How to Choose the Right Automated Option Trading Platform

How to Choose the Right Automated Option Trading Platform
How to Choose the Right Automated Option Trading Platform

Option trading is a good way of making money in the crypto market relatively fast. While risks associated with opening leveraged market positions should never be discounted, the benefits often outweigh them.

If you have a reliable technical analysis strategy or a trustworthy provider of trading signals, you will be able to create a powerful automated trading system that works well for the options market.

Contemporary bots are capable of delivering outstanding performance and outcompeting human traders consistently.

If you are interested in options bot trading or other forms of trading automation, the industry will overwhelm you with choices.

Selecting a good provider of automation services in this oversaturated market is quite important.

Building a stream of passive income with options trading is a challenging task and only reliable automation vendors will help you do it.

Option trading for beginners: what is an option?

Options are contracts allowing you to purchase assets at a predetermined price and at a specific point in the future.

You need a margin trading account to use these financial instruments. Since all positions are leveraged, the risk is quite high but rewards can be even higher.

There is a distinction between a standard option contract and a binary option. The latter is a form of an agreement between a trading platform and a trader.

They put a wager on the price action. If a retail trader guesses the direction of the price, the trading platform pays him a reward. If the price goes in the opposite direction, the trader loses the money. In many ways, it is a fancy form of gambling and should not be considered a proper investment tool.

When a retail trader engages in options trading, several main goals must be pursued:

  • To reduce option trading risks. Using an automated trading system with delayed orders (stop loss and take profit) while limiting the size of any given position is a good way of mitigating risks associated with using leveraged positions. You should always keep an eye on open market positions and be wary of margin calls.
  • To increase your option trading profits. Automation can significantly boost your overall profitability if you have a reliable technical analysis strategy or a good source of trading signals. Note that too many bad signals will quickly drain your margin account regardless of the quality of automation products you are using.
  • To find a good combination of settings for your bots. Testing everything is quite important if you plan to automate your option trading. A technical analysis system can be tested on the TradingView platform with Strategy Tester. The WunderTrading platform and many other automation providers have back-testing capabilities to check how well your bots perform against the market history. Use these tools to find an excellent combo of trading signals and order placement algorithms

Novices are encouraged to read as much as possible about derivatives and margin trading. Leverage is a powerful tool but it can be very dangerous for people who do not fully understand how it works or borrow too much on risky trades.

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Choosing good option strategies

Since options are derivatives, their prices are closely connected to prices of underlying assets. Almost all tokens in the crypto market are speculative instruments meaning that the only good way to predict price action is by using various methods of technical analysis.

Picking a good strategy that will generate consistent trading signals is not an easy task. However, with enough time and effort dedicated to testing promising analytical approaches, you will be able to build an automated trading system that will produce good results.

Here are some ideas that you may want to explore:

  • Use Relative Strength Index to identify upcoming price retracements. You can make a put or call option based on the values of RSI. When it reaches 75 or higher, it means that the market is overbought and it is a good time to buy a put option. When RSI drops to 25 or below, the asset is oversold and you should prepare to buy a call option.
  • Bollinger Bands and breakouts. This indicator creates a channel limited by standard deviations of the price in both directions. In theory, the market will try to stay within the channel and keep prices somewhat close to the median value. When a breakout happens (the price breaches one of the bands), it means that a new trend may form in the near future.
  • The Put-Call ratio is a great tool designed specifically for options. The indicator shows the change in the sentiment. When the value goes over 1, it means that people are buying more call options indicating a bullish movement in the market. When it drops below 1, the amount of put options is higher and the market is led by bears.

These are just examples of strategies that you can use to run option trading bots successfully. Of course, you need to test every single investment idea extensively before applying it to real market conditions.

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You should not limit yourself to just a couple of indicators. Experiment with different analytical approaches and find something that works for you.

Picking a good automation vendor

Building a good automated option trading system is not as challenging as finding a provider of automation services.

It is crucial to work with a company that delivers a good product while never disappointing you with technical issues and outrageous pricing.

Look for companies that have good user interfaces, focus on providing an excellent level of customer care, and boast impressive product lineups.

User reviews are less important since many automation platforms attract newcomers who do not understand the ramifications and limitations of using trading bots.

Below are some good places to work with if you want to build an automated options trading bot in 2024.

3Commas — a good place to start

This vendor is known for its focus on social trading. While it is not a good idea to use copy trading for margin trading accounts, you can still find a good retail trader to copy. However, you should not focus on social trading aspects of the platform. 3Commas has a rich catalog of automation products that can help you build any bot.

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With its reputable history and brand recognition, this company is one of the most popular destinations for retail traders who want to use automation in their investment activities.

Altrady — a simple and efficient trading bot

This company has an overly complicated user interface and does not have any social trading functions, but you will be able to run various types of preset solutions like DCA and GRID bots while also building automated trading systems that can work with derivatives.

Altrady is relatively simple and can be mastered quickly, but the initial period of getting used to the UI can be quite daunting.

On the other hand, the platform does not overcharge for its services and delivers a good level of user experience.

WunderTrading — the best choice for option trading

Many experts believe that using custom analytical systems is the most effective way of trading options. WunderTrading is a great destination for retail traders interested in building custom bots.

The functionality of the platform is rich enough to allow users build, analyze, and adjust bots in real time without any hassles.

The product lineup of the platform is quite impressive. You can use preset bots (DCA, GRID, Arbitrage), statistical arbitrage systems powered by artificial intelligence, copy trading, and other forms of automation to build a balanced portfolio.

WunderTrading is integrated with many centralized crypto exchanges offering margin trading accounts to their users.

Be careful with leveraged positions

We strongly recommend all newcomers to be very careful when engaging with the derivatives market.

Leveraged positions bring in massive profits when they work out, but several bad trades that quickly run your balance dry.



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