Using AI and Crypto Trading Bots

 

The crypto space is notorious for how volatile it can be. That can be frightening for those currently navigating it and those looking into it. It's for this reason that people will use every trick in the book to get an edge, and one prominent solution is the famous system known as artificial intelligence.

 

What’s interesting, AI-powered trading bots in the crypto niche can help to go through market difficulties quickly and easily, disproving misunderstandings and common myths about cryptocurrency, and giving a more efficient trading method. ​If you're not aware of AI and how it can be used within the crypto space, let’s get you up to speed on what all this is. This will include what it is, how it's used, which typically comes in the form of trading bots, and what you may expect from its utilization.

Contents:

- Crypto's future

- Beyond traditional algorithms

- The perfect AI or trading bot tactics

- What comes with using such tech

- Ensuring data accuracy

- Final thoughts

Crypto's future

Before we get into AI, let's look at trading bots on their own. These are tools used in areas of the financial market that allow one to trade automatically through the use of algorithms. The mode of operation is fairly basic and can be summarized in the following steps:

- Getting a good bot that you link to your crypto account via API key

- Setting the parameters in which you wish to execute your trades, which include things such as volume, momentum, and sentiment, as well as how your capital will be allocated

- Analysis of market and technical data which the tech backing the bot can do efficiently, and at lightning speeds

- The bot will then identify opportunities and proceed with risk allocation according to your parameters

- The bot then executes the buying and selling of crypto, which is allowed to happen via the API

Beyond traditional algorithms

The technology behind some of such bots is artificial intelligence, which, while still advancing, learns from datasets to perform assigned tasks. The AI solutions within crypto niches execute such functions efficiently or at least the current version of it. Regardless, what AI can do is learn from datasets and perform the functions it's asked to do based on that, said functions are done not only quickly, but tirelessly. This gives the ability to do the following:

- Trade 24/7 as the crypto markets don't close

- Analyze large amounts of data within seconds

- Execute trades sans emotions

 

Now, it should be noted that in theory, artificial intelligence should be somewhat autonomous, but in its current form, it's not close to that. As such its application is in algorithmic trading bots, which still need human input.

 

The perfect AI or trading bot tactics

The crypto market has a current valuation of the significant financial scale and influence of the market. It is literally over 2 trillion dollars, although that can change due to the ever-present volatility, the use of AI trading bots will need to be accompanied by a solid strategy. Fortunately, many tactics almost seem custom-built for automation, and two notable ones include:

- Arbitrage, which takes advantage of price discrepancies across exchanges and AI can improve due to the speed with which it can spot the differences

- Scalping, which takes advantage of small price movements the market sees and can be improved by AI, which can execute numerous trades within seconds

 

In addition to this, is the element of risk management, which is necessary in the space to avoid catastrophic losses. This is something that can be achieved through tools such as stop-loss orders, which some advanced AI trading bots have.

What comes with using such tech

AI and trading bots are great tools that one can use for the crypto market as they are speedy, operate with autonomy, analyzing vast amounts of data and execute trades without the influence of emotions. However, there are a few challenges one has to consider before using the tech.

 

The first of these is the choice of AI platform you choose, which should not only have the possibility of having a bot, but the accompanying tools that increase the chances of success. These include various order varieties, technical tools, as well as access to various cryptocurrencies, and the API that your bot will need for integration.

 

Ensuring data accuracy

As far as the bot itself is concerned, its primary concern should be the data that it analyzes. If said data is in any way inaccurate, it doesn't matter how good the bot is, the results won't be as expected. As such you'll need to constantly oversee things to see to it that the data is accurate, and the bot's response is what you want - something that is necessary for a market that's always in motion. Additional points to monitor:

- Market values with real-time data accuracy for current asset values

- Trade volume to measure market activity as well as historical data

- News feeds but use reputable sources to predict the niche moves

- Track sentiment research on social media to determine market mood

- Exchange reliability and changes of the exchanges that are being used

- Indicators with the accuracy of such data as moving averages and RSI

Final thoughts

AI has taken over the business world and its uses, and effects have naturally spread into the cryptocurrency space. AI is particularly effective in algorithmic trading bots, as it can allow one to actively participate in crypto proceedings at all times without actually being ever-present.

 

This is particularly useful in a space that's constantly operating, is highly volatile, and has tons of data that require sifting through. Useful as these technologies are for automation, they aren't near full autonomy, so quite a decent amount of input will have to come from you. As such the tools should not lessen your sharpness. By applying proper crypto data products that provide real-time and historical data through WebSockets and APIs, you can ensure millisecond-level precision and comprehensive market coverage!

You can get your Real-Time and Historical Cryptocurrency Data with a free Crypto Data API key.

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