Blockchain and AI are two technologies that have greatly transformed how we do things today. Through crypto, blockchain has changed the entire financial infrastructure. On the other hand, AI has been transforming how we do things in every aspect of our lives.
While they are quite different, these two harmoniously work together to improve the financial sector and help traders become more successful. From streamlining their activities to gaining insights into the movement of the Bitcoin price, there’s a lot to gain from using AI for crypto trading.
In this article, we discuss the necessity of AI in dealing with the volatile crypto market, highlighting the different ways it can empower you as a trader. We also touch on some of the best AI crypto trading tools and the challenges that come with incorporating AI into trading.
Real-Time Market Monitoring
AI algorithms are capable of seamlessly monitoring market activity, following price fluctuations, and identifying patterns from market data. By doing so, they can gauge market psychology, enabling you, the cryptocurrency trader, to stay ahead of the curve at all times.
AI also constantly monitors social media posts, news headlines and several other developments that could impact crypto prices. Additionally, AI systems can help detect suspicious market activity.
Trading Automation
With the help of pre-defined parameters, AI trading bots can help execute trades. The result is the elimination of human emotion from the equation and consistent trade execution in accordance with the selected strategy. You can set parameters for various factors such as market volatility and price targets to allow the AI to automate entries and exits within the set constraints.
Investment Recommendations
AI also can personalize user experience on various exchanges. Since it majors on data, it can analyze your trading history and risk preferences. It can then recommend investment opportunities that match your objectives as well as risk tolerance. These can either be within particular cryptos or the entire market.
Risk Management
It’s obvious that crypto trading comes with its fair share of risks and even the most experienced traders often lose significant amounts. The good news? AI offers several ways for you as a trader to minimize your losses.
The first one is through position sizing. AI-backed algorithms automatically adjust position sizes depending on market volatility and risk balance among other factors. Doing this helps users maximize returns and reduce the risk of making huge losses.
Additionally, some counterparties can also cause losses for traders because of their unreliability. With the help of AI, you can avoid such platforms by doing a valuation of factors such as financial stability and regulatory compliance.
Smart Contract Analysis
While smart contracts lie at the core of crypto transactions, their complex data can contain errors. This is where AI comes in. It helps analyze smart contracts to identify bugs and security holes and how to improve their efficiency.
As a result, you can save on gas fees and avoid costly hacks. Additionally, Artificial Intelligence can help optimize smart contracts. AI systems achieve this by streamlining the code and suggesting ways to make the contract run smoother within the blockchain network.
Top AI Crypto Trading Tools
Here are some of the most popular AI crypto trading tools in the market today:
3Commas
Cryptohopper
Gunbot
Coinrule
Before choosing any of these tools, ensure you conduct in-depth research and keep in mind their risk tolerance, trading strategy, and specific features.
Challenges of AI Crypto Trading
Some of the disadvantages that come with using AI in crypto training include:
Market Fluctuations: AI systems can find it hard to navigate crypto markets because of their erratic nature.
Technical Expertise: Setting up AI for crypto trading requires a deep understanding of technology including the creation and improvement of algorithms.
Lack of Human Insight: While AI will help make sense of huge data, it doesn’thave the intutiveness that comes natureal to humans.
The use of AI is also still undergoing regulatory policies in various regions and comes with an inherent risk of overfitting. However, if well-utilized, it can help you reap huge benefits through proper market analysis and automation.