How AI Can Help Crypto Traders Improve Trading Experience

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Cryptocurrencies have become a mainstay in the world today. Increased adoption of cryptocurrencies and its ever-expanding use cases have seen more individuals and institutions getting involved in the space. Whether investing passively or trading actively, the end target is profit, which potentially can be astronomical in this industry.

Long-term crypto holders do not monitor market situations at all times. Short-term traders, however, actively try to game the volatile nature of the cryptocurrency market to make as much profit as they can. Despite their best efforts, the success rate is usually low compared with the numerous opportunities available in the market.

This inability to fully maximize potential opportunities that abound is due to the limitations of human nature. Our need for rest and inability to multitask and monitor several situations simultaneously have brought about a new paradigm in cryptocurrency trading. Here, the deployment of artificial intelligence (AI) in crypto trading has helped efficiently maximize market situations and opportunities.

Artificial Intelligence in Cryptocurrency Trading

With the financial markets becoming relatively staid, AI provides a game-changing spark that transforms the landscape. Like fire was to the early man, so has AI been described to trading.

Artificial intelligence refers to a fully developed and tested automated trading robot. Such pieces of code can analyze and forecast market price movements and automatically trade on behalf of the user. AI-powered crypto trading solutions are quickly becoming one of the most efficient, straightforward, secure, and cost-effective ways to invest in and trade not only fiat currencies or stock markets, but also digital assets with precision and speed inaccessible before. AI trading automations are not only tools that execute trades and transactions on behalf of human investors, some of them are capable to read the market data and adjust trading strategy according to the slightest price changes.

As established already, cryptocurrency trading offers many opportunities, however, it is fraught with challenges. This makes cryptocurrency AI trading even more critical. Issues such as price and trend prediction, volatility forecasting, portfolio construction, and fraud detection are complex for humans to analyze and learn from at a go. AI trading techniques can address these challenges.

AI trading bots carry out numerous actions, before they can provide the optimum output user requires for profits. They collect historical market data, calculate indicators, simulate order execution, and execute strategies against the prevailing market conditions.

Although similar in function, AI cryptocurrency trading bots are built differently. Some are designed to maximize profit through market and price volatility. Others take advantage of features available on crypto exchanges to yield profits, while specific bots can carry out portfolio building and optimization.

Benefits of Automated AI Trading

Well-developed AI crypto trading bots can maximize profit for its users while reducing exposure to such unwanted events like sudden price drop or trend reverse. These are not the only benefits they offer. Others include:

Lower entry barrier

It is critical to understand that entering the cryptocurrency ecosystem and profiting from trading is time-consuming. Before attempting to invest in a crypto career, new and aspiring traders must conduct extensive research to learn the ins and outs of the industry. Still, even this planning and analysis cannot guarantee long-term success. A trading bot does not ensure success, but it, however, increases the chances.

Crypto trading bots assist novice traders in replicating the actions of successful traders in the space. By automating crypto trading and utilizing some intuitive features, users can ease their way into the industry. AI trading bots automate the trading process and reduce the amount of risk associated with crypto trading.

Time-saving factor

Trading cryptocurrency is time-consuming. To stay abreast with the latest industry developments and make proper trading decisions simultaneously requires constant monitoring of market trends and insights on a minute-by-minute basis. Experienced traders know this, and it is a significant reason behind the increased adoption of AI bots.

With more emphasis on intuitive trading these days, traders can limit the time spent observing market fluctuations. By automating the trading process, a crypto AI bot can make the most of opportunities that spring up.

Round the clock trading

The crypto ecosystem is up and running 24 hours a day, seven days a week. Traders, however, need to rest and attend to other life necessities. AI bots do not sleep or rest, neither do they need to attend to other things. Once deployed, they work round the clock and in the background, while traders enjoy their lives without worrying about missed opportunities.

Increased efficiency and productivity

Humans have a limited ability to make calculated decisions and work without losing focus and productivity. Any experienced crypto trader will tell you that trading cryptocurrency is time-consuming and exhausting.

It takes a lot of experience, knowledge, and quick thinking to make the proper calculations and trade at the right time. However, with a crypto trading bot, you can limit the amount of time you spend in front of your computer, and let it do all of the work.

Bots are highly efficient and can perform split-second mathematical calculations that can make or break a trade, so it's no surprise that bots account for the majority of all transactions.

