How to do automated crypto trading 26 May 2025

What is Automated Trading?

Trading is the process of buying one asset using capital from the asset you currently own. The best way to think of this is buying a second hand car, you will spend time exploring the features and condition of different cars before deciding on a car to buy.

Automated trading is the activity of setting up software to automatically carry out the trading on your behalf. Ideally, your automated trading strategies are based upon your existing trading strategies, but by running them automatically to optimise making profits.

Disclaimer

None of this article is trading advice, there is a high probability that using automated trading will not result in financial gain, indeed it is highly likely that it could result in loss.

Any data produced though back testing may show profits and losses but is not designed to offer any guidance on trading or offer promise of future profit.

Why you need to start automated trading

Ignoring the hype - a key benefit of using automated trading

Those participating in a market over many years will naturally try to educate themselves more, in the market of cryptocurrency, here are some things you may discover or wish to learn about;

• The project itself - does the project make sense, how easy is it to understand, is there real potential value in what it sets out to do?
• The sector - is the area this cryptocurrency resides within a real potential growth area? Examples could be data storage, another could be AI, online privacy, lending platforms
• Does the project have better features than higher market cap projects offering similar capabilities? One example could be Litecoin versus Bitcoin

A more important consideration is of the influencers within the space themselves;

• Does what an influencer says genuinely manifest? One exercise is to see what they announce on social media and evaluate what the price does
• Are you finding yourself waiting for something to happen because you are told the price will be X percent higher by the end of the year? Worse, do you steadily watch the price decline, but fail to act because you are holding out for a massive rise?
• How honest are the influencers? Do they admit their mistakes, their failings? Or are they only presenting a façade?

The main reason to start automating trading is to decide on your rules of trading and let the software act - without emotion.

Upcoming Automated Trading Platform offered through Crypto Statto teaser

Before proceeding on with the article, we would like to give you a little teaser on our new upcoming software.

If you wish to find out more, reach out to us at commercial@cryptostatto.com

We are currently road testing a new platform we have been building to conduct automated trading based upon rules we set. The primary aims of the software is;

• Rebalancing portfolios
• Generating cashflow
• Maintain and potentially increase asset amounts - i.e. increase the number of coins held

The precursor to doing this is primarily to improve on our main trading strategies through automation and take away much of the manual effort.

The platform itself - Trading as a Service (TaaS)

The platform is a set of applications and database(s) running in your own dedicated space, independent of all other users. It is designed to let customers manage their own rules to act against portfolios they assign permissions to. The platform is designed to allow users to set trade actions off the back of deltas between different values. An example could be a difference between the most recent price and last week's price.

The platform features a Trader's dashboard with three primary functions;

• To set up and manage your strategy's trading rules
• To view statistics and information on the data being used by the platform
• To report on trading and portfolio activity

The platform runs engines on a schedule, performing the following based upon a combination of trading pairs, market data, trade allocation rules, and your portfolio positions;

• Decision Evaluation
• Decision Execution

We expose most data held on the platform via an application/API on the platform too, meaning you can use this data for independent trading or producing your own reports.

Fundamentally, you can manually move assets off your portfolios to limit the amounts you are trading/holding/exposing on these portfolios.

We have plans to add our own indicators to the platform, and explore the possibility of adding additional external sources to the platform to allow more common indicators to exist.

There are some caveats, we will highlight for transparency;

• The platform is not designed to be a high frequency trading platform (HFT)
• The platform is not designed to do Arbitrage Trading
• We are not aiming to add all the many popular indicators provided on other popular platforms such as "Trading View". Example include; death crosses, golden crosses, Bolinger bands, Fibonacci levels, overbought and oversold indicators (RSI), etc.
• All trading exchanges have limits on the number of requests that can be performed per second, per minute
• Slippage in price is always a risk, but most exchanges will not accept orders below or above a price
• There are natural limits to the number of trading pairs offered by an exchange, the number of calculations that can be performed by our software. We only run four or five main strategies on a basket of perhaps 2-10 trading pairs.
• The process of Decision Evaluation and Decision Execution will not be a seconds based process. There are plans to scale out processing massively to get much faster decision evaluation times, but this is not in the current version

The platform is point-in-time based and looks at recent deltas to allow the platform to post orders to the trading exchange.

