AI: Friend or Foe to Traders?

[internetional]

Recently, Coinbase announced that they had recorded the first crypto asset exchange where both parties were AI. It's doubtful this was truly the first such transaction, even on the Coinbase platform. AI elements have been integrated into trading bots for quite some time now. It's likely that AI-based bots have been trading with each other before, but no one had informed the exchange’s management. So, this is more likely the first officially documented transaction.

Nonetheless, this is a significant milestone. AI is not just a predefined trading algorithm. AI bots can learn and adapt their trading strategies. They not only recognize chart patterns but also consider traders’ expectations from these patterns - things like fear, greed, and other psychological aspects of human traders. They can analyze the challenges traders face, assess how well they overcome them, and take into account the successes and failures of human traders.

The number of AI bots will undoubtedly increase, and their competitive advantages over standard bots and human traders will enable them to trade profitably. If we view the market as a competitive battleground where every gain comes at someone else's loss, then eventually there may be little room left for human traders. Just as high-frequency trading bots using APIs edged humans out of front-running and arbitrage, AI bots could outcompete humans in traditional trading.

On the other hand, AI is increasingly being developed as a tool to assist, not replace, human traders. AI-driven tools are being designed to help humans achieve their goals, including in trading. For example, in September, MEREXP Analytics launched an analytics tool called AI Swallow. It scans crypto-related news, reads it, and assesses its impact on market sentiment. Based on these evaluations, Swallow can help predict whether current news will drive up demand for cryptocurrencies or, conversely, cause demand to decrease and supply to increase.

The balance of supply and demand is the only real driver of price movement, and AI can evaluate the likelihood of changes in supply and demand based on market sentiment influenced by the news.

Up until now, only humans could do this. But humans can’t monitor and analyze news 24/7, whereas AI can. Additionally, humans tend to focus on news that aligns with their personal views, while AI is free from this cognitive bias, as well as from many others. AI won’t ignore news that do not fit its market outlook, and it evaluates all information objectively, without favoring its current market position. All in all, AI stands a much better chance of making well-balanced, rational decisions.

The question is, in the trading landscape of the future, will AI work for or against humans? When we read news about two AIs making a trade without human intervention, it’s easy to imagine that humans may no longer be needed in trading - AI will eventually push us out and take all the profits. But are such fears justified?

Does AI even need money or other assets like cryptocurrency? If it does, then there’s a chance AI will start extracting them from the market. But it's hard for me to imagine what AI would actually need them for. Money is a human invention, valued in human society, and it’s unlikely AI has any use for it. The same goes for cryptocurrencies.

Therefore, AI entering the crypto market is unlikely to act in its own interests. Moreover, AI doesn’t have interests - at least not yet. Current neural networks don’t possess any form of agency. This means that AI will act on behalf of humans, based on their commands and in their interests.

Thus, in trading, AI is more likely to be a tool rather than an autonomous player. Traders who use this tool will have a competitive edge at first. Then, as the market adapts, all active participants will start using AI, much like we all use computers or other electronic devices for trading today.

So, AI should be viewed as a friend and a helpful tool. We shouldn’t panic and shout, “It’s all over! AI will rob us all!” Nor should we abandon trading because we think there’s nothing left for humans. Instead, we should seek out new opportunities and solutions that are based on AI, learn how to use them, and apply them actively.

However, I do worry that in the near future, we might see a wave of fraudulent offers selling AI bots for trading. Distinguishing a worthwhile offer from a scam won’t always be easy. I can’t think of a universal strategy to help traders unfamiliar with AI separate the good from the bad and choose truly useful tools.

I have a few questions for traders.

• Have you already encountered any AI-powered trading tools (aside from the AI Swallow I mentioned)?
• Which of these tools have been useful, and which ones were just a waste of time and money?
• And generally, do you believe that AI can become a trader’s ally and assistant? Or do you fear it might destroy the type of trading we’re all used to and leave us without a source of income?

[GreatArkansas]

• Which of these tools have been useful, and which ones were just a waste of time and money?

I will focus on this question because for me, the distinction between useful tools and those that are a waste of time and money often goes down to transparency, human control, compliance, etc.
If you use AI in trading, it's indeed a powerful tool for me, but like any tool, its value depends on how it is used in trading which we all know is very complex and complicated.

In my own opinion, the best I can see that is useful is for example a tool that verifies the algorithm, analysis, or pattern that you are using, and it will explain to you the uses of it, how it works, provide some use cases, etc.
A waste of time or money is the unrealistic result or promise, which we all know is very common right now in A.I., like guaranteeing correct answer or output but in reality, it's not.

