30s Summary

AI trading bots offer a way for people to trade cryptocurrencies around the clock, mimicking human behaviour to follow a set of created rules. These bots can continually adjust their strategies based on market fluctuations, operating at a rapid speed and without emotion. They can be tailored individually or purchased ready-to-use from platforms such as Coinrule or Pionex. However, users should be mindful of associated risks, including potential significant errors, security vulnerabilities, and the need for regular manual adjustments to counteract rapidly changing markets. Despite these challenges, AI bots can present an exciting opportunity for engaged crypto traders.

Full Article

You can program AI bots to study and copy how humans trade.
Crypto trading bots work non-stop — a big plus compared to human traders.
You have the option to make your own bot from the ground up or buy a ready-made one.
While they’re super handy, AI bots aren’t foolproof and can pose some trading risks.

Imagine having a non-stop assistant that buys and sells cryptocurrency for you while you’re snoozing. That’s what AI trading bots are all about.

These snazzy software programs use fancy formulas to copy how humans trade, handle strategies, and change tactics as the market fluctuates.

So what exactly is an AI bot for crypto trading?

Well, it’s pretty much software that acts like a human trader. These useful tools examine human behavior, such as how we usually day trade, and create a set of rules to follow.

Here’s an example: if a bot notices that people usually buy Bitcoin at one price and sell it at another, it takes that into account when setting its own rules. An AI bot constantly studies the market to tweak its operations, and even lets you throw in your own rules to guide its decisions.

This article can walk you through how to train an AI bot for crypto trading, including the good and the not-so-good parts.

Why get an AI bot up and running for crypto day trading?

Like humans, AI bots can mess up. This could be a bit off-putting, but there are lots of reasons why having an AI trading bot can be a good thing.

They always-on: Since you’re human, you can only trade for so long. Meanwhile, the crypto market runs 24/7, so it’s impossible for you to keep up every minute. But a bot doesn’t need to sleep. It can buy and sell for you even when you’re ZZZ-ing.

Super-fast: On top of being available all the time, a bot can operate way faster than you thanks to modern tech. AI bots for day trading crypto can make millions of calculations in a second. It might mess up, but its speed could recover any losses before you notice.

No emotion: AI doesn’t get stressed or panicky. It won’t make a panic sale based on a quick feeling. Instead, the bot will trade following its rulebook and your guidelines.

Interesting tidbit: You can train bots using tactics from big deal traders, like Warren Buffett. It’s not a golden ticket to success, but it’s one way to teach your bot.

So how do you train a crypto trading bot?

You can start day trading crypto with AI in two ways. You can either build a bot yourself or sign up for a ready-to-use bot like Coinrule or Pionex.

To build an AI crypto trading bot from scratch, you’ll need some tech savvy. You need to know programming languages like C or Python, which are crucial for setting up rules and automating trading steps. The bot needs to be able to tap into real-time crypto prices. Mostly, you can retrieve this info from crypto exchanges using their application programming interface (API). APIs are sort of like a middleman that helps different applications speak to each other.

You need to program an AI formula for crypto trading. This means you need to know about trading strategies. Some common day trading strategies include:

Scalping: This involves buying and selling crypto based on slight price variations. You’re taking advantage of crypto’s quick price changes, buying when it drops a few dollars and selling when it jumps a few. It’s not all about making a ton of money at once, but gradual profits that add up.

Technical trading: A lot of day traders use technical trading strategies like the relative strength index (RSI) or the moving average convergence/divergence indicator (MACD). The RSI tells whether an asset is overbought or oversold, while the MACD follows price momentum and trends. Both are useful for predicting market moves and picking good times to buy or sell.

Arbitrage: Different cryptocurrency exchanges show different prices at different times. Arbitrage involves buying a cryptocurrency on one exchange where the price is low and selling it on another where the price is high, cashing in on the price differences. To set this up, you’ll need to connect to several exchange APIs.

Many bot creators focus on one of these strategies, like an arbitrage bot or a scalping bot. You can always change the strategy later or make lots of bots.

Once you’ve created a bot, you should test it through backtesting. Backtesting involves mimicking trading using historical data to see how the bot might have acted in past market scenarios. It’s a bit like a sports team running practice drills to practice situations that’ll come up in an actual game.