Using additional tools and technologies

A core principle of our software is not to replicate functionality that already exists elsewhere. For example;

• We are not attempting to build a platform like TradingView that has scripting capabilities within it and trading strategy sharing
• Profit and Loss is probably best covered by Crypto Tax software that already exists. We may look to incorporate some data from these platforms if enough customers require it
• We erred away from centralised trading engine platforms

For this reason, we recommend considering trading in its entirety - not expecting a single platform to meet all your needs.

We welcome feedback - www.cryptostatto.com/contact

Disadvantages of Automated Trading

A money printer, just making money sounds too good to be true, a myriad of complexities can lead to disastrous consequences. We cannot list them all here, but here are some common issues with automated trading.

Day trading can show potential moves that most algorithms have not accounted for

Setting up trade rules to investigate different indicators is a very time-consuming process. Significant testing will need to be undertaken to validate the system's indicators aligns with your expectations. What manually looks like a bull flag could be very hard to replicate with code.

Software is designed to behave on instructions, and not wider spread market conditions

Imagine you have a trade rule that will buy a certain amount of an asset if the price falls by a certain percentage. When trading manually, you may have your own check you perform. If the software does not contain that check, your software may buy that asset when you would usually not buy it.

There is a cost to Automated Trading

Retail day traders and casual swing traders can find enough free online resources to help them manually inform their decision making process. Once you start investing in automated trading, the cost is not simply financial but also in terms of your time to learn and validate the software.

Automated trading may be less secure

The more applications that can access your portfolio, is an extra risk. We cannot advise individually on this, do read our section on security towards the end of this article.

Advantages of Automated Trading

In our opinion, automated trading has far more benefits than disadvantages. The most basic form of automated trading is to set a limit order - you create an order to buy or sell an asset outside of the current market price. Imagine if you had to sit there all day watching for the price to be at a value where you bought or sold the asset.

Here are a few advantages to trading automatically.

Adjusting risk without emotion - avoiding decision paralysis

"I wish I had trusted my instincts" is potentially the trader's most commonly uttered phrase. Setting software to automatically make trades based upon your strategy is far better than hearing a news article and making a trade. One such example is the constant discussion around how bots and whales are manipulating the market. Having your own software running means you trust your process as opposed to not taking action due to hearsay.

Having different trade strategies for different cycles

Holiday season is the best example of cycles. Beaches are empty in winter, we don't see that much skiing in the summertime. It is the same with trading. There are phases and cycles in cryptocurrency that makes certain strategies highly professional, average, and loss making. Only seriously professional traders can trade multiple strategies at the same time.

Trading 24 x 7

Naturally, humans must sleep but cryptocurrency and other markets are open when you are sleeping. Having automated trading engines running on your schedules, means you can trade whilst sleeping. Or you can target other global markets to follow the clock.

Automated trading can be more secure

In the last section, we highlighted that automated trading can be less secure because you are giving apps access to your portfolios. At the same time, not using mobile apps to do trading can be far more secure.

Aim of this Automated Trading guide

The aim of this guide is to discuss the main functionality of our trading platform strategies to give potential customers an understanding on how we use our own software.

We have no affiliation with Coinbase, or any other trading exchanges. If we do have affiliation with an exchange or data platform, this will be clearly explained.

We provide an overview of the main functions of this software because it aligns with how we want to automate our trading and it is built with flexibility in mind to cover many trading strategies.

Existing types of automated trading software platforms

Exchange platforms

Most trading exchanges allow you to set up trade orders that can execute in the future. Some trading exchanges give access to more advanced trading strategies to lock in profits.

Trading Marketplaces

A trading platform permitting their users to share their trading strategies and use other successful trading strategies.

