Learn what ERC-20 tokens are, how they work on the Ethereum blockchain, and why they’re crucial to DeFi, stablecoins, and token interoperability in the crypto ecosystem.

What are ERC 20 tokens, and how do they affect your crypto journey? 

Have you ever wondered why certain cryptocurrencies interact smoothly on the same blockchain? Or how about how so many new tokens pop-up overnight without causing issues with each other’s coding? The simple answer is the ERC-20 standard. It’s one of the most influential technical guidelines in the entire crypto space.

Ethereum introduced the world to smart contracts back in 2015, and soon after, the ERC-20 standard arrived on the scene. This standard introduced a blueprint to developers, telling them if they wanted to build a token on Ethereum – they needed to follow certain rules. 

Because ERC-20 tokens follow the same common set of guidelines, they can talk to each other, and interact with thousands of other decentralized apps without friction. 

If you’re confused, don’t worry. You’re not the first person to ask, “What is an ERC 20 token?” and you won’t be the last. Here we’ll demystify the concept, and show you how you can trade and manage ERC-20 tokens on Zoomex – all without KYC verification. 

What Are ERC-20 Tokens? Understanding the Basics

ERC-20 tokens are “fungible” digital assets that exist on the Ethereum blockchain. “Fungible” is just another way of saying every token is interchangeable with every other token of the same type. It’s the same as how any dollar bill from your wallet is worth exactly the same as any other dollar bill in another pocket, wallet, or hidden under a mattress. 

ERC stands for “Ethereum Request for Comment”. The number 20 – just relates to the numerical identifier for the proposal (yes, there are others).

So, when we talk about the ERC-20 standard, we’re talking about a specific set of rules proposed back in 2015 for creating tokens on Ethereum. If you’re wondering, that standard was proposed by the developer Fabian Vogelsteller – who wanted to create a specific framework for token development. 

If a token follows these rules, it’s officially an ERC-20 token. That standardization lets different tokens and apps communicate - without confusion or clashing code.

Before ERC-20, every new token’s developer had to figure out their own custom code. It was a free-for-all. Some tokens just wouldn’t work well with certain wallets or exchanges. ERC-20 changed that by demanding a consistent set of functions and behaviors for tokens. 

Wallets, exchanges, and decentralized apps (DApps) only needed to code support for “ERC-20” once. After that, any ERC-20 token could hop on board. It was a game-changer for efficiency. We just wouldn’t have seen the decentralized finance explosion we have today without ERC-20. 

ERC-20 tokens are everywhere today. According to some reports, there are 

 of these tokens in existence – although most of them don’t hold any real value. Some of the most popular options you might have heard of include: 

Again, that list only covers a fraction of the options out there. There are literally thousands of tokens out there, proving the versatility of the ERC-20 standard. 

If you want to experiment with these tokens yourself, Zoomex makes it easy. Whether you prefer the traditional approach of a centralized exchange (CEX) or you’re exploring decentralized exchanges (DEXs), you can manage and trade a variety of ERC-20 tokens in one place.

The History and Evolution of ERC-20 Tokens

To really get a grasp on how important ERC-20 tokens, and the ERC-20 standard really are, we need to go back through the history books (a little). 

Let’s start with the early challenges people faced with the Ethereum blockchain. 

When Ethereum launched, everyone got excited about smart contracts - self-executing scripts that automatically do what they’re programmed to do, whether that’s sending crypto, issuing refunds, or distributing rewards. 

But early on, there was a major snag: every new token had its own logic, its own blueprint. Some tokens would behave differently than others. That forced wallets and exchanges to do extra technical work for each one.

In November 2015, developer Fabian Vogelsteller proposed a unifying standard: Ethereum Improvement Proposal 20 (EIP-20). This outlined how all tokens should be built to ensure they’d work together seamlessly. By 2017, ERC-20 was officially accepted.

Since then, countless new standards have been built following that framework – and on a broader scale, ERC-20 has made a huge difference to the crypto world. For instance:

As mentioned above, the Ethereum development process, and the blockchain world has changed a bit since the creation of ERC-20. 

Even though new standards- like ERC-721 (for NFTs) and ERC-1155 (semi-fungible tokens) - have become popular, ERC-20 is still the bedrock for any token that wants to be straightforward and fully interchangeable.

Of course, Ethereum’s improvement process keeps evolving. In 2023, the community refined how EIPs and ERCs are handled in separate repositories. Despite all these changes, the original ERC-20 blueprint remains a cornerstone. 

