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Artificial Intelligence (AI) is helping crypto traders up the game by leveraging the latest tools and applications. AI can facilitate better analysis of data, gauge market sentiment, identify price patterns, find trade setups, and automate crypto trading
Since the launch of ChatGPT in November 2022, there has been a never-seen-before interest in AI applications. The market has been flooded with AI tools of all shapes and sizes to facilitate tasks like copywriting, designing, writing emails, and analyzing data. But do you know there are excellent AI tools like CoinScreener or Kryll.io to help you in trading cryptocurrencies? Using these tools can help you improve your trading performance and profitability.
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Getting curious? Here are the top 7 applications of AI in crypto trading.
1. Real-time monitoring
The crypto market operates 24/7, but crypto traders are human beings and they need to sleep and rest! Also, there is more to life than just looking at the computer screen when prices go up and down. So, you can simply use AI tools to track price changes and other market developments around the clock. These applications are designed to generate alerts when a particular requirement is met. For example, you can set the applications to generate an alert when BTC crosses a particular price – let’s say $30K.
2. Sentiment analysis
The crypto market is driven by investors’ sentiment. Positive sentiment is a bullish factor while negative sentiments have a bearish effect on the market. So, it is crucial to keep track of changes in sentiment to predict market movement.
AI tools are designed to analyze news reports, market developments, and even discussions on social media to sense the ongoing market sentiment. Based on their sentiment analysis, these tools can generate a market sentiment report or score to help you make better trading decisions.
3. Trade signals
Not all trade setups are worth entering. Different trade setups have different profit potential and risks involved. AI tools can generate trade signals by keeping an eye on price movement, market volatility, buy and sell orders of other traders, momentum, and technical indicators. You can also customize these tools to generate trade signals as per your specific requirements. For example, you can program the tools to generate trade signals when a crypto is trading at a 52-week high price.
4. Risk management
A core aspect of trading is risk management and protection of capital. A lot of new traders risk their entire capital because of poor risk management strategies. Since the crypto market is extremely volatile, it’s common to see a crypto’s price moving by 10 or even 20% on the same day! Tremendous price changes can also occur minute to minute. So, if you don’t follow risk management rules for the right position size or calculated stop losses, you may end up wiping the entire capital.
AI tools can be extremely handy in managing risks while you trade cryptos. These tools can help you determine the right position size, deal with volatility, and manage stop losses.
5. Automation
The right AI tool can help you take your crypto trading the auto-pilot way. All you need to do is feed the system with instructions. So, if you want to buy a BTC worth $500 whenever its price falls by 1% from the current price, you can instruct the application. It will execute the trade when conditions are met. AI trading bots are AI-driven software applications. These can automate all aspects of crypto trading, starting from entry to risk management and profit booking.
6. Predictive Analytics
One of the best ways AI can help crypto traders is by predicting future price movements. Advanced AI tools are equipped with sophisticated data analysis tools that can constantly monitor price changes and predict probable future movements. While it is extremely difficult (if not impossible) to predict the exact future price of cryptos, these tools can provide enough indications to improve your trading performance.
7. Portfolio management
Building a profitable crypto portfolio requires significant knowledge and effort. You need to know the correlation of returns of different cryptos. Moreover, you need to calculate portfolio risks and returns to build an optimal crypto portfolio. AI tools can do all these in a matter of minutes by picking data from the right sources. Also, AI-based crypto portfolios avoid manual errors and human biases.
So, if you want to stay ahead of other traders, leverage the power of AI to drastically improve your trading performance. Also, always try to stay updated about the latest developments in the ever-changing crypto market.
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