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In the past few years, the world has seen a very rapid shift towards AI integration, automation, and the emergence of AI tools and apps to bring comfort into your day-to-day tasks. Menial tasks are no longer your headache thanks to a new AI tool at each step.
Similarly, AI integration in the finance world is all about taking small steps as well. Startups are on the brink of facing a very important decision – whether trusting AI trading bots is the smart move. And they’d be lacking if their answer is no. You might be wondering, “Trust AI with all my assets?”.
Yes, and no. Relying on AI trading bots is not less about trust and more about supervision.
However, the main question remains unanswered – Is AI worth the hype? Or are there more reasons to stay cautious at this time? Keep reading to find out.
What are AI Trading Bots?
AI trading bots, or automated trading systems, are the newest way to capitalize on AI. These crypto trading bots like Quantum AI, and 3Commas, all work by automating transactions without oversight.
Each bot requires a unique set of algorithms and training at first, but once that is out of the way, you can sit back and relax as AI looks for the best trading opportunities for you based on your portfolio. However, not everything is sunshine as machine learning brings its own set of challenges (we will get into those later).
Hype vs. Caution
Now arises the main question. Are AI trading bots worth the hype, or should they be approached with Caution? Though these Crypto trading bots claim to analyze data at lightning-fast speed, would you be willing to trust a bot with your assets?
And there lies your answer.
There may be a handful of investors who will put their full faith in AI trading bots to make all their financial decisions. However, as of 2024, AI is still developing and will take some time to reach the point of full automation in the world of finance.
Not all hope is lost though, as AI is 100% worth the hype, for all the right reasons. It brings numerous benefits to the table for investors and traders, which help them make better decisions and gain a competitive edge.
Benefits of AI Trading Bots
Simply put, AI is the future. How? Here are a few benefits of implementing AI trading bots like Quantum AI into your day-to-day trading:
AI Never Rests
One of the major benefits of bringing AI into your team is that it never really rests. These bots like Quantum AI are constantly analyzing the market conditions, and self-evolving based on what they learn. Access to real-time data, decision tracking, and keeping in touch with market trends helps them stay ahead of the curve.
Efficiently Fast
AI is lightning-fast. There are no two ways about it. It might even be up to a hundred times faster when compared to human traders. They can efficiently analyze large volumes of data, in real time, all the time. With this competitive advantage, every millisecond matters while making important financial decisions.
Eliminates Bias
Bias and emotions can break your standing in the market. That is why it is important to put your emotions on one side, and your business on the other. FOMO and greed can also push many traders into making the wrong decisions, and suffer losses. On the other hand, AI’s lack of emotions can be good for you. Bots do not make decisions based on FOMO, but rather on the data that is presented to them.
Data Is Key
For an AI bot, the key factor in making every decision, suggestion, or recommendation is DATA. These bots are trained specifically to make data-driven decisions at all times, and make sure that no other influence is involved, like it would be in human analysis. This is why these bots don’t make any impulsive decisions and adapt to market changes very quickly.
Diversity In Your Portfolio
Automation helps traders manage their portfolios very easily, effectively opening the doors of diversification. This helps traders lower their portfolio risk, and create an effective risk management strategy.
Challenges of AI Trading Bots
As briefly mentioned above, AI trading bots aren’t 100% reliable and have their own set of challenges. Even though these bots have evolved and are now better than ever, a few problems still linger between your portfolio and total AI automation. These are:
Complex Algorithms
AI trading bots like Cryptohopper and Trade Repro AI require constant upkeep. Their complex algorithms can be very hard to maintain, making it difficult to fully implement AI in your day-to-day. Without proper knowledge of programming languages, it may be difficult to rely on AI trading bots to manage your crypto wallet.
Regular Monitoring
Because of their complex algorithms, it is very hard to understand each decision that AI makes. There are many factors connected to this, the major one being the technological complexity. Due to their highly complex nature, they are prone to malfunctioning, outages, breakdowns, and more.
Black Box Nature
The decision-making process of AI algorithms is termed a ‘Black Box Nature’. Since AI trading bots are trained over previous data, and may misinterpret data sets without notice, which can be very hard to track. Simply put, it's hard to understand why AI suggested, recommended, or performed the task that it did. This creates a clear lack of transparency.
Are Crypto AI Trading Bots Safe?
AI bots have been extensively trained to make the best possible decisions with the given set of data. However, you need to oversee their operations to double-check their decisions and avoid any unwanted mishaps.
Just like humans, AI cannot predict the future, making them just as susceptible to events that have a huge impact on the market. Past examples of this include the COVID-19 pandemic, the tragedy of 9/11, and the 2007-2008 crisis. These events hit the market unexpectedly, making bots susceptible to bear losses during another similar event in the future.
Should Startups Rely on AI Trading Bots?
AI trading bots are not everyone’s cup of tea, yet. With that being said, let's look at some cases where they are an amazing addition:
- Risk Management: Risk Managers may regularly implement AI to automate stop-loss protocol. This will help minimize losses in the market in the long run.
- Algorithm Traders: Are you trading with preset algorithms? AI trading bots can help cut your work time by half. Algorithm traders can bring automation into their strategic operations.
- Investment Giants: Huge investors that have a vast portfolio which they need to effectively manage, can simplify their operations with AI. With the help of Artificial Intelligence, they can also optimize their investment strategy effectively.
Conclusion
AI bots can bring a lot to the table. Efficiency, accurate analysis, back testing, you name it. AI can help you cut down your work time to half, but there is a clear need for caution at first. Every coin has two sides, and AI’s good side outweighs the potential risks. With proper monitoring and alignment, you can slowly start to integrate Artificial Intelligence into your startup’s operations.
Many companies use AI trading bots like 3commas, Quantum AI, and other market giants to simplify their operations and manage time effectively. Do you think your company can be next in line?