As you might expect, since they’re designed for Ethereum, ERC-20 tokens rely heavily on smart contracts. 

Think of a smart contract like an impartial referee that lives on Ethereum. It executes the rules of a token whenever transactions take place. When a developer decides to create an ERC-20 token, they deploy a smart contract that spells out how many tokens exist, who owns them, and how they can be transferred. Once the code is on Ethereum’s blockchain, it’s unstoppable.

The network’s nodes each keep a copy of the transaction data, which means every movement of a token is recorded for good.

All of those things are key functions of ERC-20 tokens, but there are only two primary “events” managed by these tokens: 

From a technical perspective, using an ERC-20 token usually involves writing a smart contract in Ethereum’s main programming language (Solidity). That contract needs to include all the necessary functions and events – it might look something like this:

    mapping(address => uint256) private _balances;

    mapping(address => mapping(address => uint256)) private _allowances;

    event Transfer(address indexed from, address indexed to, uint256 value);

    event Approval(address indexed owner, address indexed spender, uint256 value);

    // Implementation of the six required functions

    function totalSupply() public view returns (uint256) { ... }

    function balanceOf(address account) public view returns (uint256) { ... }

    function transfer(address to, uint256 amount) public returns (bool) { ... }

    function allowance(address owner, address spender) public view returns (uint256) { ... }

    function approve(address spender, uint256 amount) public returns (bool) { ... }

    function transferFrom(address from, address to, uint256 amount) public returns (bool) { ... }

The ERC-20 standard obviously provides the foundation here, but developers get the option to add additional functionality beyond the basic requirements. That’s how we end up with tokens that have various different use cases and features. 

If all this sounds a bit technical, that’s normal - the important takeaway is that by sticking to certain rules, tokens stay interoperable with every other ERC-20 tool out there, from Zoomex and other exchanges to wallets like MetaMask or hardware solutions like Ledger.

The most obvious “major” benefit of ERC-20 tokens is that they enable interoperability.

Ever used different brands of headphones that plug neatly into the same audio jack? That’s basically what ERC-20 is for Ethereum. Because all ERC-20 tokens follow the same “shape,” any app that can handle the standard can handle any ERC-20 token. This opens the door to:

It’s all of this synergy that keeps the Ethereum ecosystem growing and thriving, allowing developers to build on each other’s work, rather than starting from scratch.

But there are other benefits to ERC-20 tokens too:

The ERC-20 standard leaves a ton of room for developers to get creative. They have to implement the required functions, but beyond that, they can dream big. They can add custom features and properties to virtually any token, creating:

This flexibility allows for rapid innovation and experimentation within a familiar framework.

Most of the top Ethereum-based cryptos by market cap are ERC-20 tokens. We’re talking tens of billions of dollars in combined value locked up in stablecoins, governance tokens, gaming assets, you name it. 

This broad adoption has created a powerful snowball effect: more projects adopt ERC-20 because everyone else is doing it too. Plus, we now have a robust infrastructure of supporting services, such as:

What is an ERC-20 wallet? Honestly, it’s just a fancy way of referring to any wallet that supports Ethereum tokens. Popular choices like MetaMask, Trust Wallet, and hardware solutions from Ledger all read ERC-20 tokens by default. This “plug-and-play” approach cuts out headaches for users and developers alike. There’s minimal friction between new tokens and existing services, which is one reason DeFi ballooned so quickly.

So, what are ERC 20 tokens in the grand scheme of things? They’re a backbone of the cryptocurrency world. They’re tried-and-true building blocks that let countless coins, apps, and services work together on Ethereum. 

Since its introduction, the ERC-20 standard has spurred an entirely new era of financial and technological creativity. We’ve seen new stablecoins revolutionize payments and money transfers, governance tokens reshape how communities make decisions, and a flood of DeFi services that anyone with an internet connection can access.

Yes, gas fees can get pricey when the Ethereum network is busy, and yes, the growing number of tokens can mean more noise to sort through. But that’s the price of innovation: friction arises where there’s high demand. As Ethereum continues to evolve - making strides on issues like scalability and sustainability - it’s safe to assume ERC-20 will remain a cornerstone.

If you’re ready to dive deeper, try trading ERC-20 tokens on 

 - it’s secure, straightforward, and you won’t be forced through a labyrinth of ID checks just to get in on the action. From stablecoins pegged to the US dollar to brand-new tokens that might become tomorrow’s big thing, ERC-20 gives you a front-row seat to the ongoing crypto revolution.

