-term or Short-term?

    • Which cryptocurrencies will this bot deal in?

    • Which exchange do you want it to function on?

    • Which programming language will you use? Python, JavaScript, or others?

    • Do you have the skills or team to develop a crypto trading bot?

    Step 2: Choose a programming language

    The first real step in designing your bot is to pick a programming language to start your journey of building a crypto trading bot. Popular choices include:

    Python: The most widespread and straightforward option out there, it also has a huge library of how to code for your bot. Additionally, libraries like CCXT and Alpaca Trade API has enough material for you to connect your bot to various exchanges without much hassle.

    JavaScript: Used in web-based trading bots (web browser), it is often used for server-side scripting and building asynchronous trading bots.

    Java: Known for being consistent and stable throughout these years, it is applicable in high-frequency trading bots and is thought to have a steeper learning curve when compared to Python.

    C++: Used to design the most sophisticated applications and tools, C++ is known to create the most smooth and fast-running applications, making it the perfect candidate for designing a bot for the HFT system.

    R: This language is mostly used in statistics and charts, positioning it as the ideal choice when designing bots aimed at market analysis, historical data analysis, and similar

    Step 3: Connect to Exchange via API keys

    To access the market data as well as to enable your bot to trade over it, you will need to provide it with access to an exchange. This is done by using a secret API key, which is a gateway for your BOT to send and receive information from these exchanges. Most platforms let you use an API key, and in fact, some require you to do so to authenticate your BOT.

    Step 4: Start from scratch: Get a great dev team together and start coding

    Here comes the tricky part, if you don’t have the skill level to do this, you may need to hire a development team for your BOT. Now is the time to finally commence constructing the code for your BOT. This step can be simple or complex, depending on how complicated your objectives are. This is the stage at which you’ll need to incorporate other features in your bot like risk management or technical indicators.

    Step 5: Test Your Code

    Run your beta version of the BOT through a simulation, such as paper trading, to determine whether it produces optimal results. Look for any flaws or shortcomings and determine whether it is performing as intended. Aside from testing on live simulated environments, it is necessary to work on historical data to determine whether or not it is working.

    Once you believe the BOT’s output is satisfactory and is ready to come out to the real world to show everyone its capabilities, you can evaluate it in real-world scenarios and whether it can handle real-life situations or not.

    Step 6: Constant Monitoring

    The final step in developing a trading bot is to continuously regulate and monitor the performance of your BOT, looking out for any bug or problem that may arise, requiring you to intervene. Most BOTs require some updates and work up after every few months or years due to the dynamic state of the market.

    Key considerations to remember when developing a crypto trading platform or bot

    In your journey to design your very own trading bot, certain factors can play out against you which must be kept in mind to avoid any losses.


    While BOTs can follow your guidelines, they’ll need to be updated every now and then which means they wouldn’t be able to keep up with the regulatory laws of the region you plan to operate in. Thus, when designing your bot, it is extremely important to keep in mind any regulations your BOT may need to consider before it executes trades.


    Make sure that you implement adequate security and safety measures, as the crypto landscape is notorious for being a target for hackers and scammers. Implement robust security measures like 2-factor Authentication (2FA), and store keys on a secure wallet, preferably using cold storage.

    Reliable Data Sources

    There are countless sources of data for you to utilize in your bot’s training. However, the accuracy of this data must be maintained at all times. Spurious data can adversely affect the decision-making process of a trading bot, skewing it against your interests.

    We suggest data from trusted crypto exchanges like Coinbase or Bitstamp, or well-established data platforms like CoinMarketCap.

    Strategy Design

    We can not overstate how important it is for you to thoroughly plan, design, and test the strategy for your trading bot. These strategies should not only align with the values, goals, and risks of your users but also should be tested multiple times before finally implementing them. A single mistake can cost your clients a substantial portion of their investment.

    User-friendly Interface

    Many developers forget they’re supposed to deliver a product that’s easy to use. Make sure you do not spend all the resources on designing the perfect trading strategies in your trading bot but lack the necessary interface for users to operate it smoothly. A well-designed trading bot is user-friendly, featuring an intuitive and straightforward interface.

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    Pros & Cons Of Using A Crypto Trading Bots

    Can’t make up your mind about Trading Bots? Here is a thorough analysis of their positives and negatives for you to decide.


    Automated trading. By using bots, you’ll never have to worry about manual transactions, which also removes the human error as a bonus!

    Increased Speed. Trading BOTs are much faster in conducting transactions than their human counterparts and can save you thousands of dollars by conducting transactions in the last second.

    Emotionless Transactions. Trading bots execute trades without human emotions or hesitation, which could otherwise result in financial loss due to impaired decision-making capabilities.

