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In the past, financial trading took place over the phone, where you had to call your broker to execute a trade on your behalf if you wanted to buy stocks. However, during this post-internet age, the application of technology has moved the buying and selling of financial securities online. In addition, it has advanced the process in many ways, like creating and using APIs.
What is an API?
API stands for Application Program Interface. It is an interface between two applications that can communicate with one another. It sounds more complicated than it is. An API acts like a messenger that takes requests and tells a system what to do – then returns the system’s response to you.
Most people need to realize that they use APIs almost every time. For example, if you search for a new home online, the website uses an API to comb through a database of available apartments or multiple listing services.
Developers make APIs as pre-packaged, plug-and-play applications that a website can use to facilitate users’ complete experience.
What are Crypto Trading APIs?
Crypto APIs provide information about cryptocurrencies and allow you to interact with a trading system. Below are some given examples of things crypto APIs can do:
- They gather price data from several exchanges, ensuring you get the latest information on current and historical prices.
- They show trading volume, opens, closes, high and low points, etc.
- They rank the most common coins by popularity, overall trading volume, or other statistical data.
- They display reliable news feeds about stories connected to the crypto markets.
How Traders Use Crypto APIs
Anytime users enable an API, they give it their API private and public keys. The API uses these keys to let the exchange know that it can access your account information on that exchange.
Besides, third-party services can use these keys to access data within an exchange. For example, a crypto API can gain access to market information, trade on behalf of the user, and can also obtain access information on the user’s funds in their account. Once a user deletes their API keys on the exchange, they withdraw the API’s access to their account.
Crypto APIs have two main settings required for them to work correctly: the ability to collect “balance” information from your account on the exchange and two is the ability to make a trade.
Significance of APIs for Crypto Trading
Trading can be tedious and time-consuming, especially on rebalancing. Studies on rebalancing determined that rebalancing one’s portfolio every hour would outperform other rebalancing rates.
Taking time out of each hour of your day to rebalance your portfolio almost sounds unreasonable. And if a user can manage a diversified collection, it will take an even more significant amount of time to rebalance. However, rebalancing at this rate is one of the best ways to perform well on an exchange.
The good thing about APIs is that they don’t worry about how time-consuming something is. You are required to give the API the correct instructions, and it’s off to the race. Therefore, a pro trader can dedicate more time and resources to market research or leisure.
Increased Speed: Precision
APIs are way faster compared to manual traders. You start to realize the fundamental importance of precision once you spend more time making trades and understanding price points in the market. Predicting a crypto’s highs and lows is only possible for some, though calculations can get close.
Precision is everything when it comes to severe traders. However, people are imperfect, but luckily, APIs aren’t. Once you give it instruction, it will perform its task every time and precisely.
For example, you sell a certain amount when Bitcoin hits $9,000. Working manually, you would have to watch the stock always or wait for a notification to tell you when it reached that price. Because Bitcoin is highly volatile, you may need more time even if you saw the exact moment it hit the desired price point. The rate would have changed when it took you to execute a trade. It’s hard to say how rapidly prices will fluctuate in cryptocurrency. But, with a properly programmed API, you will sell at that $9,000 mark the instant it occurs.
Human traders often face greed, FOMO (fear of missing out) during pumps, or panic selling during dumps. It can lead to some losses. However, they rely solely on indicators and configurations for APIs and will not trade on emotion. APIs, therefore, will reduce unnecessary losses.
Crypto markets are notoriously volatile, so it is crucial to employ a solution that can quickly minimize dormancy to execute orders at the desired price. A human trader can only focus on a limited number of daily trades.
Still, an API can theoretically run unlimited deals daily and only be limited by trading opportunities. As a result, it can execute much larger trades without risking price slippage and increase any cryptocurrency holdings’ liquidity.
Cryptocurrencies have no business hours. That is, the crypto market never closes. A trader must regularly watch the market to get a complete view of what’s happening. It seems impossible. It would be best if you had some sleep and did other things with your life. But APIs don’t sleep.
Using APIs doesn’t force you to implement only one strategy and be stuck. Instead, you can use different methods for different times and situations. This way, you can sleep without stressing that you are missing out on a great trade or that your portfolio might suffer through the night.
Cryptocurrencies are still relatively new, meaning they are highly unregulated. Prices have massive fluctuations, offering enormous profits or resulting in huge losses. Given the volatile nature of the crypto markets, crypto trading APIs can be useful. If only a little, all crypto traders could benefit from at least some automation and precision.