Pros and Cons of using AI Trading bots

Trading bots are the go-to for carrying out automated trading. Today's sophisticated bots are highly customizable, taking into account a vast amount of data, such as trading volume and price fluctuations over specified time frames, as well as the currency's order history. These bots constantly monitor the price movements of selected crypto assets and respond following pre-programmed rules.

AI crypto trading bots offer the following advantages to their users:

Lack of emotional attachment: Investors are humans affected by various emotions in the cryptocurrency market. Because of the volatile nature of the crypto market, dealing with emotional attachments is extremely important when trading.

As a result, one of the advantages of crypto trading bots is that they lack emotional attachment — an automated machine-centric process to avoid serious consequences.

High trading efficiency: Crypto trading bots have made cryptocurrency trading more efficient, due to their multitasking capabilities. They also provide investors with ample opportunities and data analysis for making intelligent decisions at critical times.

Simple investment: The cryptocurrency market may be highly complicated for new investors and traders. It can be difficult to understand complex charts, analyze data and price action, and get to grips with other topics.

However, through automation, crypto trading bots can turn a complicated investment process into a simple one. This is one of the most significant advantages of using crypto trading bots.

It is not always the upside when it comes to trading bots, and they possess certain downsides that traders must be on the watch for to reap the full benefits of AI trading bots.

Limited cryptocurrencies: The crypto market contains thousands of digital currencies for efficient trading. However, a disadvantage of AI crypto trading bots is that they only have access to a limited number of these cryptocurrencies. They are specialized software tools that work with a limited number of digital exchanges.

Unexpected decisions: For sure, crypto trading bots operate automatically 24 hours a day, seven days a week. However, their ability to make unforeseen decisions on behalf of investors resulting in a minor gain or loss is a drawback.

A bot is only as reliable as the trading strategies that it is programmed with, and while they can lead to generous returns, they can also be flawed and result in market losses. Users have to be wary of being overly reliant on them.

Time-consuming process: While the functionality of automating tasks can save time, the entire process of implementing crypto trading bots is time-consuming for learning to manage the tools efficiently and without potential error. Traders would have to create the bots and back test them to achieve an optimal output, taking lots of time.

Relatively expensive: The cost of accessing top-of-the-range AI trading bots can be a significant disadvantage. Although prices are dropping due to increased competition and the growing availability of open-source software, the price has been a prohibitive factor for many years, with systems at the top end of the scale costing upwards of $10,000.

With a quick look online, traders will find a plethora of cryptocurrency trading bot options. Several online platforms provide these bots to help their users make profits. These trading bots connect to cryptocurrency exchanges, typically via an application programming interface (API).  Bitsgap is an online platform offering several AI trading bots to help meet the automated trading needs of traders.

Important Things to Know When Choosing a Crypto Trading Bot

When deciding on an automated trading bot to use, cryptocurrency traders must consider some factors, including price, level of complexity, and ease of use. A well-designed trading bot integrates multiple crypto exchanges, increasing profit opportunities and utilizing AI machine learning algorithms for enhanced automation capabilities.

Firstly, traders should consider how intuitive an automated trading bot is when evaluating it. Whether a user deploys a pre-programmed bot or their codes, an easy-to-navigate platform is essential. Those who do their programming will still benefit from a straightforward, user-friendly configuration wizard and an inviting dashboard that provides a quick overview of trading activity.

New crypto traders may want to consider a crypto trading bot that does everything, so they can sit back and earn a completely passive income. Alternatively, time-saving bots that provide the tools needed to automate existing crypto market strategies can be deployed.

In this case, specific vital questions to ask include the following:

  • Which tools does the bot provide?
  • Can benefits be gotten from a comprehensive set of technical analysis tools, such as Bollinger Bands, relative strength index (RSI), and moving average convergence divergence (MACD)?
  • Can a trailing stop loss be employed?
  • Is it equipped with a diverse set of DCA and shorting features?

Thirdly, when looking for automated trading software, look for features that enable back-testing of crypto strategies and those that allow piggybacking on the top-performing approach of other traders. Another critical issue to consider is whether the price is competitive and if trading fees are charged.

Finally, accessibility is also important. Traders should think about whether the bot is cloud-based and whether it supports all types of devices, so they can access their trading account whenever they want.

