WHAT ARE BOTS
Bots is the short for ROBOTS, it is a piece of software that execute a series of actions on your behalf. They usually run in background, in a Command Line environment, making them tricky to use for most of people.
After setting up parameters, bots are capable of doing bundle operations in a faster way then humans. Different type of bots for various tasks, even for everyday use exist, and you are already using them without knowing.
Let’s have a closer look at them.
BASIC BOTS
The most basic bot is the one you can meet when calling any public service, redirecting you to the desired counter.
A more evolved one is validating your everyday bank operations, or Credit Card buys. Those bots will use security checks, your buying habits, and trigger an alarm in case of “abnormal behavior”.
And finally, most evolved bots, often referred as Artificial Intelligence, are used in some call-centers, chats searches and many more to come, giving you the illusion of a real person, answering all your questions (Google, Alexa, Akinator…).
FINANCIAL BOTS
Bots are already long used in the finance industry, and in a widely manner.
Once given parameters, they will execute any kind of orders you asked :
- Buy IF
- Sell WHEN
- Analyze THIS
Doing so, no more need to watch for data/charts during hours, your money is working autonomously. As simple as it seems, a BUY ORDER or a STOP LOSS means you are using a bot already.
Of course, you still require the knowledge to teach the bots what they should execute, or you could use “pre-configured” bots.
Those “pre-configured” bots (often referred as Trading Bots) are simply pre-filled with analytics tools triggering profits, but none of them is 100% effective, because there are many events that cannot be predicted.
Another kind of bot, less known, is a kind of bot used in Forex market, called an Arbitrage Bot. This particular type of bot is simply configured to spot price discrepancies between 3 currencies and once it does, will buy one for a second one, and sell for the third. This is referred as Triangular arbitrage.
They are less popular because they rely on very small price variation, and require more liquidity, but on the other hand, have a 100% success on all their operations, because a BUY order will be executed ONLY when a PRICE discrepancy is spotted. This form of bot requires many more transactions and a larger amount of money, but is SAFE to execute. This kind of trading is simply not possible without bots due to the fastness required.
CRYPTO BOTS
Crypto being another kind of Financial market, it is then subject to the same rules, with the same tools used in other markets, to an exception : it is a relatively new, wide spreading market, not having Financial institutions yet ruling it in the manner of Banks, allowing an everyday emergence of Marketplaces.
This is a big opportunity to run a Classic Arbitrage Bot, a more basic arbitrage, where the bot will spot price discrepancies between 2 marketplaces, execute a BUY on one, and a SELL on the other one.
So now we know about Arbitrage and Triangular Arbitrage, it is time to introduce our best bot, the Frontrunning Bot.
Put in a simple way, when someone BUYS an asset, it will send a request under the form of a Transaction to a Marketplace and add a TOLERENCE for eventual prices fluctuations. The blockchain is made so that this Transaction will be stored for a few seconds in a Book Order (called a Mempool),and will be executed if within the range of the tolerance, giving our fast bots the opportunity to BUY IT BEFORE and then fulfill the previous order.
As you can see, once again, our bot will make a transaction only when the sale is spotted. A smaller benefit with a 100% rate of success.
LEGALITY
Bots are widely used in every Country, every kind of market since decades, without any kind of regulation. Bots are considered as an extension of human brain, simply automating a strategy with every Marketplace offering some of those bots in the manner of automated trading.
Bots are to trading what Instant Messaging is to Email.
