Automated trading bots have exploded in popularity in recent years. These bots, often powered by AI, place trades based on pre-programmed rules or live data signals. But how exactly do they work—and should you trust them with your money?
How Trading Bots Operate
There are generally two types:
- Rule-based bots: Follow specific conditions set by the user (e.g., Buy X when price drops by 2%).
- AI-based bots: Use machine learning to adapt to market behavior in real-time.
Most bots operate via APIs connected to exchanges, executing trades at lightning speed.
The Benefits
- 24/7 market monitoring
- Emotionless trading
- Backtesting on historical data
- Instantaneous execution
The Concerns
- Over-optimization and curve fitting
- No guarantee of profit
- Vulnerable to high-volatility events
At Rapid Labs, we design adaptive AI trading engines with built-in risk management tools. Whether you’re a retail investor or an institution, trusting a bot requires understanding its strategy and limitations.
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