How to Build a Simple Bitcoin Trading Bot, Part 2

In part one of "How to Build a Simple Bitcoin Trading Bot," we covered what algorithmic trading is and how to recognize and analyze market inefficiencies.

In part two of this series, we will cover the six steps to developing an algorithm.

We first need to find out what kind of market we will be trading - i.e., a bear or bull market.

Trading the Bitcoin to StableUSD market will allow us to both long and short because when we are long we have our portfolio in Bitcoin, and when we are short, we have our portfolio in StableUSD.2.

There are multiple platforms that allow you to integrate your algorithm into backtesting data and use a simple programming language to create it.

We want to test the Bitcoin vs. USD market for the past five years.

Since StableUSD has a 1:1 ratio with the dollar, its price will remain $1 and so we can use the Bitcoin vs. USD market as a proxy.

You can also look at how the algorithm would have performed against the market as a whole.

As it is the most important step in determining the usability of the algorithm, it also gives you an idea of how the algorithm would perform if used in the present.

The fun of algorithmic trading is found in the challenge of always adapting to the market.