Efficient Crypto Trading Bot strategies to Consider

When it comes to implementing a market-making strategy, a cryptocurrency trading bot can be a practical option. This is a great solution in low liquidity situations. By eliminating intermediaries, an AI bot automatically places limit-orders for a price outside the spread, to profit from buying low and selling high. In this way, the AI trading bot allows traders to increase their trading volume while saving a significant amount of time, effort, and money setting prices and earning on the spread.

A crypto bot arbitrage strategy is another option. It enables users to profit from the extreme volatility of the digital currency markets, while also benefiting from the lower risk of arbitrage trading. Decentralized digital currency markets are still relative newcomers to the online financial arena, and while the gap is closing, significant price inefficiencies still exist on various crypto exchanges.

A crypto robot arbitrage strategy reduces exposure by allowing the trader to profit from these significant price differentials by purchasing a cryptocurrency at the lowest possible price on one exchange and immediately selling the currency at a higher price on another exchange to earn a profit on the spread.

An intra-exchange cryptocurrency arbitrage bot can accomplish this far more efficiently and quickly than a human and with a much broader reach. Monitoring multiple currencies across several exchanges and responding to market opportunities before prices change would be difficult for even the most experienced investor, and this is where AI bots truly shine.

Any discussion of the benefits and drawbacks of crypto trading bots must consider numerous options on the market today, catering to every type of trader. The option of a simple software designed to implement fundamental strategies exists alongside a more advanced artificial intelligence-based system capable of processing a wealth of complex data and executing multiple trades on multiple markets simultaneously.

The traders’ choice will affect the price, ranging from free, open-source software to professional-grade systems that cost thousands of dollars. Trading bots, without a doubt, can be costly, and they are essentially only as good as the market strategies with which they are programmed. However, when used wisely and with human oversight, they can be an invaluable tool for quickly and efficiently exploiting market opportunities to maximize your profits.

Bitsgap: an Excellent Choice for AI Trading

Bitsgap is an all-in-one trading platform that allows users to consolidate their cryptocurrency exchange accounts and trade from a single interface. Bitsgap is integrated with over 25 major cryptocurrency exchanges, including market leaders such as Binance, Kraken, Bitfinex, Poloniex, and Coinbase Pro. There are no exceptions to the service coverage for each exchange. Services available on Bitsgap include trading, automated bots, portfolio, arbitrage, and signals.

The Bitsgap platform offers a trading interface that allows users to place orders quickly, manage their portfolios, and monitor the results. There are numerous features and tools available for both new and experienced traders. An intuitive and optimized interface includes all proper trading instruments that provide the most comprehensive trading data.

Bitsgap offers some proprietary AI trading bots that have been back tested to ensure efficiency that users can choose, modify, and deploy to earn profit.

Bitsgap AI Crypto Trading Bots

Users can select from the available trading bots on Bitsgap depending on their trading objectives. Available options are:

Classic bot

This bot performs optimally during a price rally. The Classic bot always buys and sells a fixed amount of the base currency per order to maximize the return on each completed trade due to a progressive increase in volume as the price rises.

An example of the LTC/USDT grid is shown in the image above. The Classic bot distributed base currency evenly across all grid levels so that it buys and sells 10 LTC at each level. It will buy 10 LTC at each level if the price falls. Conversely, if the price rises, it will sell 10 LTC at each level.

An example of how Classic bot builds its trading grid.
An example of how Classic bot builds its trading grid. Source:Bitsgap

The Classic bot strategy is best suited to a strong uptrend in the market. It has statistically proven to be more successful than the other strategies during price rallies, due to its investment distribution logic, which achieves better market exposure as the price rises.

Sbot

This trading bot is useful for taking advantage of a sideways market pattern, in which the price moves within a specific horizontal range as shown above. The SBot evolved from the Classic bot, with the key difference being its investment distribution logic.

An example of a sideways market pattern.
An example of a sideways market pattern. Source: Bitsgap

Per order, the SBot always sells and buys a fixed volume of the quote currency. An example of the LTC/USDT grid is shown below. The SBot distributed the investment evenly across the grid with buy and sell orders, ensuring that the investment total is always $100.

An example of how Bitsgap Sbot builds its trading grid.
An example of how Sbot builds its trading grid. Source: Bitsgap

This means that as the price falls, the bot can now buy more LTC because their value has decreased, and the user can afford more coins with $100 at their disposal. When the price rises, the SBot's ability to sell coins decreases because the limit is only $100 per grid level.

