The future episode, where super robot traders fight against micromovements in stock prices, is here. With access to algorithmic trading bots at the click of a button, we can see the downfall of human investors and the triumph of artificial intelligence.
Algorithmic trading bots are programmed to buy and sell when they detect pre-programmed conditions and can execute any trading strategy. They have been used by professional traders for twenty years, and the company has also brought them to the crypto market.
Today, a new crop of accessible crypto trading tools are on the market, created with retail clients in mind. I know – I’ve built a few. Currently, I am working on a system that helps new investors discover their own risk preferences based on previous trading and investment data.
The use of such bots could have a huge impact on the crypto market going forward, as retail accounts account for up to a quarter of crypto trading volume. And the most interesting thing is that this could signal democratization in market access and participation.
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If this happens, access to trading bots and other specialized tools should be combined with open education. Re-establish a gated system where only “accredited” investors are allowed access to the crypto market while others are excluded due to lack of education and elitist and regressive capital.
It is unfortunate that financial education is not taught in schools, so many people fall in love with sophisticated professionals and fraudsters. Trading bots, combined with proper education, are one step towards leveling the playing field.
This technology provides a kind of experiential education for amateur traders, so that they can feel the movements of the market using small positions and automatic strategies. They can experiment with different bots to learn about different strategies such as arbitrage, dollar cost averaging and futures trading.
Furthermore, those who gain expertise in trading bots – for example, using several bots simultaneously representing a hedged or diversified strategy – can beat experienced players. After all, no human can constantly monitor the crypto market 24/7, but bots can.
In fact, trading bots thrive in the 24/7 crypto market where they can spot arbitrage opportunities and ride the wave of high volatility. No human can follow these markets and will always miss out on opportunities that bots can take advantage of.
However, traders still need to make important decisions that will affect the bot’s performance, such as choosing assets and price ranges to buy and sell the bot. So, while bots are a great tool, they are not without risk.
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The deeper a trader knows entry and exit points and trade timing, the better he will be at setting up his bot. However, most users don’t need expert-level knowledge – they just need to understand why setting up a long-term grid bot on a microcap that’s only pumped at 200% is a bad idea.
Another advantage is that bots take the emotion out of trading. Even professional traders struggle to keep their cool, calculated minds with large amounts of money on the line.
Some may “marry the bag” and continue when they need to sell. This kind of behavior becomes “dumb money” – trading that reacts emotionally to market changes rather than reason.
Trading bots do not suffer from this emotional handicap. They implement strategies in a calculated vacuum. Neophyte traders can find a lot of value in these instruments on their journey as independent traders and investors.
Previously, professional traders honed their skills as part of their job. But with the advent of AI trading, retail investors now have an opportunity to catch on. As the specter of inflation haunts major economies around the world, it is important that the latest investment tools are accessible to all as a means of access and education so that ordinary people can preserve wealth and create economic opportunity.
Bill Xing is head of financial products at Bybit. Before joining Bybit, he founded Panda Analytics, a crypto indexing and trading automation company. He has a master’s degree in financial engineering from the University of Illinois at Urbana-Champaign.
This article is for general information purposes and is not intended and should not be construed as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.