AI-Trading Signals: Ultimate Guide

There is a lot of talk about using AI trading signals in crypto day trading. But do AI signals even work and are they worth the hype?
Tony A.
Chief Communication Officer
Editor-in-Chief of the Walbi blog. Connect with him about writing techniques, cryptocurrency, and music.
May 16, 2023
AI-Trading Signals: Ultimate Guide

The use of AI and machine learning has generated a lot of excitement lately - due to the rise of powerful tools like ChatGPT or SnapChat AI. But there is more to AI than making strange artwork or talking to a computer. Now, crypto traders are starting to use AI trading signals in an attempt to get an edge on the competition.

What are Trading Signals?

Trading signals are indicators that assist you in making informed decisions while trading. They can advise the optimal timing to buy or sell an asset. In cryptocurrency trading, mathematical algorithms or human analysis help generate the signals.

Furthermore, trade signals can show you many trading opportunities.

They analyze

  • market movements,
  • chart patterns,
  • and statistics.

Not only that, they help to make technical analyses to draw summaries. They also understand fundamental analysis and quantitative analysis. They help traders to test economic factors and use other signals from other systems.

Trading signals are crucial for crypto traders. They give clear directions to the traders daily. It helps the traders to have a deep understanding of the market condition. Leading them to cut losses and maximize profits.

How Does AI Trading Help with Trading Signals?

Here are some ways AI can help with trading signals for crypto traders.

Pattern recognition

AI algorithms can analyze historical data to identify your trading patterns. It leads to more accurate predictions of future market trends. You can have information on asset price changes in certain periods.

Real-time analysis

AI can track real-time market conditions. It generates trading signals based on the latest data provided. It has asset price patterns that also play a crucial role in the analysis. From this factor, you can learn about up-to-date and actionable insights.

Automated trading

AI can create trading bots. They can execute trades based on your predefined trading strategies and targets. They also can assess the trader's risk tolerance rate. The goal is to reduce the potential for human error and emotion-based decision-making.

Natural language processing (NLP)

They designed AI to understand texts. They can analyze news articles, social media posts, and other sources. They aim to help you determine how the market may react to specific events. All at once, leading you to more informed trading decisions.

What is ChatGPT and its Effects on Crypto Trading?

ChatGPT is an AI-powered language model developed by OpenAI. It is well-trained to do a variety of tasks like

  • translations,
  • making summaries,
  • research
  • and generating conversations.

Next, they understand a massive dataset of text from the internet. From this, they generate coherent and relevant responses to a wide range of prompts.

ChatGPT has many functions. Some people use it as a virtual assistant while some others use it for customer service. Now, Crypto traders are learning to prompt ChatGPT to assist them in staying informed.

For example, AI helps crypto traders with

  • Market analysis: ChatGPT is a popular automatic analyzer. It has data from many trusted sources. In trading, they can identify market trends and patterns. They also can provide you with valuable insights into market conditions.
  • Trading signals: ChatGPT can generate trading signals. They make their judgment based on the analysis of daily market trends. This aspect helps you to identify profitable trading opportunities.
  • News analysis: ChatGPT can track news sources and social media every day. It provides traders with up-to-date information on market sentiment and important events.
  • Risk management: ChatGPT can assist traders in managing risk. They provide insights into the potential impact of market events. This gives you guidance on your trading positions. It helps you make the fast decision to cut the risk of losing capital.
  • Educational resources: ChatGPT can also provide traders with educational resources. They have access to articles, tutorials, and webinars. This will help traders to improve their trading skills and knowledge.

Is AI crypto trading risky?

There are some risks to using ChatGPT to trade. For example:

Wording sensitive results

There are various responses that ChatGPT can generate. AI can be uncertain depending on the wording used in its prompts. This is because ChatGPT creates responses based on patterns from its training data. Specific words can influence the patterns activated and responses generated. It is important to make a clear prompt to receive the most relevant responses from ChatGPT.

Lack of human-level critical thinking

ChatGPT is a very powerful tool. Yet, it lacks critical thinking skills. It cannot have the same skill that you own. This means users need to always verify and confirm the insights generated by the AI.

Limited access to real-time data

It may not have real-time data. Their analyses follow the historical data recorded by the system. This means the data they provide may not be relevant or accurate.

System bugs

The code generated by ChatGPT may contain bugs. This could lead to many problems which could affect functionality and accuracy.

What is Strategy Testing: Why Every Crypto Trader Should Do It

When using AI trading signals, be sure to always practice strategy testing. Strategy testing uses both the power of the human mind with AI to ensure you’re always making the best decisions. Here are some strategy testing tips to get you started.

  • Measure accuracy: You can use strategy testing to check the signal's accuracy. In real-world market conditions, you can determine the effectiveness of the signals. Then you can compare the results with the actual market situation.
  • Identify weaknesses: Testing can help traders identify weaknesses in AI trading signal strategies. Once you understand which areas are less effective, you can refine your strategies. Then, you can also improve your trading performance.
  • Optimize parameters: Testing can help traders optimize their AI trading signal strategies. This includes stop-loss and take-profit levels, to achieve better results.
  • Backtesting: You can use backtesting to test strategies against historical data. It is a strong tool to help you to determine how effective the signals would have been in the past. This will give you greater confidence in the signals’ effectiveness while trading.
  • Assess risk: Testing can also help you to check the level of risk associated with using AI. It is important to always analyze the signals’ historical performance. Next, you can compare them to the market conditions. You can use this step to better understand potential issues and rewards.

How does WALBI use AI trading signals in its platform?

WALBI noticed this trend of crypto traders using AI trading signals to help get a competitive edge on the market. Hence, we decided to integrate AI directly into our platform to save crypto traders time.

Suggested reading: What is WALBI? The Future of Web3 Crypto Platforms

In trading, time is money. If a trader is going back and forth between multiple platforms trying to collect AI trading signals, then they may be missing out on some volatility to capitalize on.

To put it simply, WALBI uses AI as an assistant for traders. It will help them:

  • Scan the daily news, social media feed and regulatory announcements to find trade signals
  • Research past price history of digital assets to locate patterns and predict future volatility
  • Use productive technical indicators to automatically analyze price data

All the above and more will save crypto traders tons of time in research. This allows them to focus on what they know best, executing trades. The more trades they can make, the higher their chance of success.

Let WALBI show you the light in the dark seas of crypto

Of course, AI trading signals don’t guarantee profit but they make the job much easier. In our eyes, we see the cryptocurrency market as a dark sea and you as the ship. Navigating these waters is difficult, filled will rocks and waves that can topple even the strongest ship.

To help, you need a lighthouse. WALBI is that Lighthouse. Shining light on those dark seas to help you find your path to safety and hopefully, profitability. That’s why we are calling our AI trading assistant Lighthouse. It will guide your crypto trades when you need help to ensure you avoid the dark twists and turns that the crypto market can provide.

Tony A.
Tony A.
Chief Communication Officer
Editor-in-Chief of the Walbi blog. Connect with him about writing techniques, cryptocurrency, and music.
May 16, 2023
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