Why We Need Trading Bots

Avatar Guest Author 5 years ago

This article will introduce a series on writing software that facilitates trading cryptocurrencies by summarizing its merits. Some features, like their speed and reliability, probably seem obvious. A summary of the advantages offered by their objectivity, however, could fill volumes, enough to remedy our educational system’s failure to teach the implementation of logical skills. Perhaps most importantly, bots allow users to evade the risks inherent in trusting another human with handling their investments.

The human reaction time (~ 0.2 seconds) and working memory capacity severely limit how many sources of information we can simultaneously handle. If updated once per second, merely 6 independent information sources would exceed even the most intelligent person’s physiological limitations of attention. C-Cex, a cryptocurrency exchange with 1050 trading pairs, provides information at rates that overwhelm unaided humans by orders of magnitude.

Modern computers, however, can perform complex reactions in microseconds. This enables them to handle unexpected events, like abrupt price changes, in less time than human traders can even overcome their disbelief. Combined with a lack of need for sleep or entertainment, this provides bots with advantages that no human could rival.

Bots also work with minimal impediment by preconceptions. Humans unconsciously harbor countless assumptions about future events, many of which arise from bias instead of rationality. Though a bot’s inspiration for a choice might lack convenient interpretation into natural language, it always has an objective and verifiable basis in past observations. Properly written bots suffer from none of the logical fallacies that plague humans; our instinctive approaches to pattern recognition have such a staggering number of defects, in fact, that approximately 90% of publications in medical journals contain severely botched statistical analysis.

This level of incompetence among scientific researchers reveals another opportunity offered by bots. Despite the central role that statistical analysis plays in all practical applications of STEM fields, our educational system evidently fails at encouraging people to learn it. Beyond their obvious financial rewards, bots help users hone their understanding of statistics: cryptocurrency exchanges’ digital environments render practice of statistical concepts much more convenient than real-world settings. However, unlike most other digital environments (e.g. video games), exchanges provide real-world incentives. This combination of traits circumvents the inefficiencies inherent in conventional education, by objectively gauging users’ competence and rewarding them accordingly.

Adopting this responsibility immunizes an investment against all risks of ulterior motives outside the user’s hardware. The bot digitally serves as a financial adviser with superhuman specialization in its task. By relying on code for handling these functions, users absolve themselves from unnecessarily trusting another human with transferred funds or access to their system. To the extent that one can assure protection from hacking and physical theft, no risk of fraud can arise.

Learning to write a trading bot provides rewards beyond mere financial profits – it trains the author to minimize and overcome their biases. Whether the reader seeks merely to improve their bottom line, or to find a constructive outlet for exercising their rationality, trading bots pose an offer too good to refuse.

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