Artificial Intelligence and Algorithms
This is going to be a short chapter because it is only intended to introduce you to AI and programmatic trading. It is my strongest belief that you should get into AI trading, or at the very least programmatic trading, as quickly as possible.
Many traders talk about the art of trading and getting a feel for the market before you actually get into programs and algorithms. But I am in it for the money, and so are you, I assume.
In that case, the thing that you want to invest in, in addition to the T1 line and the Bloomberg Terminal, is a comprehensive trading algorithm and an artificial intelligence platform. They may seem like the same thing, but they are not at this juncture.
The algorithm is one where you can pull various data feeds and tell the program what you want it to do, and it will do exactly what you tell it. If there is a mistake in the program, or the logic in the concept is faulty, you will get suboptimal results and you will have to tweak it yourself over time.
AI on the other hand is self-learning. If something is self-learning that means you get to tell it what output you want, and if that output is wrong, it will continue to chew on the data to arrive at predictions that are accurate.
The way we run our AI is to feed it millions of points of data and run specific instructions that it will then look at and make a prediction, it will then look at the subsequent price data and see if its predictions are correct. If they are, the program learns. If it’s wrong, it learns that as well, then changes the parameters until it learns so far ahead that its predictions and strategies become highly effective and accurate. That’s what you want. That takes time, as the market is constantly evolving.
Within ten years you will get to the point that you can leave that program to do the trading while you hang out with your pals and take on a new expensive hobby. After all, that’s the whole point of AI, and crypto-economics and cryptocurrency trading are ideal markets to run AI.
The idea of this book is to give you an understanding of cryptos, how they work and how they behave in market conditions. It also serves as a launching point for you to get the best trading mindset and the understanding of what you should or shouldn’t do to make money in this market. If you are planning to enter small, that’s fine, but make sure you have the infrastructure to support your trades. Don’t just open a trading account and hit the buy or sell button based on recommendations you find on random websites.
The trading of Cryptocurrencies is in its infancy, and it is the best time to get into it. The convergence of AI and cryptos has made it a huge area of growth and wealth creation. I can’t stress this enough, do not waste your time and resources on random accounts and trades. You have to make this a focus and an endeavor. This is serious business and you should bring a serious mindset to the table.
Whether you look at Bitcoin or Altcoins (Altcoins is the term given to all other cryptos that are not Bitcoin) the trading strategies are the same. Their underlying blockchain may differ, but the nature of the exchange and the way to profit from it remains identical.
Within your basket of investment, spend more time looking at Bitcoin and Ethereum, but also have a healthy exposure to the other nine cryptos that we mentioned earlier in the book.
There will be more cryptos entering the market in the next few years, and then after that, you will see a consolidation of several them and the attrition of a large number of tokens and other coins. What you will see is the nature of evolution play out over the next ten years, and you will have a front seat to it if you indeed get into this full-time.
Do not hesitate to invest in the infrastructure and get to know the nature of the market. It will carry the day.