Are AI trading bots profitable? Yes, and no. It’s a complex question and I’d try to explain both the fronts by the end of this piece.
Even if this is your first day reading about AI trading bots, I’ve made sure you understand trading bots better in the next few minutes.
Do note that this is a neutral article. We are not for, or against trading bots. Rather, our goal is to explain trading bots to you, their benefits and pitfalls and then let you decide.
Let’s get started then?
Table of Contents
What are AI trading bots?
We can talk of AI trading bots’ profitability only after we fully understand what these AI trading bots crypto are.
Well, AI trading bots are just bots, powered by artificial intelligence that place buy/sell orders for you.
Do note that there’s a slight difference between non-AI and AI trading bots. Non AI trading bots do just what you tell them, even when that decision may cause you losses. AI trading bots follow instructions as well but they’re also capable of offering additional tips, understanding signals and are just slightly smarter.
Human traders vs. AI trading bots
AI trading bots can be more profitable than human traders only if the bots can do things humans aren’t good at, isn’t that right?
Well, there are a few clear benefits AI trading bots have over humans:
- Faster: At the very least, AI bots are way faster than humans. They can be used to leverage even the narrowest spreads and buy/sell the lowest differences. Doing it manually will require more clicks, fast internet and so much more that it’s not practically possible for humans.
- Void of emotions: Mastering the market first requires mastering your emotions. This is where 99% of the traders fail. Well, an AI bot is definitely safe from making wrong decisions based on emotions.
- 24X7 online: You need to sleep, have fun, and do other things. AI bots don’t.
- Can do more tasks simultaneously: Advanced bots can trade multiple pairs at the same time. You can’t. They can also backtest multiple timeframes and charts while doing that manually would take a lot more time.
There are a few other benefits but I’m certain you’ve got an idea by now, haven’t you?
How to choose a good AI trading bot?
AI trading bots aren’t all in the same boat. Each bot differs based on its features. Hence, you must look for certain metrics when choosing a good AI trading bot.
- Compatibility with your exchange: Whatever bot you’re using, must be compatible with your trading exchange. Without that, there’s absolutely no point of the bot, is there?
- Ability to trade multiple pairs simultaneously: Your bot should allow you to configure multiple pairs to be traded simultaneously.
- Ability to understand patterns and signals: This is where the AI part of bots comes to life. The best bots understand patterns and indicators and either execute trades, or notify you with potentially benefiting strategies.
- Customizable parameters: The bot must allow you to customise as many parameters as possible. It’s a simple case of control over the bot. The more you can control, the better.
- Choose what suits “you”: There’s no one bot that suits all. Each individual has a different risk tolerance ratio and trading strategy. Your pick needs to align with how “you” do things.
Pitfalls to avoid when using AI trading bots
A bot that trades for you, sounds like magic, is almost magic but shouldn’t be treated like magic. What I mean is, even bots aren’t “unlimited money making machines” and you need to be careful.
Here are the most common mistakes people make when using AI trading bots that you should avoid:
- 100% reliance on the bot: Never do that. Setting the bot up and sleeping won’t work. You must constantly monitor what it’s doing, why it’s doing that and make changes on the go. You must still use your own strategies, trading plan, diversification ratio and everything else. Basically, use the bot as an assistant not a master.
- Start small with the bot: Your initial capital with the bot, any bot, should be small. Think of it as paper trading but with real money (yes, that’s a oxymoron, I know). In fact, if possible, it’s not entirely wrong to start with paper trades before real money.
- Security: Pay serious attention to your bot’s security. Enable all the 2-FA measures you can. It’s optional but reading the documentation and ensuring the bot is truly secure can’t hurt either.
Are AI trading bots profitable?
Now that you’ve somewhat better understanding of AI trading bots, let’s address the question you came here for. Are AI trading bots profitable?
The answer is as simple as answering -”Can planes fly”? The technical answer is, yes.
The non technical, more realistic and practical answer is- “it depends on the pilot”. Or, in this case, the trader.
Any trading bot can only be as successful as it’s configured to be. Hence, what trading strategies a trader uses, what’s the stop loss, how much backtesting has been done all adds up to the trading bot’s success or failure.
And, even when all the things are done right, there’s a chance it may fail. Of course, when used right and with caution, trading bots do make money.
Conclusion- Are AI trading bots profitable?
As I just explained, yes, they’re profitable, given the right strategies, caution, market movement and a few other points.
At the end, it all boils down to a plethora of factors and even the specific bot you’re using. This is why it’s very important to choose a good bot that has minimum downtime and offers maximum control.
I personally use 3commas but you’re free to go with any other reputed bot out there.
