Lately I've been trading a lot and I've had a chance to watch how the bots work. It's really annoying. But aside from that, I'm starting to feel like they, long term, leech value out of the coins and essentially hand it to the exchanges and bot operators.
They all work with the same basic premise: Track the exponential moving average, the volume of trades, and when it goes beyond the middle range (right on the line), either buy or sell under certain conditions.
Which sounds reasonable enough so far, if it's just the same thing a person could do, why not let a bot do it, right?
Here's why I feel they're a toxic component to the trading process:
1) They don't care at all about what the coin is about, it's fundamentals, management, nothing other than it's EMA score. They would literally trade dog turds around if the market was volatile enough.
2) They cut humans out of the process unless the humans don't mind getting the short end of the stick. The only way to get your trades in on a bot-infested coin is to either take current market value or keep your offer so close to it that you might as well have. If you try to buy too far below a coin value, they make an offer 1 sat higher than yours. If you try to sell too far above coin value, they make an offer 1 sat lower than yours. By the time you get your trade in, the price has already changed enough that it's probably not a good trade anymore.
3) They work against natural market dynamics. In a botless world, the actions of a coin's team and the fundamental laws of supply and demand dictate a coins value. But in the bot's world, the only thing that matters is 'is it high' or 'is it low' (and, a bit, what is the current volume). So if a great coin gets good news (like GEO did recently), and as soon as the coin starts to climb a bunch of people start selling... that's why. The price rose enough to make it profitable to sell, so they will. Which then drives the value down until it's back in EMA range. Bots are fundamentally incapable of HODLing. That's not what they're there for. And if this reaction drives value down enough to spook human investors into selling, eventually the value goes down below EMA and the bots will buy the coins right back to repeat the cycle again in a moment.
This cycle ultimately removes volatility from a coin, while constantly edging it downwards. I think the steady downwards trend is because of trading fees, but maybe it's because humans eventually get fed up and leave. I'm not sure.
So... that's my rant about why bot's are screwing up crypto exchanges. Thoughts on this? Possible solutions or strategies for mitigating these effects?
I've been giving some thought to programming a "brainless" bot that just takes commands from me as to what trades I want to make, and then it does the 1 sat snipe BS the actual bots do, to make sure my trade has a better chance of happening. But otherwise, it wouldn't make any decisions and it wouldn't have an autopilot. Maybe that's what's needed? It feels like a cheap trick that edges out other humans from the process so I'm reluctant to take those steps... but I want my trades to be successful so that has to take priority.
Here's an example of a trading bot ("gunbot") along with detailed descriptions of how it works:
https://bitcointalksearch.org/topic/gunbot-automatic-poloniex-profit-generator-1715214