[pooya87]

Believe if or not this is a very old question. Do trading bots work?

The answer is yes and no. The technology is definitely getting better, and with more advanced bots things are improving. But the thing about markets is that they are not predictable, which means a trading bot (call it AI or not) can not predict it. They can only execute predefined scripts and act according to certain signs they have seen. like noticing an increased volume and number of new buy orders then predicting a coming pump, and consequently making a "buy" move for profit. But it can never predict that some whale is going to suddenly decide to dump a large sum on the market crashing the price of that asset. Hence that move ends up in a loss.

Here is the most dangerous thing about automation: the market may not be predictable but a computer program is. If its moves could be predicted, it could also be gamed....

[internetional]

Here is the most dangerous thing about automation: the market may not be predictable but a computer program is. If its moves could be predicted, it could also be gamed....

Yes, and this is another manifestation of the emerging problem. If the program I use now can be predicted, AI will predict it and will be able to play against it successfully.

So, because of AI, it's becoming dangerous to use many existing bots for trading.

[knowngunman]

The answer to your question in the thread topic depends on how one utilized and perceived AI. In some aspects like data analysis, automation and risk management, AI can be seen as a friendly tool. In other aspects, AI is perceived as a threat to human jobs, market manipulation and causes over reliance making traders to be too relaxed with critical thinking skills. If you look at the latter aspects, it's a disadvantage for traders.

Although, AI development and deployment requires funding by human entities but they certainly have no personal uses for money and cryptocurrency. Not only money or crypto, they don't have any physical desires because they only exit in digital realm. Moreover, I don't see them replacing human entirely in every aspect since they rely on human provided resources. Of course, they can study and interact with financial markets but their actions will still be determined based on how they are being programmed.

So, because of AI, it's becoming dangerous to use many existing bots for trading.

Is there any difference between AI and trading bot in the first place? I do see them as interchangeable terms.

[crwth]

If it's ever the first time it's done, I think it's a great thing of an application because every tool should be used if it can be applied. For it to be trading is impressive, knowing that I am a trader.

Having market makers as AI would be helpful for an exchange. If it has become a great asset, it would be a fantastic tool for exchanges and everyone.

It can be an excellent tool for everyone and enhance the overall probability of winning.

[Tungbulu]

You know, I keep thinking about this things about AI trading bots or whatever they're called. Usually AIs are depicted as a better version of humans, it's like amplifying the humans built-in abilities,  which gives them a higher advantage over normal humans, although there are still several ways it has been proven that no matter how smart an AI is, humans will always be better than AIs and I'll not delve into that right now.

My only concern is: if AIs are really amplified versions of humans, then surely, they're supposed to have discovered where humans are getting it wrong, since maybe they're considered to be in a better position to make trading choices and maybe probably correct those errors. So then I wonder, if this is so, then why exactly can't trading bots have  a 100% confidence that they'll get it right whenever they're trading, since they can be able to detect and fix those mistakes, thereby giving them at least a 100x advantage over the normal humans. So why the hell do they still need developing in order to get it right? Why?

[hugeblack]

I think you are not asking the right question, AI trading bots will be a contributing factor in trading and like AI applications, their ability to make decisions is still far from the human level and requires someone to bear the cost of those decisions.

The right question is how to reduce the misuse of this technology, because through these bots exchanges can make most traders lose or some VIP traders always win, this can be done now on scam platforms but AI will make it possible on all platforms.

[Adbitco]

Believe if or not this is a very old question. Do trading bots work?

The answer is yes and no. The technology is definitely getting better, and with more advanced bots things are improving. But the thing about markets is that they are not predictable, which means a trading bot (call it AI or not) can not predict it. They can only execute predefined scripts and act according to certain signs they have seen. like noticing an increased volume and number of new buy orders then predicting a coming pump, and consequently making a "buy" move for profit. But it can never predict that some whale is going to suddenly decide to dump a large sum on the market crashing the price of that asset. Hence that move ends up in a loss.

Here is the most dangerous thing about automation: the market may not be predictable but a computer program is. If its moves could be predicted, it could also be gamed....

You are absolutely right and that is the disadvantage of AI be it automation. They only acted towards the predefined instructions and they can't truly predicts and give exact future of what coin could be or what sum of amount to be purchased by people be it whale but it only gives signal or read the market when the action had already taken place then it send to users.