ERC-20_Tokens.png

What Are ERC-20 Tokens

Learn the key differences between APY and APR in crypto investing. Discover how these metrics affect your returns, and how to choose the right strategy for staking, lending, and yield farming.

You’ve almost definitely seen the terms “APY”, and “APR” dotted around on the web or pasted onto advertisements shared by finance companies. But what do they actually mean – and what kind of a role do they play in crypto? You’ll need to know if you want to improve your crypto returns – after all, various kinds of financial metrics make a difference in the crypto space. 

The terms APY and APR will usually show up in crypto when you’re staking, lending, or yield farming. They’re not just sidenotes. They can drastically affect how much you earn from each investment. So, if you’ve ever Googled: “What is APY in crypto?” or even just “APR crypto” – don’t worry, you’re not alone.

Before we jump in, consider a quick parallel: in traditional finance, you see APR whenever you shop for a mortgage or car loan, while banks love to brag about their APY on savings accounts. In crypto, the usage is somewhat similar, but the differences can be amplified because of the way decentralized finance (DeFi) protocols calculate (and sometimes turbocharge) your returns.

Still confused? Read on for a more in-depth definition, and an insight into how Zoomex helps investors leverage both APR and APY opportunities.

Understanding APR (Annual Percentage Rate)

So, what is “APR”? Annual Percentage Rate (APR) is a financial metric that represents that yearly interest generated by an investment or loan. It doesn’t take the effects of compounding into account, however. If you see “5% APR,” that means your principal will grow (or debt will increase) by 5% per year. Simple enough.

You can break this down into a straightforward formula:

APR = (Interest earned or paid per period × Number of periods per year) ÷ Principal amount

So, looking at the concept from a crypto investment perspective, imagine you stake 1,000 USDT with a 5% APR. You’d expect to earn exactly 50 USDT in interest by the end of the year. That’s assuming the interest only gets paid out at the end of the term. 

You’ll typically see APR in the following crypto-based scenarios: 

The good thing about APR in crypto is it’s simple and transparent. If a platform promises you 12% APR, it’s easy to figure out roughly how much you’ll earn after a year. Unlike yield-farming protocols that might change your reward day by day, a simple APR-based product can feel more stable. But there are downsides too. 

As a financial metric, APR isn’t perfect. For instance, it: 

These downsides are pretty problematic in the crypto industry, where many platforms will automatically reinvest your earnings (like the ones you get from yield farming protocols). That’s why APY is generally a more accurate alternative. 

Understanding APY (Annual Percentage Yield)

So, what is APY? Annual Percentage Yield (APY) is a financial metric that does account for the effects of compound interest. That means your earnings pile on top of your principal at regular intervals (daily, weekly, monthly, or even hourly), and each subsequent interest payment grows a bit larger than the last. 

The formula for calculating APY incorporates the compounding effect:

So if you’re quoted 5% interest annually but it compounds monthly, your actual yield comes out higher than 5% by the end of the year. Compounding literally supercharges your returns—especially if the underlying rate is relatively high or if compounding happens frequently.

Since APY looks at the annual returns generated from a crypto investment (even when earnings are automatically reinvested) it’s a valuable metric in crypto. Usually, you’ll see it in:

Imagine a liquidity pool advertising 20% APY. If the interest compounds daily and you deposit 1,000 USDT, you’d likely end up around earning about 200 USDT in one year, assuming the rate stays constant, and you keep your money locked in.

The real strength of APY comes from the  “snowball” effect of compounding. Each time interest is paid, your principal grows, so the next interest payment is applied to a larger sum. 

Over long stretches, this adds up in a serious way. That’s why a modest difference- say, 10% APR vs. 10% APY - can translate to surprisingly bigger gains if you hold your crypto in that protocol for multiple years.

Breaking it down, there are a few key differences between APR and APY that are relevant to crypto investors. The main distinction is the compounding factor. 

Consequently, for the same nominal rate, APY always yields a bit more over time - unless there’s literally zero compounding going on. Plus, you get an actual representation of full growth from your financial metrics – not just a partial view. 

If you want to see how APR and APY relate, you can use this formula:

 is (meaning the more frequently interested compounds), the more APY grows relative to APR. A classic example:

In traditional finance, you’ll see APR on credit cards, car loans, or mortgages, while APY is used for savings accounts or CDs. In crypto, the lines can blur, but generally:

Knowing which metric is being used is important – because it helps you (the investor) make better decisions on which opportunities to pursue. 

