Over the past 10 years we’ve seen the rise and rise of trading bots and Quantitative Funds and we’ve seen the fall and fall of traditional Asset Managers and Hedge Funds.
In building your crypto trading bot, what did you find was the most difficult human behavior to encapsulate with an algorithm?
such a great question and I’m so glad you asked!
I’d probably say we did everything we could to not replicate human behaviour
If you’re actively trading, human behaviour gets in trouble. Human’s have pack mentality which means you chase after a stock as it goes higher and end up getting into terrible trades. This is also one of the reasons day traders typically never make money. The algorithm wins because it’s not replicating human behaviour and just doing what’s most sensible given the data it has.
Good luck with the move too David!
Excellent insights. Thanks for the read! As a company that is preparing to launch an algo fund, it’s always nice to have some new perspectives.
As of now, profitable trading bots are like God to me – I’ve heard of them and there’s a great probability that they are everywhere, but I’ve never seen or experienced one myself.
But, as you said, I too think they’ll become more common in the near future due to the rapid advancement in A.I. and ML.
Most trading bots that show up on Google search are so not reliable. Anyone who goes with one must have an iron heart to be putting their money straight into another person’s pocket.
if you run a monte carlo simulation on a coin toss (assume heads=profit, tails=loss) you end up with a bunch of paths producing a profit and a bunch not producing a profit. Now, it’s no good looking at the model after it’s run and then picking the one path that has consistently hit heads and saying ok this is a “profitable model” and therefore we’re awesome. This is basically what everyone touting profitable bots does, they either overfit or take a favourable subsample of data to show that theirs is “profitable”. If you take any bot that’s in the public domain today, I guarantee that on a long enough timeline the survival rate goes to zero. The reason for this is simply that the bot developers aren’t incentivised to produce a profit for you. This is the exact reason we’re building Credium - when we launch we’ll have a page on the site where you can see our daily performance so we’re held accountable to what we produce for clients.