[shinratensei_]

It's a friend for the traders who uses AI and got access to it and it's a foe for traditional traders like us, if AI could make technical analysis of the market within millisecond and decide what to do accordingly to the data available in the market for example the technical indicator and price action then we might be having big disadvantages here.
It'll be deadly combination if AI is combined with real time news, it could literally put order within just millisecond calling the exchange API if somehow there's really bad news relating to bitcoin out to the public.

but for now, AI seem to be not capable enough for that but eventually it will, the growth of AI has been exponential and I expect it to just get better.

[Dr.Bitcoin_Strange]

I have a few questions for traders.

• Have you already encountered any AI-powered trading tools (aside from the AI Swallow I mentioned)?
• Which of these tools have been useful, and which ones were just a waste of time and money?
• And generally, do you believe that AI can become a trader’s ally and assistant? Or do you fear it might destroy the type of trading we’re all used to and leave us without a source of income?

On kucoin exchange, I have actually tried out one inbuilt bot that helps to carry out an automatic spot trading. The bot helps to buy when the price is low and sell when the price of the selected asset have move past the bought. I quite love the feature because it makes it easy for an investor to set the price they want to buy and sell and even while they are sleeping, the bot will automatically conclude the trade.

If AI can actually do better than humans in trading, that will be great, at least it's decision will not be biased or influenced by any form of emotion. Another bot which I have tried out is the inbuilt of bot bybit exchange, the bot only makes a suggestion of the coin or token you should trade and also points out the position to enter and I have actually tried to follow it's suggestion by entering a position for a token it recommended but I lost that trade.

[internetional]

On kucoin exchange, I have actually tried out one inbuilt bot that helps to carry out an automatic spot trading. The bot helps to buy when the price is low and sell when the price of the selected asset have move past the bought.
...
Another bot which I have tried out is the inbuilt of bot bybit exchange, the bot only makes a suggestion of the coin or token you should trade and also points out the position to enter and I have actually tried to follow it's suggestion by entering a position for a token it recommended but I lost that trade.

Did those bots pretend to be AI based?

Is there any difference between AI and trading bot in the first place? I do see them as interchangeable terms.

There are many differences. For instance,
- AI bots can learn from their own previous trades and modify their algorithms for opening and closing positions.
- AI bots can take into account natural language text information (for example, obtained from news).
- AI can create trading algorithms based on the textual descriptions of trader's needs.

[Zigabel]

There's is never a complete yes or no answer to all of your questions so far it concerns trading.

AI will always have its advantages and roles it can perfectly play in the trading industry but what we can never say if it will ever be better than a human trader because it obviously comes with its own flaws which cannot be undermined just like humans, but using it as an assistant can be a great idea, it can help you with gathering data a whole lot and that isn't even going to take you a lot of time as it would have if you were to.fetch those dats alone then with executions, there are times trades may not be rightly executed because i want to believe it will act like trading bots too.

[deadsea33]

Till date I have not used AI yet. I think own analyzes are better than AI. But I have heard from many people that they have made good profit by using AI bot for trading. Yes, I believe it because many people do copy trading on different exchangers.  A lot of profit can be made from this.
But I don't support AI because many fake AI are entering the market these days. That's why trading is not perfect even if it is done well. But I want to tell everyone that AI is always risky.

[o48o]

Does AI even need money or other assets like cryptocurrency? If it does, then there’s a chance AI will start extracting them from the market. But it's hard for me to imagine what AI would actually need them for. Money is a human invention, valued in human society, and it’s unlikely AI has any use for it. The same goes for cryptocurrencies.

Just like companies that hire people, if for some reason AI would like to make humans work for it it would need an incentive that those workers would accept. In that case owning crypto would be perfect. Because i don't think that AI could ever set up a bank account, it just might hide cryptocurrencies to encrypted files. But that's pretty sci-fi. Other way would be manipulating humans. And if AI would be smarter than humans, we would never know what hit us, because we couldn't recognize sophisticated manipulation. In fact, if we were manipulated now by some high end AI, we wouldn't know.

Therefore, AI entering the crypto market is unlikely to act in its own interests. Moreover, AI doesn’t have interests - at least not yet. Current neural networks don’t possess any form of agency. This means that AI will act on behalf of humans, based on their commands and in their interests.

This is something i've been thinking too. But i totally see a possibility that we want to build an AI as human like as possible, probably with organic material, so we could interact with it better and learn about ourselves while doing it. This would mean that at some point they probably would end up being just superior versions of us. They would have motives as humans would. They would be driven with code that gives them urges that suits us, written on their core. Similar to humans having coded DNA and instincts molded by our evolution.

