The blockchain ecosystem is digitalized to its core making it a prime target for all sorts of automated systems. Enhanced cryptocurrency trading bots are developed by a growing number of providers indicating a strong trend toward artificial intelligence and machine learning adoption specifically in the crypto industry. Note that it is just a part of a bigger picture with global spending on asset management systems powered by independent software agents projected to shoot through the $10 billion mark by the end of 2024.
Algorithmic trading, which used to be a field dominated by human traders building advanced technical analysis strategies and automating mundane operations like opening trades and setting up delayed orders, is experiencing a dramatic shift. Many suppliers of automation solutions are interested in developing AI trading software. It is an understandable change of direction as next-gen trained software investment managers seem to be outperforming traditional strategies by a large margin.
Why AI stock trading bots are becoming a big deal
Deloitte surveyed the participants of the global financial industry in 2020 and learned that over 70% of all institutions are heavily investing in methods to autonomously manage risks and avoid using human experts altogether. Deep learning models like RNN and CNN are recognized as hugely valuable methods of analyzing massive swaths of data and producing outcomes that human analysts simply cannot.
Recently, the rise in the use of natural language processing and advancements in large language models allowed developers to create systems capable of processing numerical and textual inputs. Software agents trained like this read news articles, social media posts, reports from companies, and more. Then they combine conclusions with quantitative analysis to deliver excellent forecasts and make appropriate predictions about the market.
Artificial intelligence systems are increasingly used everywhere in the financial sector. From personal assistants and advisors to human-like chatbots, the automation of routine tasks leads to better experiences by retail traders purchasing products from a variety of vendors offering asset management, high-performance ATS, and other tools.
However, the biggest impact that the advancements in the field of autonomously thinking software agents can potentially deliver is on the automation industry with advanced autonomous ATS trained with ML positioned to take over during the next five years.
Here are some reasons why it will inevitably happen:
- Improved quantitative strategies. ML methodologies allows for the processing of incredible volumes of information. Quantitative approaches are based on crunching numbers while searching for correlations between different types of data and identifying patterns. These improved robots can do it faster than traditional algorithms and outperform humans assisted by advanced traditional analytical software.
- Better algorithmic trading. In theory, AI trading algorithms can be flexible and adaptive. Contemporary ATS products are already good at producing consistent profits and avoiding risks, but they still require human supervision and initial tuning. Some benefits of using these autonomous systems were highlighted in the research by Ritika Chopra and Gagan Deep Sharma conducted using a meta-analysis of several academic papers on the matter. It seems that ML systems has a positive influence on contemporary investment automation.
- Meticulous risk management. These advanced technologies can be utilized to find optimal risk-reward ratios for any market position, adjust target profitability, and protect portfolios from excess dangers. Over 60% of all individual retail traders say that they struggle to understand and use many advanced risk mitigation practices and don’t even attempt to diversify their investments.
- The growing infrastructure. Deep learning algorithms have been around for over two decades and neural networks are nothing new to people in the tech industry. However, it lacked the necessary digital infrastructure, dedicated data centers, and optimized toolkits to develop and deploy new software agents quickly. Amazon, Microsoft, and other tech giants are now offering such services to developers allowing for rapid growth of the emerging industry.
These reasons ensure that AI trading bots future trends continue shaping up rather nicely. If these products turn out to be economically feasible and produce consistently good outcomes for end users, we can expect an explosion of advanced ML-based systems in the fintech field. Right now, key players in the automation industry are deploying their versions of products enhanced by expert programs that can think on their own.
What are AI trading bots?
These fully autonomous software programs are designed to trade financial assets without any human intervention. They achieve autonomy by utilizing sophisticated methods to effectively crunch huge volumes of market data in real time, execute market orders, and adjust themselves depending on the current situation.
Products in this category are relatively rare since only a limited number of developers deploy products that heavily utilize autonomous programs. Many claim to have them running in the background, but proving these claims is difficult. Examples of transparent and effective implementation of the technology are few and between.
How AI trading bots work
Just like other autonomous investment robots, these ones rely on time-tested analytical instruments to make informed financial decisions. Usually, a combination of technical indicators, quantitative analysis, statistics, and machine learning systems are employed to arrive at conclusions that serve as the foundation for actions like opening market positions, setting up delayed orders, etc.
In some cases, developers try to implement advanced software training approaches like the deployment of neural networks and genetic algorithms to introduce adaptability and flexibility into the bots’ architecture. In theory, such robots can learn from their mistakes, make adjustments to their own parameters in real time, and achieve a balance between maximizing returns and minimizing risks.
This advanced forms of software can be a part of the backend infrastructure or interface, or all levels of any contemporary product for retail traders.
The benefits of AI trading bots
The utilization of self-sufficient software made with ML systems is a goal for many companies in the automation industry. Why do we find ourselves in a peculiar predicament where AI as a buzzword is everywhere yet we lack products that actually utilize the technology?