    Multiple Trades. BOTs can conduct multiple trades over a diverse set of assets, on different exchange platforms. This high level of multi-tasking gives BOTs a competitive edge over other traders in the market.

    Operate 24/7. While you’re bound by your human needs, a BOT isn’t. It can work all day every day and generate revenue for you without ever needing any rest.

    Customized Trading. Depending on your preferences Trading BOTs can execute trades based on your instructions. It’s like an underling working for you, but you don’t have to pay them and they work for you 24/7.


    Difficult Feat. Designing a working BOT without any limitations or shortcomings is a challenging process, often requiring an enormous amount of investment in time, money, and skill.

    High Initial Investment. Developing the Trading BOT can require substantial financial costs since you may have to hire developers, pay fees to exchange and cloud hosting, and other fees.

    Recurrent Maintenance. Trading BOTs require regular checkups and updates to keep them functioning appropriately due to the dynamic nature of the market. Certain strategies used by the BOT may no longer be lucrative, or be outright detrimental for your investment.

    Inability To Adapt. While it’s true most trading bots are designed to deal with the constantly fluctuating ecosystem of the market; the crypto landscape is at another level, with a very high volatile environment in which bots may struggle to adapt entirely.

    Loss Of Control. Some traders simply do not want to hand over control of their transactions to someone who isn’t even human. Putting your financial decisions in the hands of a machine requires a high level of trust in the technology, which not all traders have.

    Overfitting the BOT. Any trading bot is typically designed to perform market analysis based on historical data, but this can be counterintuitive at times due to changing demographics and market trends in the future. While the trading bot is busy accommodating transactions based on historical price data, future price movements can turn out to be quite different.

    Top Crypto Trading BOTs

    Here are some popular choices for many traders of crypto bots available online via a third party:-

    1. Crypto Hopper

    2. Kryll

    3. Cornix

    4. 3commas

    5. Gunbot

    Read more about the best crypto trading bot in our guide here. (includes open source bots)

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    Final Verdict: Are Crypto Trading Bots Worth It?

    Crypto trading bots have reshaped how transactions are occurring now, with over 85% of traders using some algorithmic trading strategies. While these trading bots might’ve helped traders when markets are bullish, they’ve consistently struggled to perform well under volatile ecosystems, a domain in which work is still needed.

    Regardless, it offers features a human could never accomplish like 24/7 operation and highly swift transactions. Investors who can harness the powers of these features are truly the ones who have benefitted from this novel technology overtaking the crypto world.


    Most frequent questions and answers

    Yes. Crypto trading bots can be highly lucrative, depending on how effective it is in delivering results. A trading bot with effective strategies that can leverage market conditions in its favor can make you thousands of dollars in a single day!

    No. Crypto trading bots are not illegal in most parts of the world. However, they still have to adhere to local rules and regulations and are often scrutinized by policing bodies like the CFTC. Remember that any bot operating under centralized finances must adhere to KYC (Know your customer) and AML (Anti-money laundering) regulations.

    Anywhere between $10,000 to $70,000+. Cost is divided between developing teams, cloud hosting services, exchange platform fees, acquiring data costs, and compliance fees (to the government). Of these, the most costly part is developers fee.

    Cryptohopper. With an intuitive and straightforward user-interface, crypto hopper offers traders an endless list of features ranging from automated trading and paper trading to thorough market analysis. It is also compatible with several popular exchanges like Coinbase, Kraken, and KuCoin. Moreover, its best part is providing all these features with a very feasible price range.

    3commas, HaasOnline, and Zenbot. These are the leading choices of most investors in Coinbase. These custom trading bots offer features like portfolio management, and open-source trading, and connect to multiple exchanges.

    Yes. Designing a trading bot from scratch is an extensive process requiring dedication and resources. Nonetheless, it is doable. Consider factors like funding, workforce, regulations, and timeframes before embarking on this arduous journey.

    Yes. In fact, you can probably make a lot more than a hundred bucks if you play your cards right. Experienced crypto traders can make thousands of dollars in a single day. Learn more about cryptocurrencies and trading on our website here, and hone your trading skills to start making money in crypto.

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    Skrumble.com provides all its content for informational purposes only, and this should not be taken as financial advice to buy, trade, or sell any investment instruments or products, including but not limited to cryptocurrencies, or use any specific exchange. Please do not use this website as investment advice, financial advice, or legal advice, and each individual’s needs may vary from that of the author. Investing in financial instruments, including cryptocurrencies, carries a high risk and is not suitable for all investors. It is possible to lose the entire initial investment, so do not invest what you cannot afford to lose. We strongly advise conducting your own research before making any investment decisions. This post includes affiliate links with our partners who may compensate us.

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