AI Explained: Advantages and Disadvantages of AI in Trading

The chief advantage of AI for trading is the elimination of emotions. Without AI, every person would be worrying about their trading decision, whether they made the right decision at the right time, and so on. Second guessing would never end. AI keeps emotions at bay and simply comes to a trading decision from an evaluation of all inputs—a trading decision unhindered by human emotion. AI in trading helps the system be consistent and disciplined. It leaves no room for interpretation and therefore eliminates differences among different people. Further, because AI trading systems are automated, they can execute orders as soon as certain trading conditions occur. This is especially beneficial for cryptocurrency investments—whose markets never sleep! Unlike the stock market, crypto markets never close and are open for trading 24/7. Thus, you can go to sleep and rest assured that your crypto order will be automatically executed, including any stop-loss orders you inputted. In any event, with every new innovation unfortunately comes several disadvantages. One disadvantage is poor internet connection where the AI system is set up on a computer rather than a server. Trade orders will not be executed if an individual’s internet connection is poor or is lost. If this occurs, your order will not be sent to the market and will not be executed. AI systems also need continuous monitoring to prevent order glitches. Imagine if your AI system accidentally duplicates a trade order. To prevent unnecessary processing mistakes, AI systems need to be monitored. Only with AI could we have seen the development of digital currencies and blockchain technology.