If you expect the price to swing within a horizontal range, the SBot strategy can be effective. The SBot has statistically proven to be more successful than the Classic bot in sideways markets due to its investment distribution logic, which uses the dollar-cost-averaging (DCA) method to generate extra-base currency for traders.

Combo bot

This is a futures trading bot that trades through the combination of grid and DCA algorithms. The Bitsgap Combo bot intends to profit in both a rising and falling market. When compared to spot trading bots, the Combo bot can generate returns of up to 1,000% due to the leverage instrument. Similarly, the potential for high returns is accompanied by an increased risk of significant losses, due to the volatility and unpredictable nature of the cryptocurrency market.

To use Bitsgap Combo bot, you will have to choose an exchange that supports futures trading, e.g. Binance Futures.
To use Bitsgap Combo bot, you will have to choose an exchange that supports futures trading, e.g. Binance Futures.

Bitsgap's trend-following bot uses grid and DCA algorithms to trade futures contracts. The bot makes full use of grid technology to execute trades on every market move. The DCA, on the other hand, is the ultimate solution for using the dollar-cost-averaging effect to optimize the entry price.

Because the bot's built-in trailing function automatically places grid and DCA levels, the Combo bot can follow the trend in both directions and generate returns indefinitely. The automated trailing of the stop-loss follows the trend and, as a result, secures the generated returns.

All Bitsgap bots are supplied with an informative interface that allows to track their performance in real time. This enable precise and straightforward profit calculation.

Bitsgap bot performance interface contains all the information users might need.
Bitsgap bot performance interface contains all the information users might need.

Other Trading Automations

Aside from these AI trading bots which help to automate trades, Bitsgap also offers several other features that give traders an edge in the market.

Demo mode

Both new and experienced traders have the opportunity to try the bot they are interested in and see what it is capable of. Hence, Bitsgap’s demo mode enables users to test all the  trading features using virtual funds in a risk-free environment.

Arbitrage

The automated and AI-powered Bitsgap system provides users with arbitrage opportunities, which profit from price gap of the same asset between different exchanges.

It can be difficult to profit from arbitrage when using manual crypto trading. The time it takes to transfer funds from one exchange to another can cause the spread to vanish. Bitsgap can execute buy and sell orders on multiple exchanges at the same time, without transferring funds. To execute orders at the click of a button, traders simply need to have fiat and crypto on the corresponding exchanges.

In a matter of seconds, Bitgap's AI technology can detect and analyze over 20,000 arbitrage opportunities within integrated exchanges.

Smart orders

Bitsgap provides its users with three market orders to help with seamless trading on the platform.

One cancels the other (OCO) orders is a pair of orders connected with a conditional link that state that if one order executes, the other order will be automatically canceled.

Bitsgap offers clean and simple tool to connect two orders with OCO conditional link.
Bitsgap offers clean and simple tool to connect two orders with OCO conditional link.

On an automated trading platform, an OCO frequently combines a stop order and a limit order. When the stop or limit price is reached and the order is executed, the other order or group of orders is canceled automatically.

OCO orders are usually used by traders to reduce risk or enter the market. The allow to semi-automate the process of trading cryptocurrencies without the necessity of monitoring the charts 24/7.

The OCO order can be used in the following situations: to stop loss or take profit, to buy more, and to exit or average down a position.

Stop-market order is an order that allows you to buy or sell a cryptocurrency at the market price, as soon as the trigger price for the buy or sell order is met. The general purpose of a stop order is the inverse of a limit order, in that it will be filled at the best price available at the time the trigger is executed, rather than at a specific price.

The stop-market order can be used in several situations but is best suited to resistance breakouts and support breakouts.

Trailing stop-market order includes a trailing option that will track the price and adjust open orders accordingly. This option is useful when traders want to move open stop-market orders if the price moves by a specific percentage. It will allow them to set the stop-market order and let the automation handle the rest, eliminating the need to manually move the order all the time.

This market order is suited to buy the dip and selling the top.

In addition to all of this, Bitsgap users have access to 24 hours dedicated customer support, as well as a desktop and mobile app access, to ensure they never miss a trade. There is also competitive and flexible pricing available, allowing access to all of these features to varying degrees.

Users can select one of three subscription plans Basic, Advanced, or Pro - based on their level of expertise. Except for smart orders, which is available only on the Advanced and Pro plans, the Basic plan gives traders access to the majority of features. High-volume traders, on the other hand, will find Bitsgap pro to be tailor-made for them.