First Touch

AI in Crypto Trading – Balancing The Risk and Reward

You’ve probably heard about people making a ton of money trading cryptocurrencies like Bitcoin and Ethereum. But it’s also super easy to lose a bunch if you’re not careful. That’s where artificial intelligence (AI) software programs can help you automate your day to day trading experience.

AI can study huge amounts of data on cryptocurrency prices, trading activity, news, and more. It uses this info to spot patterns that humans might miss. When used on trading platforms like Coinbase, Bitcoin Buyer, Binance, or Kraken, these AI “trading bots” can make lightning-fast trades based on their analysis.

But is letting robots control your crypto trading a genius idea or a terrible mistake? You might be thinking of hopping on the automation train yourself, and you are right. Let’s look at the good and the bad of using AI trading bots and how it can help your business stand out from the crowd!

The Pros About AI Crypto Trading

woman crypto trading
  • Mind-Blowing Speed

While you’re still reading the news or staring at charts, AI can process millions of data points per second and trade in a blink. It captures tiny price moves that humans can’t. Imagine processing hundreds of trades, analyzing thousands of charts, and predicting future cryptocurrency rates and lightning fast speeds. That’s what AI can do.

  • No Emotions

Fear, greed, and hype cause many traders to make poor decisions. AI has no emotions – it just follows its programmed instructions without feelings getting in the way. Many times, traders miss out on trades with amazing potential, simply because they did not expect the price to skyrocket due to emotional factors. AI has no such bias!

  • Always Watching

You might stay up all night monitoring the markets, but eventually you’ll need sleep, food, or a bathroom break. AI trading bots never stop watching 24/7 to catch every opportunity. It does not need rest, helping you stay up to date with things you would otherwise miss out on.

  • Higher Profits

Studies show well-programmed AI trading systems can beat human traders over time by always having a slight edge. How? Because they’re always active. You cannot rely solely on AI yet, but comparing the always-on analytic mind of a machine to a human trader who needs rest and sleep, you know who will stand out in terms of data analysis.

The Cons of AI Crypto Trading

  • Coding Errors

Even very advanced AI is only as smart as its coded instructions. If there is a flaw or error in the algorithm, it could make really bad trading decisions over and over before you notice. Always make sure to use trusted AI trading bots, or make sure that there is an expert overseeing the decisions made by your bot.

  • Data Errors

If the data the AI learns from is incomplete, biased or wrong, it will make poor predictions based on bad info going in. It is very important to always feed the whole picture to your bot, or it may cause some serious losses down the road.

  • Black Swan Events

AI is awesome at normal conditions but might fail in wild, unpredictable “black swan” events like exchange hacks or new crypto laws. It might be confused during sudden price drops as well, and needs to be properly trained to cater to such events in the crypto market.

  • No Human Control

While AI can enhance returns, crypto is still super risky. Letting AI run everything with zero human oversight could spell disaster. You should always have an AI expert overseeing every more the bot makes, or you might regret it later on.

Balancing the Risks & Rewards

So AI crypto trading isn’t magic. It comes with its own set of pros and cons but it can give you an edge if used wisely. You need to implement a few tips and tricks to make sure you get the most out of your AI bots, without taking big hits in your portfolio.

Here are some tips:

  • Go Slow at First

Don’t bet it all on AI right away. Test it with a small amount first before adding more money over time. You can keep automating your task day by day, but not all at once. Test what works for you, and go on from there. Later on, you can implement multiple bots trained for their specific tasks, making the process much more streamlined.

  • Use Good Exchanges

Only use known, trustworthy exchanges like Coinbase Pro that allow AI trading bots and provide ways for AI programs to access data. Use trusted trading bots like Bitcoin Buyer, Quantum AI, etc. With newer bots popping up on the market all the time, it’s very easy to trust the wrong app and lose your assets.

  • Blend AI & Humans

The safest and the best path is letting AI crunch data while an experienced human trader oversees things in case trouble happens. Oversight will help you make smart decisions about automation later on.

  • Set Risk Limits

No matter how smart AI is, always enforce strict risk rules like risking only 1-2% per trade and setting protective stop losses. This way, even if you are unable to monitor the bots performance at all times, you will not suffer huge losses on wrong bets.

In Conclusion

AI will absolutely play a major role in analyzing markets and making trades. But real people and businesses adopting cryptocurrencies for actual use is what really matters long-term. Even the smartest robot can’t control that.

For now, AI crypto trading is just another tool to increase your edge – a powerful one when used properly. Don’t buy into “get-rich-quick” AI hype. But by responsibly blending AI with human intelligence, you can gain an important advantage in this crazy crypto world.

The key is striking the right balance between man and machine intelligence. Master that, and the future crypto profits could be yours!

The published material expresses the position of the author, which may not coincide with the opinion of the editor.

Scroll to Top