Beginner’s Guide to Crypto Trading Bots — Part 18 — The Signal Bot

Possible the most powerful bot in our toolset, but totally dependent on the quality of the signal!

C.W.Morton

Jun 26, 2024

Possible the most powerful bot in our toolset, but totally dependent on the quality of the signal!

Source : Straico AI. Prompt : Signal Trading Bot at a switchboard

The Signal Bot

Profile
Best for : All Markets
Profit Expectation : Variable
Risk : Variable

A signal bot is a very simple concept to understand, but can be complicated to create and deploy.

The most common variety will:

Look for a signal. This can be market news, price action triggers, an online channel for market triggers, no limit to what your signal can be or where it can come from.

Once the signal occurs, the script will:

Purchase or sell a coin when that predefined trigger is activated

One example might be having an automated script “listen” for specific keywords on a popular crypto website, then based on those keywords, examine price action, and if the action conforms to your expectation, buy or sell an asset.

If a particular whale trader shares some “big news” on their primary discord channel, and your script grabs that news and then sees that coin price is taking a sharp sudden move, you might decide to code your bot to enter a position at market price and sell at a predefined limit for gain. This would all be custom programming, but I mention this to give a general idea of what is possible.

Combining bot concepts — you might program a signal bot to execute a short (futures) when it detects bad news from a coin, so you enter your short position as fast as you can waiting for the dip to occur in response to the news.

Or you might become good at reading chart patterns and decide to make a signal bot that searches for price movement patterns and triggers your buy or sell based on candlestick patterns. Oh the Possibilities….

Source : Make Workflow Integration Scenario

^ Signal Trading Bot built with a popular workflow builder, Make ^

My Make Affiliate link : https://www.make.com/en/register?pc=cascadia3d

Thank you if you sign up for Make.com using my link! It will help me keep writing these articles. The Binance module featured above is currently only available to non-USA users, so unfortunately I can not build one of these bad boys. I hope this info helps others out there!

Advantages of a Signal Bot

Take Advantage of External Data to Make Profitable Trades: A signal bot is more about acting on clues that the market will move, and entering or exiting your positions right before or immediately after the price change starts to gain momentum.

Disadvantages of a Signal Bot

Timing is Everything: Just because you get a signal, doesn’t mean the bot will move fast enough to act on it. And not all signals pan out. You might get a signal, the bot may execute a buy, and then nothing happens, the signal proves to be a false alarm. If you have a lot riding on faulty signals, this can cause big losses.

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