When it comes to trading in cryptocurrency, making a profit is just as important as keeping your gains safe and secure. There are multiple opportunities to lose your funds and using bots to trade significantly increases the chances of losing your funds. However, with a little vigilance, your funds can be as secure as those stored in the bank.
Robot trading is basically using computer algorithms (set rules) to make trading decisions. The human element is just as important in using trading bots. The bots are useful in automating your trading strategies but nor replacing you entirely. Now that we understand that bots don’t replace us, we can then understand that the responsibility of safety of our funds is in our hands.
Bots work by gaining access to exchange APIs (Application Programming Interfaces). These are special permissions specific to each account on the exchange platform that will allow the trader (the account owner) to interact with the exchange using trading software. The information and permissions available through APIs are extremely sensitive and if they fall into the wrong people, these people can easily cause havoc and if not properly protected, can withdraw funds from the account.
So how do I Protect Myself?
First of all, it is essential to understand that most bots are run off a server. This is important because bots are designed to operate perpetually and having your work computer switched on endlessly is not an ideal situation. So because bots are operated from a dedicated server, they are exposed to online hackers. So to protect yourself, first pick a reputable hosting service. There are several out there but there are also several that are not worth your time so take the time to get yourself a good hosting service provider for your bot that is not only secure but also reliable.
Once you get a good host it is time to set up your bot. most exchanges provide permissions with the API functionality. Typically most exchanges offer three options for setting up your API access. These are:
- Read – allows your bot to read data available on your account as and the order book.
- Trade – allows your bot to open and close trades as defined by your algorithm
- Withdraw – allows your bot to withdraw funds from your account
Obviously the ‘withdraw’ permission is the most sensitive but all these commands are still potential tools for hackers to target you. Even if you have disabled the ‘withdraw’ access for your bot, if a malicious hacker gains aces to your API key, they could read personally identifiable information including your account balances and how successful you are as a trader and use that information to attempt a phishing attack. The best way to ensure the security of your account is to effectively manage the permissions of your API key. To be safe, never enable the withdrawal access unless you want to withdraw funds and disable that functionality immediately after withdrawing the funds.
Security is your own initiative and responsibility because even the best-guarded platforms could be compromised. Reduce your trading risks as well as reducing your risk of losing your money.