In a nutshell, here’s why the APR vs APY debate actually matters in crypto:

The difference between APR and APY can affect your overall return, but you also need to be sure you’re looking at real, long-term potential, not just an eye-popping promotional figure.

Exploring Real-World Applications in Crypto

We’ve already mentioned, briefly, some of the ways APR and APY are used in the crypto space, but here’s a closer look at three common use cases:

 is arguably the easiest on-ramp to crypto earnings for newcomers. You’ll see either APR or APY - sometimes both, depending on the platform. For example:

For example, Cosmos (ATOM) staking might offer around 8-12% APR, but staking through certain validators or services that auto-compound can result in effective yields closer to a 13-14% APY.

In yield farming, you typically add liquidity to decentralized exchanges or specialized DeFi protocols – and get rewards in the process. These systems might distribute platform tokens, trading fees, or other incentives. Often, your share of the rewards is auto-harvested and reinvested multiple times a day, leading to that big, bold APY figure.

With APY in yield farming, you benefit from:

The compound effect in yield farming can be substantial. Some protocols have even advertised figures of 100% or more. Although usually, those rewards aren’t sustainable. 

Crypto lending platforms are where APR and APY are often both used in tandem. 

If you lend crypto on many platforms, you’ll see an APY that includes compounding growth. Conversely, borrowers pay an APR- and they’re charged simple interest on the amount they borrow, which keeps it straightforward for repayment. The distinction also helps lenders see a realistic sense of how their interest payments can grow if they keep re-lending their returns.

Tips for Choosing Between APR and APY-Based Investments

So, how do you know if you should be pursuing APR or APY-based investments. Really, there’s no “right answer”. It all depends on your goals, risk priorities, and other factors. 

Consider your financial goals, and think about: 

 can be enticing, but is the platform stable? Are there big whale investors who can crash the token price? Higher returns always come with corresponding risks:

The actual returns you’re going to get from your investment will always be affected by taxes and fees. In some countries, every “compounding” event might be seen as a taxable event – which means higher taxes. Then there are fees to consider too:

If a protocol compounds daily and you’re paying substantial fees each time, your real net APY could be much lower.

APR_and_APY3.png

APY vs. APR: What's the difference?

Discover what All-Time High (ATH) and All-Time Low (ATL) mean in crypto trading. Learn how these key price levels influence market psychology, trading strategies, and investor behavior.

 in crypto? It’s the price ceiling — the moment a token hits its all-time peak, like Bitcoin crossing 

 is its shadow: the lowest price it’s ever touched. Together, they frame every chart, every trade, and every panic-fueled Reddit thread. 

 levels drive FOMO; ATL fuels bottom-feeder strategies. If you’ve ever asked 

, this guide is for you. We’ll break down how these psychological markers shape real trading behavior — and how to use them strategically in a market that doesn’t wait.

These peaks aren’t just historical footnotes — they’re market signals. Let’s break down 

, why it matters, and how traders use it to read momentum.

 (All-Time High) is the highest price a cryptocurrency has ever reached — full stop. It’s not just a number; it’s a psychological magnet for traders. When an asset hits a new ATH, it signals momentum, hype, or a shift in macro conviction. 

 its long-standing ATH of $69,000 (set in 2021) held until early 2025, when it broke past 

Traders track these levels obsessively. Why? Because 

 often act as resistance — and when broken, they can trigger rallies, trend reversals, or pure FOMO. Think of it as a market’s memory point that never fades.

 goes way beyond a historical milestone — it’s a live indicator of market psychology, price strength, and trader behavior. Here’s why it holds weight:

 the answer isn’t just “the highest price.” It’s where fundamentals meet frenzy — and knowing how to read that moment can mean the difference between catching a trend or chasing it too late.

 surge feels thrilling — until it doesn’t. Price peaks can lure traders into risky setups masked as momentum. Here’s what to watch:

 isn't about hype; it's about knowing when to lean in, and when to step back.

 often signal pivotal market moments. Notable examples include:​

These peaks often precede market shifts, underscoring their significance in trading strategies.

Every chart has two stories: the surge and the slide. Let’s unpack the 

, the price floor that often reveals more about risk, sentiment, and buying conviction than the peak ever could.

 — the lowest price ever recorded for an asset. These floor points usually surface during early launches or moments of brutal market stress. 

These price floors may look laughable now — but they represent the risk side of reward. Understanding ATLs adds depth to any ATH conversation.

 moments dominate headlines, ATL analysis gives you the real edge — especially when spotting undervalued assets before sentiment flips.

