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I made a lot of passive income by coding trading bots for bitcoin.

Its a steep learning curve but if you are willing to learn, it can be very profitable.

Like you, I can code confidently so during my morning commute I would read books about trading and economics. In the evening I would play with bits of code interfacing with broker API's. Within 3 months I had a working bot that automatically traded away as I slept and went about my day job (passive enough for you?).

Fast forward 6 months with a couple of hours coding a week refining my algorithms, my bots earned me more than double what I made in my day job that whole year.




To answer a few questions:

I actually ran 2 different bots with a few variations of each (for different brokers).

My first bot was an arbitrage bot running on different markets, USD, GBP and AUD. There is still huge opportunity to make money using arbitrage as I've not seen many people do it well. The trouble comes from transferring the funds between brokers, there is often a cost incurred that you must consider and price into any profit equation. @skarmklart, yes the payoff compared to the trading volume is small, but it is low risk and almost guaranteed profit.

I ran the arb bots for a few months and made around $15,000 after which I decided to step it up a level. (I started with $100)

Trading and investments always consist of a balance between risk and return. The risk for arbitrage is very low, and so the return is also low (but consistent). The return for technical analysis trading is much greater but the risks are also larger.

My second bot was programmed to take advantage of technical analysis. I realised that in the bitcoin world it is actually much simpler than people lead you to believe. I set up a database to capture price feeds, then used some free technical analysis tools to produce buy and sell signals automatically. I then plugged the signal feed into my trading api (which I wrote from my original bot) to execute my orders.

Here's some useful links: http://ta-lib.org

Books: Reminiscences of a Stock Operator gives you an insight into trading psychology

Market Wizards (there are 3 books in this series): http://en.wikipedia.org/wiki/Market_Wizards


It's really nice to find an emerging liquid market that hasn't attracted the industrial algorithmic traders yet, innit?

The whole Bitcoin world is about to become a lot less fun soon. I'll miss the early days (even as I work daily to usher in the next phase).


>>> Its a steep learning curve but if you are willing to learn, it can be very profitable.

That sounds interesting but do you think it's doable for someone without a business degree or something like that? I mean... I am fascinated by everything that's related to bitcoin but I never felt like I could do anything about that because the learning curve is just too steep. I studied sociology so I have some statistical data analysis background but I always felt that competing with guys who major in Economics would be like hobby cyclist trying to beat pros at Tour de France.

Could you please share some more info about your previous experience with trading, your educational background and anything that you think is important? It would be tremendously interesting to me.


Was it arbitrage or trading with some risk involved? For the former, there is this: https://github.com/maxme/bitcoin-arbitrage

I've tried it, and even extended it to support a certain Swedish exchange, but it seems to me the pay off is small and the unreliability of the exchanges means it's not true arbitrage.


Would your algorithm still be profitable today, with so many people running bots on mtgox?


Yes it would. I don't run them anymore though as I decided to concentrate on bitcoin ventures that would help the bitcoin economy grow! (Disclaimer: I hold a fair amount of bitcoin.)

And don't be put off by the hundreds of bots on MtGox, most of them are harmless and from 12 year old script kiddies placing hundreds of tiny ~0.01 btc orders for fun.


How do you even learn that?


Can you recommend any specific books? (on trading) Cheers


Inside the Black Box


What did your bitcoin bots trade?


Bitcoin and another currency (presumably dollars, as BTCUSD has the highest liquidity). Buy when bitcoin exchange rate is low'ish, sell when it's high'ish, reap the margin.


Yes thats correct. And yes, in a sentence you've described a simple but profitable strategy, one of many :).


Uhm... Bitcoins?




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