Is it safe to use a trading bot for cryptocurrency?
No doubt you’ve landed on this article because you’re curious about making profits using a cryptocurrency trading bot. Unfortunately, cryptocurrency is fraught with many scams, and you should be very skeptical of any service which promises you easy profits.
However, if you are careful about what services you trust with your information, then using crypto trading bots can be very safe. In this article, we’ll be giving you some safety tips which you can use to make profits without risking your holdings!
What is an API key?
An API key is sort of a secret token which one software program uses to talk to another one. Your API key is a unique identifier which verifies your identity, and in the case of exchanges and crypto bots, it gives them permission to talk to one another.
That’s why it’s important to understand what an API key is and how to limit its access. You are essentially giving another service or person permission to use your accounts, and you need to be careful with what access you give them.
You might think of it like your phone. You probably wouldn’t think twice about giving someone your phone number, as it allows them to call or text you. However, you’d never give them your unlock password because that would give them access to all your stuff!
If you’re having a hard time understanding API keys, then think of them the same way. You want the bot to be able to “visit” your account and trade for you so you can make money, but you want to control their permissions so they can’t withdraw your money or do anything damaging!
Why do trading bots need access to your API?
A trading bot trades on your behalf using your existing exchange accounts. In order to do this, the bot needs to have access to those accounts, and that means it needs your API keys to access them.
Without your API key, the bot does not have the “secret token” that the exchange requires to share your information, and your bot won’t be allowed to make any trades for you.
APIs are a necessary evil, but if you manage your permissions properly there’s nothing to worry about.
Is it safe to share your API keys?
Yes, and no. There are different API keys in your exchange account, and you need to understand what the difference is between them if you want to use API keys safely.
A good bot provider should only ask for keys which allow trading. Any third-party service provider which asks for an API key which allows withdrawals should be avoided, as it’s a huge red flag that you’re about to get scammed out of your coins!
However, sharing a trading only API key is safe, and most exchange accounts should have provisions for this which help you to maintain your account’s safety.
You might also want to whitelist specific wallet addresses in your exchange account just in case you mess up anything, as this will keep users from withdrawing funds to unauthorized crypto addresses that you do not own.
Everyone, whether bot trading or not, should also be using 2-factor authentication to protect their accounts from unauthorized logins, as an unscrupulous software provider may be hoping that you register using the same email and password used on your exchange accounts, allowing them to just steal your account the old fashion way!
Is there a way to run a bot without API keys?
Sadly, no. A bot will require your API key to trade on your behalf. This means that it’s very important that you find a trustworthy service provider. Make sure to thoroughly research the bot provider that you’re considering.
Look around for reviews of the service and make sure that their security procedures are up to snuff before you trust them with your information.
Are you allowed to use bots on crypto exchanges?
Yes! Most cryptocurrency exchanges are just fine with their traders using automated trading software, and many of them provide API keys expressly for this purpose.
Keep in mind though that all bots do not work on every exchange, so if you want to use a specific exchange, make sure that the bot you choose works on that exchange. (Bitsgap’s trading bot currently works on 30+ exchanges!)
You should also keep in mind that not all bots are created equal. Some can be difficult to use, and it’s best if the bot you choose offers a free trial of some kind so that you can see how it works before you waste money on software that is not a good fit.
Bitsgap offers a free 14-day trial, which you can use to learn how the trading bot works and get a good handle on trading before you actually have to pay for anything.
Is it possible to get scammed when using trading bots?
It is possible, but if you do your due diligence on the provider, then the risk is very low. If you want to make sure that you’re trading safely, then here are some steps you can take to lower the risk of getting your crypto stolen when using trading bot software.
- Don’t use a bot service which asks for an API key that allows withdrawals!
- Research providers before purchasing their software
- Verify their security methods before trusting them with your money
- Experiment with a small amount of crypto before committing to larger amounts
- Use a different email and password for every crypto account
- Use 2-factor authentication on all accounts
In closing, while it can be scary to trust a third-party with your account details, as long as you’re smart about it, there’s nothing to worry about. Just make sure that you don’t get so caught up in the idea of potential profits that you do something unwise.
If you’re still exploring trading bots and you want to see how they work before spending a bunch of money on pricey trading software, then you can use Bitsgap’s free trial to test things out before you commit. As a bonus, you can also take advantage of “backtesting”, which allows you to test our your trading strategies in real-time before you use your own money!