Bots, short for robots, are automated software programs that execute trading strategies on behalf of users in the cryptocurrency market. These bots are designed to analyse market data, identify trends, and make trades based on predefined algorithms. They aim to take advantage of market opportunities, minimize human error, and operate 24/7 without the need for constant supervision.
Traditional crypto exchanges are online platforms that facilitate the buying, selling, and trading of various cryptocurrencies. Users on these exchanges can manually place orders based on their own analysis and judgment. Unlike bots, there is no automation involved, and trades are executed based on the user's decisions.
How do bots work?
Bots follow specific algorithms that are programmed by the bot creators. These algorithms incorporate technical indicators, market signals, and various other parameters to identify favourable entry and exit points for trades. When a bot recognizes a trend that aligns with its programmed strategy, it will execute trades accordingly. However, this process of analysis takes time, and the bot requires a sufficient amount of data to confirm the trend before acting.
Why is there a delay in bots responding to market spikes?
The delay in bots responding to market spikes is primarily due to their algorithmic nature. Bots need to observe a consistent trend or pattern before they can take action. They rely on historical data and indicators to make informed decisions, rather than reacting instantly to sudden market movements. As a result, when there is a rapid increase or decrease in the regular crypto market, bots may not react immediately.
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