[avikz]

And generally, do you believe that AI can become a trader’s ally and assistant? Or do you fear it might destroy the type of trading we’re all used to and leave us without a source of income?

Ai can be a great help for traders, but when it is used in correct capacity. Till date I haven't come across any AI based tool that can generate income for you by trading in the market. But AI can be useful for data analysis. AI can analyze historical data and patterns and can present you with summarized data points and statistical analysis. But the decision should still depend on the human trader. AI can indeed trigger certain actions if a pre-specified condition is fulfilled. So AI can indeed help in assisting us.

But I am not much in favor for giving AI the upper hand to take decision on our behalf. Probably we will see such capabilities of AI in near future because the AI models are training themselves to become better with time. But for now, I personally think, it's too risky for traders to completely rely on it.  

 

[cabron]

And generally, do you believe that AI can become a trader’s ally and assistant? Or do you fear it might destroy the type of trading we’re all used to and leave us without a source of income?

Ai can be a great help for traders, but when it is used in correct capacity. Till date I haven't come across any AI based tool that can generate income for you by trading in the market. But AI can be useful for data analysis. AI can analyze historical data and patterns and can present you with summarized data points and statistical analysis. But the decision should still depend on the human trader. AI can indeed trigger certain actions if a pre-specified condition is fulfilled. So AI can indeed help in assisting us.

But I am not much in favor for giving AI the upper hand to take decision on our behalf. Probably we will see such capabilities of AI in near future because the AI models are training themselves to become better with time. But for now, I personally think, it's too risky for traders to completely rely on it. 

 

These AIs will not be launched for our use but for the institutions to grab traders' coins. If the AI is smart enough to make traders win, it won't be released for us becuase it's going to be released to be used against us.

AI won't just rob our jobs but also the money we have. They will be betting against us and eventually, those who hold will make money. Yet in the end, they get more coins with them. Yes, I think the fears can be justified already thinking of all these.

[tottong]

So, AI should be viewed as a friend and a helpful tool. We shouldn’t panic and shout, “It’s all over! AI will rob us all!” Nor should we abandon trading because we think there’s nothing left for humans. Instead, we should seek out new opportunities and solutions that are based on AI, learn how to use them, and apply them actively.

The market cannot be analyzed and predicted accurately so it is likely that bots will not catch accurate signals and this is a weakness.
When asked whether bots work or not, the answers may vary because there are people who use them and there are also those who don't.
For the reason that they work, it is clear that they work because they are designed for that, but talking about whether they are right or not is up to each person who uses them.

I prefer to minimize the misuse of technology and it will be dangerous for people who don't understand.
Bots or AI can be useful in their respective versions but do not guarantee that they can be used consistently.

[betswift]

Till date I have not used AI yet. I think own analyzes are better than AI. But I have heard from many people that they have made good profit by using AI bot for trading. Yes, I believe it because many people do copy trading on different exchangers.  A lot of profit can be made from this.
But I don't support AI because many fake AI are entering the market these days. That's why trading is not perfect even if it is done well. But I want to tell everyone that AI is always risky.

The best way out would be to look at AI or how it operates, pick something that - you - yourself think is a nitpick that really can be useful, and do everything yourself
That's my opinion, of course.

[justdimin]

The question is, in the trading landscape of the future, will AI work for or against humans? When we read news about two AIs making a trade without human intervention, it’s easy to imagine that humans may no longer be needed in trading - AI will eventually push us out and take all the profits. But are such fears justified?

Push us out and take all the profits? And where do the profits go? AI is a human invention, an AI model works on algorithms and codes that we write and feed into them, they can't act by themselves or do things that aren't mentioned in those algorithms. Do you think an AI will create a wallet of its own, do trading, and shift the profits in that wallet itself even if it doesn't have this fed into it?

Does AI even need money or other assets like cryptocurrency? If it does, then there’s a chance AI will start extracting them from the market. But it's hard for me to imagine what AI would actually need them for. Money is a human invention, valued in human society, and it’s unlikely AI has any use for it. The same goes for cryptocurrencies.

Are we talking about a movie or a fiction here? Come on! What we see in movies can't happen in real life, it's not like an engineer creates a robot, writes all its programs and algorithms, and then that robot starts acting by itself, kills its creator, and starts living by itself and conquering the whole world. AI models work the way we want them to, even if we program them to have interests or whatever, they will still not be able to cross us because they don't have a brain or thinking abilities.