Trading Bots vs Humans 路 Everything you need to know

Trading Bots vs Humans 路 Everything you need to know

Over the past 10 years we鈥檝e seen the rise and rise of trading bots and Quantitative Funds and we鈥檝e 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鈥檓 so glad you asked!

I鈥檇 probably say we did everything we could to not replicate human behaviour :slight_smile:

If you鈥檙e actively trading, human behaviour gets in trouble. Human鈥檚 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鈥檚 not replicating human behaviour and just doing what鈥檚 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鈥檚 always nice to have some new perspectives.

As of now, profitable trading bots are like God to me 鈥 I鈥檝e heard of them and there鈥檚 a great probability that they are everywhere, but I鈥檝e never seen or experienced one myself.

But, as you said, I too think they鈥檒l 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鈥檚 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鈥檚 no good looking at the model after it鈥檚 run and then picking the one path that has consistently hit heads and saying ok this is a 鈥減rofitable model鈥 and therefore we鈥檙e 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 鈥減rofitable鈥. If you take any bot that鈥檚 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鈥檛 incentivised to produce a profit for you. This is the exact reason we鈥檙e building Credium - when we launch we鈥檒l have a page on the site where you can see our daily performance so we鈥檙e held accountable to what we produce for clients.