ATL isn’t just a stat; it’s a behavioral checkpoint for price, sentiment, and long-term conviction.

Buying at the bottom sounds bold — until that “bottom” keeps dropping. Trading near an 

 can expose you to more risk than reward if you’re not careful.

 hype optimism, ATLs signal max fear. Smart traders treat both with equal skepticism — and strategy.

 isn’t for the faint-hearted, but the rewards can be insane if you time it right. Check out these success stories:

These stories prove it’s possible to turn 

 into life-changing wins — but it’s not without its risks. So if you’re playing the ATL game, know the volatility is real, but the rewards can be massive. Just don’t get caught chasing the next bottom blindly.

Why ATH and ATL Are Important in Crypto Trading

 are reflections of market sentiment at their peak and bottom. Understanding these key points gives you a window into trader psychology, helping you spot potential market reversals before they happen.

 signals, revealing how investors feel at different stages. Here’s what they say:

, signaling potential market reversals. When euphoria peaks near 

, it’s a flashing sign that a trend reversal could be on the horizon. Understanding these cycles can help you time entries and exits with precision.

 in crypto is about the mental triggers they set off in traders. These cognitive biases shape how decisions are made near market extremes:

Professional traders understand these psychological dynamics and don’t get swept up in the frenzy. They stick to discipline, while others get carried away by emotion. Knowing when to fight the bias can make all the difference in trading near these critical price points.

 moments ripple across the entire ecosystem, not just individual assets:

 strategies should consider broader market trends, not just individual coins.

You need more than intuition to trade near 

 levels. Real-time analysis, combined with the right tools and technical indicators, can give you an edge. Here’s how to stay ahead of the curve with actionable insights.

 requires specific tools and technical indicators:

These tools help anticipate market reactions and guide strategy development.

Zoomex offers powerful tools for tracking and analyzing crypto price movements:

Zoomex’s hybrid exchange model helps you act fast, whether you're trading on a centralized platform or through decentralized protocols. Start trading smarter today!

Real-Life Case Studies and Lessons Learned

 and their inevitable corrections can be a game-changer for traders. These moments reveal how the market reacts under pressure and highlight critical lessons in timing, risk management, and emotional discipline. 

By digging into real-life scenarios, we can uncover actionable insights to sharpen our strategies. Let’s break down what happened, why it matters, and how to use these lessons moving forward.

Bitcoin's ATH and Subsequent Correction (2025)

 offers crucial insights into market psychology and trading strategy:

 who understood ATH dynamics were able to capitalize on the euphoric phase while protecting long-term positions with strategic risk management.

Ethereum’s recovery from near-ATL prices during the 2018-2020 bear market showcases the power of strategic ATL-based investing:

Investors who saw the disconnect between price and fundamental growth were handsomely rewarded, proving why understanding both 

 dynamics is essential for any serious market analysis.

 levels requires a sharp strategy. These price points signal market shifts that savvy traders know to watch. Whether riding a rally or positioning for a rebound, understanding how to play these extremes is crucial. Let’s dive into the strategies that can help you make smarter moves when prices hit critical highs or lows.

ATH_and_ATL.png

All-Time High (ATH) & All-Time Low (ATL) in Crypto Trading: Complete Guide

Learn how crypto trading algorithms work and why they’re transforming the way traders profit in digital markets. This ultimate guide covers strategies, tools, and how Zoomex empowers automated crypto trading success.

These days, if you’re familiar with crypto, there’s a good chance you’re also familiar with crypto “algo trading”. As the cryptocurrency market continues to heat up, traders are always looking for ways to trade faster, smarter, and without emotional pitfalls. That’s where algorithms come in.

The ever-shifting nature of crypto markets means prices can skyrocket or plummet in seconds, often leading traders frustrated, and struggling to keep up. The rise of algorithmic crypto trading means you can finally swap headache-inducing manual trading strategies with automated systems that pinpoint and execute opportunities on your behalf. 

It’s not just about convenience or “saving time”. These algorithmic tools can process huge amounts of data in milliseconds, spotting minute opportunities that humans might miss.

 people now owning crypto), algorithmic trading gives you a convenient way to stay one step ahead, manage risks, and keep on winning.

Want to discover how crypto algo trading can give you a crucial edge? Here’s everything you need to know about cryptocurrency trading algorithms, and how Zoomex’s platform is empowering traders to tap into brand-new opportunities. 

