Cryptocurrency Trading: Ai vs. Bots [How it works]
With buzzwords like Ai and bots spreading around the crypto world like wildfire, it’s become increasingly difficult to tell them apart, which has created a lot of confusion.
Two examples of companies employing trading bots are Cryptohopper and 3commas. Automated trading bots have been in the market for a couple of years and have quite the following. Ai trading tools are more recent, and one of the companies using the technology is RoninAi.
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So what is the difference? Is there a difference?
In short, there absolutely is a difference. While bots execute commands based on static algorithms than can be adjusted by the user according to their strategies, Ai strategies are more dynamic. Using machine learning or deep learning, the Ai analyzes, interprets, and understands data, giving Ai software the ability to adjust its own algorithms, constantly improving itself and adapting to new data and interpretations.
So basically Ai takes the onus of responsibility and makes decisions for traders based on a giant amount of data analyzed. On the other hand, regular trading bots rely on the user’s orders. The user needs to spend hours of research, using tools like CoinGekko or TradingView to understand the markets so they can later input the right orders to the bot. Those orders need to constantly be updated depending on type of bot or market state.
Should I use a regular bot or an Ai bot?
A very experienced trader that fully understands the market, how to use a bot, and with a fair dominium of mathematics can definitely make good profit with an automated bot, hence the amount of users on Cryptohopper and 3commas that, along with the relevant bot, provide a range of tools to analyze the markets and a community to share your ideas with. But most people are not experienced traders. In fact, the majority of traders will lose money in both traditional or crypto markets.
Ai trading tools might become the optimal path to expose everybody to trading, experts or not, because the Ai will make most of the decisions and analyze most of the data for you. We’ll use RoninAi Crypto Trading Tool software platform as an example.
RoninAi uses a multitude of indicators and points of analysis to give users predictive buy/sell signals based on an amalgamation of historical and live data to fully analyze and predict the cryptocurrency market.
It is capable of understanding the difference between a bull and bear market, understands the theory behind technical analysis, and can even prescribe weight to social sentiment,assessing how much each post will actually affect the market, or which news headlines will affect it and by how much.
Algorithmic trading intended for the same purpose would quantify the data, but be unable to interpret it. Algorithmic trading would remain static and unable to adjust to market changes. Ai, on the other hand, will adjust its own algorithms to always be effective. The sky truly is the limit for artificial intelligence and its applications in the space of cryptocurrency trading.
“By far the greatest danger of Artificial Intelligence is that people conclude too early that they understand it.”
– Eliezer Yudkowsky, Machine Intelligence Research Institute
What happens if you use an Ai bot?
RoninAi combined both technologies, adding a bot to their software platform. While Ai decisions needed to be manually turned into trades, Ai will now be capable of executing trades for the user. This is an amazing element that uses the benefits of automated trading bots; the ability to trade passively, with the advantages of Ai; its ability to learn and interpret data, and make decisions for the user. All the user needs to do is choose their risk exposure, connect to an exchange like Binance, and choose a simplified strategy.
A very experienced trader with good technological knowledge can achieve great results with a properly set bot, but an Ai trading bot can be used by anybody, experienced or not, and still rival in results.
Related article: RoninAi Updates: A Look Inside Cutting Edge Ai Developments