AI-trading (trading using artificial intelligence) is becoming increasingly popular among traders, especially beginners, as it helps to automate trading and minimise risks. In this article, we will break down the top 5 AI-trading strategies that will help beginners take their first steps in the world of algorithmic trading.
- Trend Following.
The essence of the strategy: AI algorithms analyse historical data and identify stable trends in the market. The bot buys an asset when the trend is upward and sells when the trend is downward.
Pros:
- Easy to understand and implement.
- Works well in volatile markets.
⚠ Minuses:
- Ineffective in flat (sideways) markets.
- Can give false signals in case of sharp market changes.
- Arbitrage Trading (Arbitrage Trading)
The essence of the strategy: AI-bot tracks the difference in prices of the same asset on different exchanges and makes deals for profit.
Pros:
- Minimal risks as trades are based on price differences.
- Great for cryptocurrency markets.
⚠ Minuses:
- Requires fast connection to exchanges and low latency.
- Profitability may decrease if competition is high.
- Market Making.
The essence of the strategy: AI-bot places buy and sell orders at different prices, creating liquidity in the market. Profit is generated by the difference between the buy and sell prices.
Pros:
- A steady stream of small profits.
- Stability when properly set up.
⚠ Minuses:
High risks in case of sharp price movements.
May require a large initial capital.
- trading on Neural Network Predictions (Neural Network Predictions).
The essence of the strategy: AI analyses historical data, news and macroeconomic indicators, predicting future market movements.
Pros:
- Ability to analyse a huge amount of data.
- Automatic adaptation to market conditions.
⚠ Minuses:
- Requires complex model tuning and training.
- Model errors can lead to losses.
- Grid Trading
Strategy essence: AI-bot places Buy and Sell orders in equal intervals, earning on price fluctuations within the range.
Pros:
- Works well in flat (sideways trend) conditions.
- Constant stream of profits when set up correctly.
⚠ Minuses:
- Risk of loss in case of strong trend movement.
- Requires setting up grid levels.
AI-trading offers a variety of strategies, each suited to different market conditions. Beginning traders are recommended to start with trend trading or arbitrage, as they are easier to implement and less risky. Over time, you can try more complex strategies such as neural network forecasting.
It is important to remember that even the best AI strategies require testing and optimisation. Start with small amounts, analyse the results and gradually improve your AI trading system.