The API is an application programming interface that helps applications to interact with each other. In everyday life we use API all the time, but we do not always realize that we are dealing with them.
For example, when we search the Internet for a house to buy, we find a website where the site API is used to retrieve information from the respective real estate database of that resource. Essentially, APIs are created by some developers for others as a set of ready–made classes, functions, procedures, structures and constants in a certain format – so that the result is that the user on another site or in another application can get information that is easy to understand.
Thus, to get the exact time in your application in London, Singapore or Dubai, the API is used from the appropriate resource. To see the picture from NASA’s space telescope, you can also use the appropriate API from that agency’s website. Stocks realtime stock quotes also can be available to you via API.
Cryptocurrency API provide up–to–date information on digital currencies and their prices from platforms. In particular, they can give:
- the price of the particular coin;
- data on volume;
- opening, closing, maximum / minimum prices;
- historical data on trading in one or another of these or other cryptocurrencies;
- some news reflecting the situation on the crypto market;
- coin rating by popularity, etc.
Once you receive such data, you can use it to optimize your trading manually or with bots, as well as for other purposes, for example, to post information on your website.
Placing trades using the API
Professional traders use API to place their trades on exchanges. APIs in this case allow to set the time of the deal etc. APIs also allow traders to improve their transactions by using combined data. You can also get API from such companies as Twelve Data for some other purposes.
API and trading bots
- Arbitrage bots investigate the crypto market using the API for arbitrage profit opportunities and place trades accordingly. For example, if a bot sees that a particular cryptocurrency is undervalued on one exchange and overvalued on another, it makes a signal to make a trade that allows you to profit from the price difference on the exchanges;
- Impulse trading bots use the API of the cryptocurrency platforms to calculate the strength of the price movement impulse of the cryptocurrency, trying to “predict” the price (for example, its growth) and placing the appropriate trade to make a profit;
- Bots that use a rule/law of alternation (“the market does not show itself equally twice in a row“). APIs in this case are used to calculate the average price for a certain period. If it deviates from this level, the principle of restoring the average prompts the bot that the price will return to the average and that it is time to place the appropriate trade.
Is it safe?
Thus, modern automated trading relies entirely on the API, which passes all the needed info that capable of analyzing the market situation and making user–friendly decisions. In fact, the API is the use of publicly available (most often) data in its applications for profit, and it is unlikely that this is aimed at stealing your money. Your security can only be compromised if an attacker can get into your account with wallets and funds.
On the other hand, excessive trust in bots that rely on the API can be risky, as they may not take into account some of the variables that are important to your strategy (this will also depend on the settings and specifics of the bot code itself).