A Trading Bot is a supporter for traders, Market Makers or exchanges that automates executing trading based on some conditions.
It requires input data like price action, indicators and measured market trends, and then automates trading execution for a variety of purposes.
There are many Trading bots that have their own strengths, features and controllability.
In general, there are major categories that Trading Bots work for.
A Trading Bot can scan market data like historical prices, volume and indicators that may be used for the source of basic analysis before deciding and executing its next direction.
Based on the data collection and internal analysis, the bot identifies opportunities and risk points that should be avoided, and then generate signals for users.
And a Bot could set stop-loss and take-profit levels as risk management.
Identifying opportunities, risks and the right time of execution, a Bot executes trading.
In addition to these basic Trading Bot features, some bots can rebalance asset portfolios regarding market condition and user's requirements.
A Trading bot is an automated program that covers a variety of its utilization targets.
One of very well known area is market making that traders see everyday on CEX order books. A Bot provide liquidity placing orders weather it is big or small.
An Arbitrage Bot takes profit from the difference between exchanges.
And a Trend-Following Bot follows recent market sentiment executing trading along it.
A Mean-Reversion Bot executes tradings reversely that it buy stock, crypto or any other assets when prices are low and sell it the price return to its average level.
CEXs offer Trading Bots as well that is easy to use with familiar UI for individual traders.
But it is not clear if a CEX is in the side of users profit while maximizing its own profit and opportunities. There are 3rd party bots that mostly require paid subscription and some of it needs a certain level of technical knowledge or skills to control it.
