Expert AI trading systems are the next step in the overall progression of the trading automation technology. The trend is apparent as more and more companies start implementing machine learning into their R&D processes, the computational capacity dedicated to ML applications will both cheapen and become more accessible.
Some companies do not wait for the industry and try to spearhead the development process. For WunderTrading, the idea of improving AI crypto trading became the main focus of their research and development efforts in 2023. This year, the company offers the fruit of their labor to the market.
How AI reshapes the idea of automated trading
Up until recently, the general concept of automated trading did not go beyond a simple script triggered by a trading signal to place orders as instructed by the algorithm created by user. Bots are extremely efficient and can significantly improve reaction time and the speed of algorithm execution, but all the decision-making and choosing the right type of trading signals are still the responsibility of a retail trader.
An expert AI system trained on the market history is capable of making decisions. While there is still a long road ahead before we can build something that will predict price action with a high degree of confidence and consistency, there are some areas where the general pattern recognition can be quite useful.
Technical analysis is all about pattern recognition and extrapolation. A crypto AI trading bot can do it quite effectively. However, you cannot rely on an imperfect system to make pivotal financial decisions on your behalf. Right now, the technology is not yet there. On the other hand, it can be used to make adjustments to an existing portfolio and manage a system with multiple bots.
The WunderTrading company started experimenting with an AI-assisted statistical arbitrage product in 2023 and rolled out its new product fairly recently. All customers of the platform can try using this new instrument to run a sophisticated statistical arbitrage system powered by an expert AI system trained on a massive volume of historical market data.
Will artificial intelligence make technical analysis obsolete?
One of the biggest questions to ask is whether analysts will be left out of work with the development of expert AI systems focused on price prediction? It depends on the time scale. In the distant future, this change seems inevitable. At the moment, experienced analysts do not have much to worry about. While artificial intelligence may look intimidating, it is still limited by the imperfections of machine learning algorithms.
Nevertheless, currently existing AI products are very impressive. Midjourney makes artists anxious about their domain while ChatGPT pushes the boundaries of creative writing and makes it possible for machines to pass the Turing test.
When it comes to trading, these systems have apparent advantages and disadvantages. Here are some benefits to using AI-assisted statistical arbitrage trading on WunderTrading:
-
Automatic risk management. The system understands financial risks and tries to mitigate them by adjusting the portfolio in real time according to its understanding of market dynamics. AI trading bots are capable of operating semi-autonomously. They still need oversight and regular adjustments, but you donât have to watch over them all the time.
-
Running a complex investment system. Statistical arbitrage is an approach to investing which is very hard to pull off without employing an army of human traders. Even with automation, one person will struggle to keep an eye on dozens of assets simultaneously and make adjustments according to the market conditions. AI-assisted trading bots can do it easily.
-
Continuous improvements. Machine learning never stops working and improving even as you read this article. Users of AI-driven automation products will enjoy ongoing improvements and better management on the part of bots without using their own expertise. Since machine learning algorithms will also improve over time, you can expect a steady stream of incremental upgrades to the trading strategies.
-
Access to massive volumes of data. Even the best human analysts cannot process the amount of information that machine learning algorithms âeat for breakfastâ. Expert AI crypto trading software uses an unimaginable volume of data to learn about the market and its tendencies.
Disadvantages of AI trading bots
Many people are overly optimistic about the technology and believe that the road ahead is all through rose fields. However, the technology is still in its infancy and needs time to reach its full potential. It can happen within a year or a decade. We simply do not know when the breakthrough in machine learning will occur.
Right now, there are several apparent downsides to using AI for cryptocurrency trading:
-
Hallucinations. All expert AI systems created by machine learning tend to produce outputs that do not make any sense or go against the reference material. When it happens, developers call it âHallucinationsâ. These can be extremely dangerous for an investor who decides to trust their capital to a portfolio management system controlled by artificial intelligence.
-
Software glitches. Since the technology is in its early stages, software errors, glitches, and exploits are inevitable. Not a single company working with AI systems disclosed the information about software issues that their products have. Users cannot trust the architecture of these AI systems until they are tested and proven to work as intended.
-
You need a large portfolio. Statistical arbitrage is not designed to manage small portfolios that cannot afford moving large amounts of assets when needed. WunderTrading offers all its clients access to the product, but only relatively wealthy individuals will be able to use it to its fullest extent.
Should you use AI trading bots?
The WunderTrading’s AI trading system is an innovation that may become revolutionary. Retail traders interested in adopting a promising technology before the masses start pouring in should definitely employ AI to at least some degree. It is a good idea to experiment with AI products and slowly introduce them to your portfolio. Risking a large portion of your capital on something unproven is not the brightest of ideas.
