Andrew Norry, an author of blockonomi.com, explains 2 main types of bot trading.
The simplest strategy: buying an asset for less and selling for more or vice versa. Although these opportunities arise less as the market develops and markets react very fast, opportunities appear from time to time and bots can assist in extraction of extra profit. There is also an opportunity to make arbitrage of futures contracts due to the difference of its price and the underlying asset.
“Trading bots can also allow investors to use the market making strategy. This strategy provides for “continuous buy and sell prices on a variety of spot digital currencies and digital currency derivatives contracts” in an effort to “capture the spread between the buy and sell price.
In order to carry out the market making strategies, in involves making both buy and sell limit orders near the existing market place. As prices fluctuate, the trading bot will automatically and continuously place limit orders in order to profit from the spread.”