Let’s consider several apparent advantages of this kind of software:
- Accessibility. Modern traders do not have to pay exorbitant prices to access the technology by paying small fees to SaaS platforms. Just a couple of years ago, self-sufficient intelligent systems for risk management, investment, and asset acquisition were accessible only to institutions. Today, you can run a massive sophisticated statistical arbitrage ATS without hurting your bottom line.
- A new paradigm. Traditional ATS already nullify the effect of emotions on decisions, which is a huge problem for human traders. However, the necessity to supervise them makes it possible for users to allow their emotions to affect investment outcomes in a negative way. Next-gen investment robots may fully remove investors’ psychology from the equation.
- Faster automation. Algorithms are already lightning-fast and eliminate the delay between a signal and execution. At the same time, sophisticated thinking machines are even faster as they can process information, find an optimal course of action, and execute it so fast that these processes appear to happen simultaneously.
- Advanced risk management. Contemporary software programs with the capacity for independent operations for asset management and acquisition are trained to use sophisticated risk mitigation techniques. These robots are great at identifying patterns, selecting appropriate stop loss and take profit levels, choosing sensible market positions, and diversifying investments.
Remember that the barrier to entry will be lowered dramatically with the advent of reliable solutions that can improve automatic investment processes. It means that AI trading bots for beginners will attract indecisive newcomers and allow many novices to start making money even with limited experience.
The best AI trading bots to use in 2024
Many reviews are focused on platforms that offer various products that are, allegedly, powered by AI technologies. However, we do not want to overhype something that may not have sufficient evidence of meaningfully using these next-gen technologies or applying it to less relevant components like customer service or financial advice.
Instead, we want to talk about several such advanced tools that are available from reputable vendors right now and utilize useful independent programs-agents to make investment decisions and execute trades. Below are some of the best AI trading bots you can use in 2024 to make money!
Cryptohopper’s algorithmic intelligence
Many vendors are focused on integrating expert systems into the foundation of their deployable strategies. To be fair, implementing of them into GRID and DCA bots sounds like a nice idea. However, everyone and their auntie are doing it right now. Even Cryptohopper has an improved self-sufficient grid bot among products in their lineup. These tools are not something that you showcase if making an impression is of importance.
The Algorithmic Intelligence system is a completely different beast. Cryptohopper positions it as a fully autonomous strategy builder that can be fed various inputs like asset type, risk tolerance, desired outcomes, available funds, and more to produce a deployable ATS with appropriate parameters chosen during a complicated analytical process.
Right now, the system is in its pilot form and may never hit the broad market. The development team is working hard to deliver the product in a form that can produce positive outcomes for users. Note that you still have to do everything manually. The Algorithm Intelligence bot only analyzes inputs and scores them.
Here are some downsides of the system:
- It depends heavily on the quality of inputs. Data must be precise with sources examined closely. With poorly vetted market data and incorrect inputs, the system will produce bad outcomes.
- The system utilizes expert systems only to score inputs. It does not conduct holistic market analysis or configure and deploy bots autonomously.
- While having an automatic backtester seems like something convenient, the product does not solve any “real” problems for retail traders.
3Commas’ Alpha Volcano
This customizable strategy is based on readings from multiple technical indicators powered by an expert artificial intelligence system. It uses signals from several sources to find a high-probability trade and automatically execute it instantly while strategically placing delayed orders and using other risk mitigation techniques.
The development team at 3Commas claims that their product features preselected crypto coins that are suitable for this robot. Just like Alpha Tornado and Wave, it is a tailored strategy that uses reinforced learning to identify the best trading signals for specific assets and market situations.
While it is an interesting product, it is also not powered by an autonomous thinking robot directly. It is not adaptive or dynamic and offers just a list of appropriate settings chosen by their proprietary algorithm. The Alpha product line seems to be rigid and requires polishing.
Here are some downsides of the product:
- The lack of transparency. The exact list of technical indicators and analytical instruments is not disclosed anywhere.
- Only suitable for select coins. The system chooses which digital assets should be traded by fully independent investment robots meaning that investors are limited to several hugely popular tokens.
- Too simple to be attractive. We don’t make any claims about the precision or correctness of this particular product. However, many users may perceive it as too simple to be efficient.
Gunbot
Many companies are focused on deploying ready-made ATS powered by standard algorithms ran in the cloud. Obviously, the market for such products will be massive. However, some developers are a little bit more creative and dedicate time and effort to releasing niche products designed to impress professionals. It seems that Gunbot is a perfect tool for analysts interested in speeding up their workflows.
The product utilizes a proprietary large language model that interprets a variety of inputs, textual and numeric, to build high-performance strategies from descriptions provided by users. It can do some impressive tricks and implement unique technical analysis techniques to fulfill user requests. These indepdenetly operating robots require testing and scrutiny, but the fact that they work as well as they do means that the text-to-strategy interpreter performs outstandingly.
