Hello everyone..

Welcome to another day of exploring Web3 Engineering. In today's blog, we are looking into Sniper Bot, one of the well used bots for cryptotrading. So, without any further ado, let's get started.

Sniper Bot

Sniper bot is an automated program that is used to execute a cryptotrade instantly according to the conditions set by the user. The main reason for using sniper bots is its swift response to the market movements and counter orders to make profits for the users.

For example, during a auction, we can place counter bids instantaneously by continuously monitoring the bids being placed in order to increase one's allotment chances.

Let's look into the key features of the Sniper Bots:

• Precision: Sniper bots are programmed to execute trades with precision, while considering the predetermined parameters to ensure favourable market entrance and exit positions.

• Automated trading: Sniper bots operate automatically, which means once the bots are deployed, zero to none human intervention is required

• Pre-programmed algorithms: Sniper bots use pre-programmed algorithms to function, which can incorporate technical indicators, arbitrage methods, scalping tactics, and precise entry and exit points.

• Fast execution: Sniper bots can execute trades in milliseconds or less, taking advantage of favorable price fluctuations.

Are there any types of Snipers ?

Based on the trading mechanism and the parameters set, there are 4 major categories of Sniper bots. They are:

• Entry/Exit Bots - These bots are deployed with predetermined entry and exit points for the asset price. Once the price enters/exits the given value, appropriate buy/sell calls are made to achieve profits.

• Scalping Bots - These bots trade on sudden spikes in the price. They place a good number of small trades to increase the trading activity on the asset and then leverages the sudden price changes.

• Arbitrage bots - These bots make profits by dealing with multiple exchanges and leveraging the price differences in them. For example, by purchasing the tokens at the exchange which has lower price and selling them at the exchange that has higher price.

• Technical indicator-based bots - These bots are based on the technical indicators such as Moving Averages (eg 52 week moving average), Strength Indices and Bollinger Bands to initiate and carry forward the trades according to the market conditions.

Working

On the higher view, all the sniper bots work in 3 simple steps.

• User criteria ingestion

• Market monitoring

• Trade execution

Lets look into them

1. User criteria Ingestion - To deploy a sniper bot, the user must input the specific criteria depending upon the type of the bot. For example, entry and exit conditions or technical algorithm or list of exchanges etc., With these base details the bot can initiate the process.

2. Market monitoring - With the input data, the bot starts monitoring the markets in real time searching for the correlations between the parameters given by the user and the current conditions.

3. Trade Execution - The bot quickly completes transactions after locating a match, trying to enter or exit at the optimal time.

Risks and Challenges:

So far, the sniper bot seems so useful and powerful to make traders life easy and gain profits. But there are also some risks and challenges that come with the usage of trading bots.

• Market volatility: With the quick action capability of Sniper bots, it makes the markets volatile as it keeps changing the prices of the assets instantaneously. If the bot is trading with a bigger volume of the asset, it can cause a shift in price of the assets within seconds.

• Algorithmic complexity: With the increase in the complexity of the algorithm used by sniper bots, it becomes challenging to detect and stop their activity.

• Regulatory compliance: Sniper bots may be subject to regulatory restrictions, and their use may be prohibited on certain platforms.

Detection and Prevention:

• Monitoring market behaviour: Monitoring market behaviour, analysing trade volumes, and timing can help detect and prevent sniper bot activity.

• Platform restrictions: Some platforms may restrict the use of sniper bots or implement anti-bot mechanisms to prevent their activity.

• User awareness: Educating users about the risks and challenges associated with sniper bots can help prevent their misuse.