Once backtesting is done, it’s time to set it loose. Here’s how you can get it live:

Step 1: Choose where to host it. You can use cloud services like AWS (Amazon Web Services), Google Cloud or Azure. They provide reliable, scalable servers that allow your bot to run non-stop without interruption. Or, for more control and performance, consider using a dedicated server. This also amps up security and gives exclusive access to server resources.

Step 2: Secure your bot. Keep your exchange API keys safe by using environment variables or secret management tools like AWS Secrets Manager. API keys allow your bot to communicate with cryptocurrency exchanges. Protect data transfers between your bot and exchanges using HTTPS or SSL (Secure Sockets Layer) protocols to make sure info stays confidential.

Step 3: Connect to exchanges. Hook your bot up to cryptocurrency exchanges (like Binance, Coinbase) through their APIs. This lets your bot complete trades and get real-time market data automatically. Create a system to handle issues like API rate limits or connection drops to keep your bot going.

Step 4: Monitor and keep up. Use tools like Grafana to follow your bot’s performance metrics, like how quickly it completes trades and how profitable it is. Set up alerts for key events (like failed trades, large losses) through Slack, Email, or SMS so you can respond quickly to any issues.

Did you know? A bot can be trained on market crashes and upswings that happened years ago, like the Great Recession of 2008.

If making your own bot sounds like a headache, you can use a pre-made trading bot.

Platforms like Coinrule and Pionex offer AI-assisted automated crypto trading. They give you ready-to-go bots that you can control using rulesets and strategies. With these platforms, it’s easy to change your rules on the fly.

Here’s how you can get your AI bot running using this method:

Step 1: Get your account set up. Connect your crypto exchange account to the platform using secure API keys provided by the service. Customize your bot’s trading strategies using the platform’s user-friendly interface.

Step 2: Make sure your setup is secure. Only give necessary permissions to your API keys (like trading and reading data) to cut down on security risks. Don’t allow withdrawal permissions. Enable two-factor authentication (2FA) on both your exchange and trading bot accounts for extra security.

Step 3: Kick off and keep an eye on things. Start your bot with your preferred settings using the platform’s dashboard. Use the platform’s tools to track your bot’s performance and tweak as needed.

Using pre-built bots is a more user-friendly way to get into crypto trading with a bot, but there is a cost for this helpfulness. As in, it might actually cost you some money! Crypto bot trading platforms take a cut of your profits, and how much depends on how much you make. Basically, the more money you make, the less you will pay in fees.

Did you know? Crypto trading bots don’t have feelings. Humans often trade based on gut feelings rather than thinking through it, which can lead to big blunders. An AI bot can avoid emotional mistakes.

You could also consider an AI agent, which is a step up from the crypto trading bots we’ve talked about here. Unlike trading bots, which are trained using old data and follow set strategies, AI agents can learn and adapt over time, picking up on fresh trends and market changes.

AI agents can do more than just trade. They can act as financial advisers or virtual assistants, offering insights and recommendations and making trades based on what they learn. Even though you can override their suggestions, a lot of traders rely on these agents for smarter decision-making and automation.

There are risks to using an AI bot for crypto trading.

If you’ve kept up with tech news lately, you’ve probably heard of the risks that come with AI. AI learns from human activity, and even though AI is faster and more effective than humans, it’s not without risk. Here are some risks of using a crypto trading bot:

Going non-stop: While having a bot that takes advantage of every chance round-the-clock sounds great, what if it makes a big mistake in the middle of the night while you’re asleep? You can set all the rules you want, but you’ll need to manage your bot to keep losses in check. Using trading tools like stop-loss can help manage losses.

Security issues: Since bots are always online and often tapped into one or more crypto exchanges, they are at risk of hacks and theft.

Failing to adapt: Crypto trading bots learn from historical data. They may not automatically adjust to market changes or trading strategies without some manual tweaking.

Despite the possible twists and turns, getting an AI bot up and running for day trading crypto is an exciting opportunity for both seasoned and newbie traders. Whether you choose to build your own bot or use a ready-to-use service, AI bots bring constant availability, speed, and a logical approach to trading to the table.

Still, bear in mind their limitations and risks. With proper training, backtesting, and strategy tweaks, AI bots can be a strong ally in the crypto trading world.