Web based rules engines

There are many platforms giving users access to define their own trading rules. Typically, there are different price plans allowing more rules and trades.

Arbitrage platforms

These platforms seek to take advantage of differences in the price of an asset listed on different platforms.

AI trading

AI trading can cover many different approaches. Most typically, they analyse trained data to try and identify potential moves. Some AI engines can create orders off the back of their trained models.

Open Source software

We have investigated many projects on popular sites such as GitHub. Indeed, some of our team are exploring setting some of these up for ourselves. The challenge with most of this software, is being large and complex - mastering them takes significant time. Another challenge is they end up behaving like every other trading platform out there - adding more indicators.

Our thoughts on other automated trading platforms

We can't give advice on preferences as to what types of trading platforms you should use. Our main rationale for not using centralised platforms is that, in doing so, your trading strategies could be common knowledge to other traders. One could argue that the exchange always knows what trades are executed, but we have to "draw the line" somewhere.

There is no single solution to automate your trading. It becomes about how much time you wish to put into it and whether the software can meet your needs.

Cognitive cost and evaluation cost

As software developers, one of the biggest challenges is assessing whether software and infrastructure can do enough of what you need.

It is exactly the same with trading. Once you decide on some software, it will take time to set it up and test it. It is easy to forget, for example, just how long it takes to go from basic trading to advanced trading, to reading charts.

The hardest thing with appraising software is that you are entirely at the mercy of the platform. It is for this reason, we built our software to be hosted, making available enough data for you to understand the software's advantages and limitations.

Building software is a complicated task requiring extreme skill, and yet in principle, what we want trading software to do is very simple.

Key functions of our automated trading software

We set out with a set of simple aims when building this software;

• To manage our portfolios automatically
• To react to market conditions
• To manage our portfolios and create trade orders
• To have a flexible rules based approach to help us to act on certain market events to cancel orders and move balances
• To not have centralised storage of personal/corporate trading rules

We wanted the software to run in the cloud, with minimal support so we could avoid having to constantly day trade.

What was the real driver for building the software?

Anybody that owns an asset is aware that the price goes up, and it goes down. Most assets only depreciate in value. Cars being an excellent example, yet cars can sometimes increase in value.

Cryptocurrency is one of the most volatile assets ever seen - maybe the most volatile. If you are lucky enough to own a bitcoin, you will know it went way past $100k, only to fall back massively and has recently got to $104k. Today, 13th May, 2025, the price of Bitcoin has swung by around $3000 dollars. It is probable that if you had sold, rebought, sold, rebought Bitcoin, and the gods were looking favourable upon you, perhaps you could have made $3000.

Alternatively, imagine if you sold a Bitcoin at $110k, just before it dropped to $90k and bought it back again, to sell it again at $105k.

This may sound like a dream but this is exactly what many traders do with stocks. They identify cycles and change their allocation. Some stocks are seasonal.

Our working model - hypothesis

Our swing trading strategy has a few facets to it, but largely it centres around a key principle of mean reversion. Many will say this is a fallacy, but the one thing we can say without question is that over a short timeframe, a price will be hit and passed multiple times.

We must apply risk to this mean reversion theory, as a few things definitely can be true;

• An asset's price could drop to worthless (not zero)
• An asset may never reach its all-time-high
• An asset may take a long time to return to a price we wish to buy it for or sell it at
• An asset could be long-term increasing - secular bull

To really highlight this point, without referring to any charts and making definitive predictions, we could make the following hypotheses;

• Hex is never going to return to its all-time high
• Cardano seems highly unlikely to ever exceed its all-time-high
• Bitcoin will probably go significantly higher
• Solana seems to be on an upward trajectory
• Most cryptocurrencies could become worthless in years to come

We can go further. We can say that there is a chance that Bitcoin could become worthless. No matter how small that chance may be, we must consider it. Just think about the many high street chains that no longer exist.

