The thing about a future where robotic super traders fight over micro-movements in share price is that it’s already here. With one-click access to algorithmic trading bots, we could see the downfall of human investors and the triumph of artificial intelligence.
Algorithmic trading robots they are programmed to buy and sell when they detect pre-programmed conditions and can execute almost any trading strategy. They have been used by professional traders for two decades and these firms have also taken them to the crypto markets.
Now a new set of affordable cryptocurrency trading tools has hit the market, built with retail clients in mind. I know – I’ve built a few. I am currently working on a system that helps novice investors find their own risk preferences based on their previous trading and investing data.
The introduction of these bots could have a huge impact on the crypto market in the future, given that retail accounts for up to a quarter cryptocurrency trading volume. And what is most interesting here is that it could signal a democratization in market access and participation.
If this is to happen, then it is necessary to combine access to trading bots and other specialized tools with open education. Re-creating a closed system where only “accredited” investors have access to crypto markets while everyone else is sidelined due to lack of education and capital is elitist and regressive.
It is unfortunate that financial education is not taught in schools, leaving many people at the mercy of sophisticated professionals and outright scammers. Trading robots combined with proper education is one step to level the playing field.
This technology provides a certain type of experience education for amateur traders, allowing them to feel market movements using small positions and an automated strategy. They can experiment with different robots to learn about different strategies such as arbitrage, dollar cost averaging and futures trading.
Additionally, those who gain expertise in bot trading – for example using multiple bots at once to represent a hedged or diversified strategy – could outperform experienced players. After all, no human can monitor the cryptocurrency markets 24/7 all the time, but a bot can.
In fact, trading bots thrive in the 24/7 crypto markets where they can scalp arbitrage opportunities and ride the waves of high volatility. No human can keep up with these markets and will undoubtedly miss opportunities that a bot can take advantage of.
However, the trader still needs to make critical decisions that will affect the bot’s performance, such as selecting the asset and price range for the bot to buy and sell. So while bots are a great tool, they are not without risk.
The deeper traders understand entry and exit points and trade timing, the better they can set up their robots. 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 just pumped 200% is a bad idea.
Another advantage is that bots take the emotion out of trading. Even professional traders struggle to maintain a cool, calculating mind with large sums of money on the line.
Some may end up “taking their bags” and they hold when they should sell. This kind of behavior becomes “dumb money” – trades that react emotionally to market swings instead of letting reason prevail.
Trading bots do not suffer from this emotional handicap. They execute their strategies in a calculated vacuum. Beginner traders can find great value in these tools on their journey to becoming independent traders and investors.
In the past, professional traders honed their skills as part of their job. But with the advent of artificial intelligence trading, retail investors now have a chance to catch up. As the specter of inflation haunts major economies around the world, it is imperative that the latest investment tools are accessible to all as a means of access and education so that ordinary people can best protect their wealth and create economic opportunity.
Bill Xing is the head of financial products at Bybit. Before joining Bybit, he co-founded Panda Analytics, a cryptocurrency indexing and trading automation firm. He holds a master’s degree in financial engineering from the University of Illinois at Urbana-Champaign.
This article is for general informational purposes and is not intended and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.