1) Data and alert sources

Choose robust on‑chain sources: full nodes, blockchain indexers, and specialized event feeds (e.g., mempool watchers, DEX swap streams, token transfer trackers). For Canadian traders who need redundancy, run a local node (or a node cluster) plus subscribe to at least one external indexed feed to avoid single‑point failures. Typical alert types:

• Whale transfers to/from known exchange addresses
• Large token unlocks / vesting releases
• Rapid spikes in on‑chain volume or active addresses
• DEX liquidity pool withdrawals or large swaps
• Funding rate and open interest surges on derivatives markets

2) Signal vetting and enrichment

Raw alerts are noisy—add context before acting: enrich alerts with price impact estimates, on‑exchange order book depth (top-of-book spread and depth at target price), funding rate direction, historical volatility, and correlation to market indices (e.g., BTC/ETH moves). Implement automatic confidence scoring and thresholds so only signals above a minimum score reach the execution layer.

3) Risk & trade management engine

Define clear rules for position sizing, max order size per exchange, slippage tolerances, and per‑symbol daily loss limits. Use position-sizing primitives (fixed fractional, volatility‑adjusted, or Kelly‑inspired caps) and enforce pre‑trade checks (available balance, margin, open orders). Always implement kill‑switches and global circuit breakers to halt all trading on large drawdowns or connectivity issues.

4) Execution layer (exchange adapters)

Build or use modular adapters for each exchange / venue—Bitbuy, Wealthsimple Crypto APIs, major centralized exchanges, and primary DEXs. Key features the adapter must support:

• Limit, market, post‑only, IOC, and reduce‑only orders
• Order status polling and websocket fills
• Client‑side idempotency keys to avoid duplicate orders
• Rate limit handling with exponential backoff
• Smart Order Routing (simple SOR) across multiple venues to minimize spread/slippage

5) Monitoring, logging, and observability

Comprehensive logging enables debugging, post‑trade analysis, and CRA-ready records. Track raw alerts, enriched signals, executed orders, fills, slippage, and latency. Implement alerts for failed orders, API credential issues, or anomalous fills and keep persistent, tamper-evident logs for at least the CRA‑recommended period (keep exact retention aligned with your accountant; many traders retain multi-year histories).

Event-driven vs scheduled checks

Event-driven architectures (webhooks, message queues) minimize latency—essential for mempool or whale transfer triggers. Combine with scheduled sanity checks (every X seconds/minutes) to ensure no missed state changes. Use durable message queues (e.g., Kafka, RabbitMQ) to absorb spikes and allow replaying messages during backtesting.

Idempotency and state reconciliation

If a request times out or an API call fails, do not assume failure. Use idempotency keys and reconciliation jobs that compare exchange order history to your internal state to avoid duplicate positions or ghost orders.

Latency budgeting and cost awareness

Know where milliseconds matter and where they don’t. For trades reacting to large on‑chain swaps, latency between detection and order placement matters more than micro‑optimizations in logging. Conversely, smart order routing and exchange selection can materially reduce market impact and fees—factor maker/taker fee structures and regional fee differences (e.g., settlement in CAD vs USD) into execution decisions.

FINTRAC, exchanges, and your obligations

In Canada, exchanges are generally required to comply with FINTRAC rules for anti‑money laundering and counter‑terrorist financing. As an automated trader, your direct regulatory obligations depend on whether you operate as a dealer/MSB or only trade for your own account. If your automation involves offering trading services to others, custody, or converting fiat, consult a regulator or legal counsel because registration and reporting requirements may apply.

CRA tax reporting and record keeping

The Canada Revenue Agency (CRA) treats crypto transactions as either capital gains or business income depending on the facts—frequency, intent, and organization of your trading. Automation tends to increase the frequency and might push activity toward business‑like trading for CRA purposes. Maintain clear, timestamped records of all alerts, signals, orders, fills, and transfers across wallets and exchanges. Good practice includes:

• Export and store exchange trade histories and withdrawal/deposit records.
• Log on‑chain transactions (txid, timestamp, from/to addresses, block number) and any internal transfers between your wallets/exchanges.
• Record the CAD or USD value at the time of each taxable disposition for accurate capital gains or income calculations.

Work with a crypto‑savvy accountant to classify trades properly and to understand implications of algorithmic profit‑sharing, corporate trading structures, or running bots as a business.