Once we frame it like this, some may not be as confident in only having Bitcoin if one had put their life savings into it.

Remember, none of this is advice, but this is what we did next.

Devise a plan

By devising a plan, you start to think about cryptocurrency very differently. Here is our plan;

• Any cash we put into fiat should be got back
• Stop putting cash into cryptocurrency
• Use cryptocurrency to accumulate more cryptocurrency
• Generate cashflow
• Have a reliable way of accounting and auditing your assets for compliance purposes

There are many cryptocurrency influencers telling you what to do, but only you can create your own plan. You may prefer to dollar cost average, stake coins, or just hodl. Whatever your plan is, our opinion is that automated trading is a necessary addition the trading toolkit.

Trade Strategies

Pivotal to managing our portfolios with the hoped (never guaranteed) profits, is to have well defined strategies. Your strategies will be formulated from your trade plan. Remember we said, there is always the possibility that Bitcoin could go to zero (unlikely), perhaps your strategy is simply to own a Bitcoin but get back the money you paid for it?

For our own trading, we have identified just four strategies. Our strategies are linked to portfolios.

Our Portfolio Setup

Bank Portfolio

This is where fiat and crypto funds are moved to and will be off-limits for trading. We expect profits to accumulate in here.

Trading Portfolio

This is where our tradeable assets are stored. These are where our orders will be filled as the price moves up and down.

Funding Portfolio (Optional)

We may choose to move capital to the trading portfolio at different times. Perhaps a cryptocurrency has fallen significantly.

Trading Rules Checks

There may come a point where we don't want to buy or sell an asset. Imagine Bitcoin went as high as $120k. We may decide we don't want to buy any Bitcoin at this price. By adding a rule check we can avoid buying at this price.

The automated trading engine

The main objective of our trading engine is to;

• Get Market, Portfolio, Balance Data on a regular basis
• Store certain data to history
• Define rules to match market conditions
• Generate orders based off defined rules

The engine runs regularly to monitor the market much like humans do.

The importance of back-testing and metrics

Our software is designed to evaluate activity on these portfolios. The critical metrics being;

• The total amount of capital in each portfolio measured at regular intervals
• Filled and cancelled orders
• Wider Market Reports to put perspective on portfolio activity

Having access to your own data is your "source of truth". Indeed, this data can be analysed deeper, supplemented with other information to help decide upon different strategies.

What about trade simulation?

We are planning to add trade simulation, but we have clear ideas on how we plan to implement this. The challenge with simulating trades against real data is it is never the same as when you start trading.

We are looking to test sandbox APIs in future.

A word on security and risk management

Security within our software

We have been thinking really hard about security. Nothing is impossible with cryptocurrency, conventional banking and software. We have planned our security architecture and run audits on our platform.

Tactics many traders used to protect their crypto and fiat assets

We cannot advise on precise steps each customer should do, but these are some of the key things most sensible traders do;

• Move funds to non-custodial wallets where you control your keys
• Consider using a custody solution off-exchange
• Watch out for phishing scams
• Be very wary of mobile phones accessing your exchange
• Consider using a dedicated machine for wallets with encryption
• Consider using hardware wallets
• Use multiple exchanges
• Use a password manager to store keys
• Avoid storing keys inside environment variables and in files on disk
• Consider moving excess fiat to your retail/corporate bank account
• Don't keep over the deposit protection limit in a retail bank account
• Set the correct permissions on each exchange portfolio
• Recycle keys and tokens
• Be careful about the software you give access to your portfolios
• Never give control to your machine over video conferencing software

The best thing to do is to read forums to understand the numerous ways people lose their money and get scammed.

Be mindful that some exchanges charge quite high fees for withdrawing cryptocurrency, and some Blockchains can have quite high transaction fees, but by moving funds off-exchange you lower the risk of losing substantial amounts of money.

What's next for our automated trading software?

The plan is to start running this software in June 2025 on limited portfolio sizes and report back. There will be an official page/website covering the software in much more detail nearer the time of being officially launched.

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