In the crypto market, crypto trading bots automatically trade one or more cryptocurrencies on one or more platforms on behalf of the owner or user. They are used to automate trading techniques to save time, execute strategies without human emotions, and ultimately increase earnings.
Recently, combining trading bots with moving averages has provided new ways for users to enjoy the trading experience. Now, by monitoring several moving averages, bots are able to detect trending pairs and automate the trade entry process.
In trading, moving averages are one of the most commonly utilized indicators by investors. Traders may use moving averages to identify trends or find entry and exit points for their positions.
However, Multi Moving Average bots can automate your trades to help you catch those trades that are more likely relevant uptrends and close the trade relatively qucik.
About the moving average concept
What is the moving average concept, you may ask?
In short, a moving average is a statistic that captures the average change in a data series over time. In finance, technical analysts often use moving averages to keep track of price trends for specific securities.
It is calculated by adding all the data points during a particular period and dividing the sum by the number of periods. Moving averages help technical traders to generate trading signals.
Algorithmic trading uses complex formulas, combined with mathematical models and human oversight, to make decisions to buy or sell financial securities on an exchange. Algorithmic traders often use high-frequency trading technology, which can enable a firm to make tens of thousands of trades per second.
Are Trading Bots legal?
Automated trading is a well-known and legal activity across most financial markets. Half of stock market trades in America are automated, and the process is 100% legal. Likewise, there are no laws prohibiting using crypto trading bots in most countries and on most cryptocurrency exchanges.
Many companies offer trading bots services to automate your investments on your favorite exchanges, for example, Coinrule’s automated trading bots.
Coinrule uses a smart trading bot tool for cryptocurrency platforms, allowing users to take complete control of their crypto trading while fighting back hedge funds with automated bots.
The Coinrule provides a wide choice of possibilities for traders who are unsure how to get started, with over 180 pre-built trading templates to choose from.
Furthermore, the technology offers real-time customer service and allows users to evaluate rule performance using past data. Coinrule also enables you to test your approach using extensive backtesting data, and you may trade 24 hours a day, seven days a week.
How to choose the best moving average concept?
Moving averages calculated with a few periods like the MA9 (the average of the previous nine price periods) react very fast to price moves providing prompt signals. On the other side, more signals may result in more false signals and more trades in a loss.
On the contrary, moving averages calculated with a higher number of periods like the MA100 (which considers the previous one hundred price periods) give more reliable signals, but with a delay.
A system catching the crossing of the MA50 over the MA100 is a good compromise for successful long-term strategies. It provides, on average, reliable buy signals.
The Multi Moving Average Crossing Strategy optimizes the exit without waiting for the same opposite crossing (MA50 below MA100). It uses the MA9 intersection below the MA50 instead to spot a better time for selling.
The setup is as follows.
- Buy when the Moving Average 50 crosses above the Moving Average 100
- Sell when the Moving Average 9 crosses below the Moving Average 50
The higher the time frame to calculate the Moving Averages, the better the strategy's overall performance. The 4-hour (or 6-hour) time frame seems the best, even if it results in fewer trades. If you want to trade more still with good results, the 1-hour time is a good compromise.
Using trading bots makes it possible to catch those that are more likely relevant uptrends and close the trade relatively quicker. This is especially effective if you run the strategy on all the available coins on the market or a specific currency.
Let’s look at an example of an automated moving average bot:
IF any coin has MA (50) crossing above MA (100) in a timeframe of 4 hours
BUY 100 USD of that coin with my BTC wallet
AND AT ANY TIME
IF that coin has MA (9) crossing below MA (50) in a timeframe of 4 hours
SELL 100% of amount bought of that coin to my BTC wallet
Essentially this rule will automatically buy any coin with the MA 50 crossing above MA 100 on the 4-hour timeframe and sell 100% of the amount bought of that coin when the MA 9 crosses below the MA 50.
Now, here is an example on the Ripple daily chart to examine how this would perform:
Generally, a Multi Moving Averages approach beats the classic crossing strategy involving only two Moving Averages. We backtested a sample of twenty trading pairs to assess the benefits empirically. The results show that the Multi Moving Average Strategy outperforms 13 out of 20 times, has a 95% higher average return, and has a 67% higher median return.