It is possible to break the Efficient Market Hypothesis and make money in the short term. You become part of the invisible hand that makes the market efficient (effectively stochastic) in the long term.
As I see it there are three types of trading bots:
- Quantitative algo bots using technical analysis, often on leveraged products, to predict market movements and time your buys and sells. As far as I can tell, these are mostly well intentioned voodoo that don't work in the long term. Of course survivorship bias leads to enthusiastic believers, just as you would get if you give random horse racing tips to enough people. The unlucky traders give up, the lucky ones become advocates, and the bot seller looks like a genius.
- Very simple crypto bots using cross-exchange arbitrage (buy on one exchange while the selling same coin on another) or triangular arbitrage (buy and sell three markets to complete the triangle). If you get the settings right then these can make a small % profit, but in most cases you won't get much turnover.
- Quantitative algo bots that actually work. As @NicolasMaduro implies, successful traders are not going to sell you their code. They just use it to trade.
The world's most successful trading bot (stocks, Fx, commodities) is probably run by Renaissance Technologies Medallion Fund, which averaged 71.8% annual return on a $10 billion fund over 20+ years (before fees). The founder is an award winning mathematician and topologist, as well as ex NSA cryptologist who hired almost 100 PhDs, harvested massive amounts of data, invested in world class engineering, is believed to host atomic clocks in various exchanges, etc.
You can beat this % fairly easily if you run a very small crypto fund. But it is hard to scale it up and keep it profitable.
There is a fourth approach, but the bot is incidental. Sometimes there is a consistent price difference in some country. Venezuela recently, Iran before, and South Korea for a while before. For a few months Bitcoin was valued 10% to 20% higher in Korea because the KRW was overvalued. During that time billions of dollars of BTC were traded in South Korea. Some people will have made a lot of money, because it was not easy to transfer large amounts of KRW back to USD due to regulation and unofficial currency controls.