Crypto algo trading is basically the strategy of using computer programs that follow pre-defined rules to trade cryptocurrencies automatically. Instead of manually analyzing charts and placing orders, you get a computer program to do the heavy lifting. 

The program examines signals like price movements, trading volume, volatility, or even market sentiment (where data is available), then triggers buy or sell orders when certain conditions are met. To break it down, the core components of algorithmic crypto trading tools include:

You’re not just putting your trading tasks on autopilot here, you’re using 

 to make decisions based on cold, hard data – rather than letting emotions take the wheel. 

Handing something as important as your trading strategy over to bots might sound like a scary concept at first. But there are a few reasons why a lot of the top crypto traders like algorithms. Some studies even suggest algorithmic trading accounts for up to 

 in US, European, and major Asian markets. 

Algorithmic crypto trading is popular because it: 

Getting to grips with crypto trading algorithms can seem a little tricky – particularly if you’re not tech-savvy. So let’s break down the core components of an algorithmic system.

The Algorithmic Trading Process: Step by Step

Innovators are always experimenting with new ways to use and improve crypto trading algorithms. But from a broad perspective, developing and deploying these algorithms involves a few central steps:

Just as there’s no one-size-fits-all algorithm – there’s no single approach to algo crypto trading strategies. Over the last couple of years, though, some methods have become more popular, such as:

 involves profiting from price differences. Imagine you notice Bitcoin selling for $50,000 on Exchange A and $50,300 on Exchange B. With an arbitrage algorithm, you could instantly buy on A and sell on B, pocketing that $300 (minus fees).

Opportunities like these appear because different exchanges can have varying liquidity, fees, or local currency conversions. In a market as global and fragmented as crypto, these spreads pop up regularly - though windows can close pretty fast. 

If you’re considering this route, Zoomex’s hybrid CEX/DEX model may offer a good edge, letting you quickly move between centralized and decentralized markets to find pricing disparities. Speed is everything in arbitrage, and even a delay of a few seconds can mean the difference between profit and missed opportunity.

Just as the name implies, trend-following strategies look for consistent price movements, often using common indicators of opportunities like: 

Zoomex offers a suite of charting tools and technical indicators you can incorporate directly into your algo’s code. This enables your bot to identify trend signals the instant they occur.

Market-making algorithms thrive in high-volume, volatile environments. Their goal is to collect the spread - the difference between the bid (buy) and ask (sell) price - by continually placing two-sided orders. A well-tuned market-making algorithm can create a steady (though sometimes modest) income stream, especially if it runs around the clock.

But keep in mind, market making has its own demands:

Overall, there are a lot of benefits to crypto algo trading – when you do it correctly. All trading strategies have their risks, but algorithmic trading delivers:

We all know how quickly the crypto market moves. That makes execution speed extremely important. Crypto algorithm trading provides 

Zoomex is a great platform for speeding up trading strategies – thanks to its high-performance trading engine, and low-latency environment. 

Emotions don’t belong on the trading floor. One of the biggest barriers to success in crypto is the human psyche. Fear of missing out (FOMO) can make you buy high. Fear, uncertainty, and doubt (FUD) might make you sell low. A bot disregards both hype and panic, sticking to logical rules.

You benefit from “consistency” – with bots that follow rules rather than being swayed by market sentiment or personal emotions. It’s a great way to ensure you stay disciplined as you trade – which is important in the crypto space. 

After all, coins like Bitcoin can drop $1,000 in half an hour, and having an unemotional system can prevent rash trades. This alone often saves people from catastrophic losses.

Another key perk of using automated strategies is that they typically have risk controls baked in, like: 

In fact, many experienced traders believe that consistent application of these risk protocols is more important than the initial choice of strategy. Ultimately, even the best ideas can fail without proper position sizing and well-placed stop-losses.

Risks and Disadvantages of Crypto Algo Trading

Crypto algo trading still has risks. The more you know about these hurdles, the more you can avoid and overcome them. The key issues to be aware of include:

No system is perfect. If your internet connection drops at a crucial moment or if an exchange’s server goes offline, your bot can’t place trades. High-frequency strategies, especially, can suffer if there is any delay in execution. Data quality also matters: if a price feed is inaccurate or delayed, the algorithm’s decisions may be off.

To mitigate these issues, professional traders often use redundant servers, backup power sources, or even multiple internet providers. While these things can add to costs, they can also be crucial if you’re running large positions or sensitive strategies.

“Garbage in, garbage out” is a well-known phrase in computing, and it rings true in algo trading. You’re going to need to be aware of:

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