Trading Bots and Automation That Ask for Too Much

Automated trading tools connect to an exchange account through an API key. The permissions on that key determine what a compromise costs you.

The permission levels

Read only. View balances and history. Cannot trade, cannot withdraw. Correct for any tool that only needs to observe.

Trade enabled. Can place and cancel orders. Cannot withdraw.

Withdrawal enabled. Can move funds off the platform. No legitimate trading tool needs this.

That third level is the one to refuse. A tool requesting it is either badly designed or malicious, and the distinction does not matter.

What a compromised trading key can do

Without withdrawal permission, an attacker cannot take funds directly. They can still extract value.

Trade against you in a thin market. Place orders on an illiquid pair at terrible prices, with their own account taking the other side. Your balance is converted into their profit without a single withdrawal.

This is the attack people do not anticipate, and it is why trade permission is not harmless.

The defences

Restrict by IP address where the venue supports it. A key that only works from one address is useless if stolen.

Use read-only unless trading is genuinely required.

Never grant withdrawal permission.

Review keys periodically and delete anything unused.

Enable the withdrawal allowlist so that even a withdrawal-enabled key cannot reach a new address without a delay.

The wallet-connected version

Automation that operates on-chain requires a private key, which means the tool has full control of whatever that key holds.

There is no permission model. A bot with your key can do anything the key can do.

The only sane arrangement is a dedicated wallet holding only what the automation needs, funded deliberately, with long-term holdings elsewhere.

The outright scams

Tools that request a recovery phrase to set up. Always theft.

Tools promising guaranteed returns. The mechanism is unstated because there is none.

Copy-trading services requiring withdrawal permission.

Bots distributed through community channels by accounts impersonating a project.

The evaluation

Before connecting anything to an account or a wallet, three questions.

1. What permissions does it request, and does it need them?
2. Can the permissions be restricted further, by IP or by amount?
3. What is the worst thing it can do if it is compromised tomorrow?

The third question is the real one. An answer of “trade my balance into a thin pair” is survivable if the balance is small. An answer of “withdraw everything” means the answer to question one was wrong.

For anything holding meaningful value, the venue’s own controls matter as much as the tool’s design. Address allowlists, IP restrictions and granular key permissions are published by platforms including platforms with a real complaints process, and a venue that does not offer them is one where a single leaked key is unrecoverable.