Right now, the platform does not have any other similar functionality or planned products with advanced capabilities in development (at least, we do not have any announcements). The Gunbot system is interesting enough to warrant some curious exploration.
Here are some disadvantages of the product:
- The product is limited to language processing. It does not provide any advice or any meaningful insights. Instead, it translates written text into strategies.
- The target audience is comprised of enthusiasts. Regular retail traders without in-depth knowledge of technical analysis will unlikely find Gunbot useful.
ByBit’s Aurora
ByBit is one of the biggest adopters of the whole concent of using self-sufficient software in the crypto industry. Their TradeGPT system filters out noise from the news cycle and presents comprehensive stories that summarize the buzz in traditional and social media. The Master Trader system is there to enhance the experience of those who are interested in copy trading.
However, their most interesting product is the Aurora investment system that uses an expert software agent capable of processing massive volumes of historical market data. It uses the results of the analysis to identify 18 parameters like potential yield, the frequency of arbitrage opportunities, drawdown risk, and more. Based on these metrics, it makes trades according to its programming.
The company claims that the bot has a respectable 70% win rate and demonstrates excellent performances across multiple markets.
Some drawbacks that this product has in its current form:
- This incredibly sophisticated software program has too many hidden elements. The mentioned parameters can be applied to literally any strategy. We do not know which indicators or methods it employs.
- Users do not have much flexibility in terms of personalization. The bot works as is and may underperform in certain scenarios.
- The attention of the development team may be spread too thin with Aurora being overshadowed by TradeGPT and other important products in development.
WunderTrading’s AI-assisted statistical arbitrage system
We finally have an entry that actually uses expert software agents to directly control automated trading bots. WunderTrading is a well-known brand in the trading automation industry. It regularly delivers innovative products. This time, it is a sophisticated statistical arbitrage system that enhances the pairs trading (spread) methodology by using machine learning for dynamic adjustments.
The product is right in the “launch and forget” category. The system is capable of working autonomously after the initial setup. You should define risk management parameters and some general instructions for the system, but it will work independently after that. The WunderTrading platform claims that the system produces consistent profits while avoiding excess losses.
One of the biggest advantages of the product is that we know that it uses standard pairs trading strategy techniques and only makes adjustments when necessary according to the findings of its machine learning algorithm.
Here are some things to be aware of when using WunderTrading’s newest product:
- AI is still a risky technology. Potential hallucinations, glitches, and emerging properties should be taken into consideration.
- The Statistical Arbitrage system requires sizeable investments. The barrier for entry is quite high and may prevent some individual retail traders from using it effectively.
How to set up an AI trading bot
Deploying an ATS assisted by a completely independent self-sufficient programt is not a universal process. Each automation platform has its own architecture and initial parameters that must be defined by end users. The variety of such products in the market also makes it impossible to give a blanket instruction that covers multiple bots all controlled by independent software programs.
On top of that, each ATS that claims to have an AI component uses it for different purposes. Some of them implement machine learning to identify appropriate settings for robots. Others may use ML to decipher human-generated descriptions of strategies to turn them into functional robots. Obviously, each of these features will demand vastly different approaches.
Let’s talk about the process of setting up an advanced independently operating robot on the WunderTrading platform. It is the most straightforward procedure that you can imagine.
Below is a step-by-step guide for beginners on how to set up a bot for the sophisticated statistical arbitrage system on the WunderTrading website:
- Sign up for the service and log in.
- Connect an exchange account. First-time users will be prompted by the system right away. Use the API connection guide from your CEX platform.
- Go to the dashboard and look for “AI Bot” in the left menu.
- Configure bot settings. The user interface will guide you through the process of the initial setup.
- Review settings and confirm them. The bot can be launched right away but we encourage you to review it before activating.
- Launch the bot once you feel that the settings are appropriate for your preferences and risk style.
Since WunderTrading’s dashboard is intuitive and informative, you don’t need detailed instructions on how to adjust AI trading bots. Each parameter has a description and a detailed help section. Additionally, pay extra attention to risk management parameters such as stop-loss, take-profit, trailing stops, position size, and more.
We also recommend launching several such robots simultaneously to diversify investments. When arbitrage opportunities become seldom in one market, another may pick up the pace. Since working within spreads is all about consistency and systematic market activity, pauses significantly reduce potential profitability.
Should you use these innovative instruments?
Appropriate utilization of artificial intelligence can have a positive impact on the efficiency of your in-market activities, reduce risks, and help you improve profitability. Contemporary ATS powered by independently thinking machines come in all shapes and forms. A smart investor should be interested in exploring these new tools if they plan to stay competitive in the crypto market.
We strongly recommend engaging with innovative tools when they are being developed to understand them better than those who will adopt them later.