How to use AI for crypto trading (A complete guide for beginners)

Artificial intelligence has paved the way for development and growth in many businesses. In this article, we will explore three significant strategies that use AI tools. We categorized the strategy based on the level of dependency on using AI for crypto:

• 1. Partial dependency
• 2. Moderate dependency
• 3. High dependency.

The content of this article is a combination of verified data and my experience as a crypto trader with five years of experience. We will cover both fundamental and technical analysis for each dependency mode.

1. Partial dependency on AI for trading in crypto market

Partial dependency is a way to rely only on AI to gather the information you require to trade crypto. The level of decision-making based on AI is limited, and you only use Al to find resources and information that will later help you decide your trading strategy. In this mode, AI doesn’t directly affect your trading but works as a tool to ease the decision-making process and reduce the time you spend on your trading plans. 

Fundamental analysis

For fundamental analysis, you need information, information, and information. Using the AI ChatGPT and other chatbots can significantly decrease the time you spend gathering information about a new blockchain ecosystem or a concept that helps you understand the functions of a specific cryptocurrency. But is it a reliable source, and to what degree can you trust the information you get from AI? It all depends on how you use it to gather data and the type of questions you ask from AI. In the next part, we will explore an example by collecting data on JASMY cryptocurrency using ChatGPT.

I asked ChatGPT to give me information about Jasmy cryptocurrency. Mention investors and fundamental aspects, and this is my answer: Jasmy is a Japanese cryptocurrency project that has gained some attention in the crypto space. Here’s an overview of some key aspects:

• 1. Background
  • Jasmy was founded in 2016 by former Sony executives, including Kunitake Ando, who served as the president of Sony Corporation.
• 2. Concept
  • Jasmy aims to create a decentralized data management platform using blockchain technology. Their goal is to give individuals control over their data and allow them to monetize it if they choose.
• 3. Token
  • The native cryptocurrency of the Jasmy platform is called JMY. It’s an ERC-20 token built on the Ethereum blockchain.
• 4. Use case
  • The Jasmy ecosystem intends to facilitate secure data sharing between individuals and businesses, with a focus on IoT (Internet of Things) devices.
• 5. Investors
  • While specific large-scale investors are not widely publicized, the project has garnered interest from both retail and institutional investors, particularly in Japan. The involvement of former Sony executives has lent some credibility to the project.
• 6. Fundamental aspects
  • Data democratization: Jasmy aims to shift control of personal data from corporations to individuals.
  • IoT integration: The platform focuses on secure data management for IoT devices.
  • Regulatory compliance: Being based in Japan, Jasmy claims to be compliant with local regulations, which may appeal to risk-averse investors.
  • Tokenomics: The total supply of JMY tokens is capped at 50 billion.
• 7. Challenges
  • Competition: Jasmy faces competition from other blockchain projects focused on data management and IoT.
  • Adoption: Like many crypto projects, widespread adoption remains a significant hurdle.

Answers such as the above clearly help you get a general understanding of Jasmy. Usually, you would have to go through a couple of websites to get this kind of information, which is not as concise as the answers you get from AI. Another advantage of asking questions from AI is that you get personalized answers. Personalized answers are important because they affect your understanding and decision-making. Before using the information you got from AI, try to ask your question in different words and formats and compare the answers you get to find the best way to gather information for yourself.

As you can see, some concepts are mentioned in the answer I got from AI, like IoT, which requires extra information if you are unfamiliar with them. You can get more information by simply typing Give me more information about IoT. Still, asking AI to write a detailed essay on IoT is better because this and other similar concepts are complex and easily misunderstood. Asking for a detailed essay will lower the possibility of misunderstanding. If you want to be sure that you understand the idea, you can tell AI to draft a short quiz to check your level of comprehension of that concept. Notice that you can also ask AI to add citations and mention reliable sources for the information it is giving you so you can check the authenticity of the information as quickly as possible. Be careful that in this method, you are only using  AI to get information to make decisions, which means you must have abilities such as critical thinking and market awareness. 

Technical analysis

If you ask MMLs such as ChatGpt for price prediction, you will not get a response; you will get suggestions or recommendations for websites and professional opinions. Other AI programs that respond with a price prediction are unreliable because the price prediction is based on the analysis you can find on different websites such as Trading View. The AI compares different price analyses and gives you an answer: the average of two different price predictions. Never ask Ai for an exact price prediction. 

As a beginner in crypto trading, you can use AI for price analysis to ask for tips about different indicators. For example, you can tell AI to explain moving averages or Ichimoku clouds and ask for suggestions from professional traders using those indicators. I remember the first time I tried to analyze the Bitcoin chart in 2018; at the time, I was familiar with many indicators, but I constantly found myself in situations where I needed help remembering small details about the implications of indicators. As a beginner, it is ok to forget small details, but I found out that even minor details can sabotage my analysis. I had to check books and websites to find a small tip about an indicator; the process was time-consuming and frustrating, too. Nowadays, you can tell AI about your problem for tiny details and get an answer almost instantly. In this category, you can only use AI for technical analysis education.

2. Moderate dependency

In this category, we rely more on AI for decision-making. In the previous category, we only used AI to get information, and all the thinking and decision-making was the trader’s responsibility. 

Moderate dependency on AI

Fundamental Analysis 

There are times when you have two or more cryptocurrencies in your watchlist that have growth potential, but you need more than your money to be divided between two assets, so you have to decide by comparing cryptos in your watchlist. Although most experts say that you should have a diverse portfolio and that putting all your eggs in one basket is a mistake, there are situations that you must take notice of. Having a diverse portfolio is a great and exemplary strategy. Still, if you don’t have the funding, you can invest all you have in one currency if you take cautionary measures like stop-limit orders. 

Deciding between two or more currencies to invest in can put a lot of pressure on beginner traders, as they are still struggling to cope with risk management in a very volatile market; they have to control negative feelings such as anxiety and fear of missing out (FOMO). You can look for guidance by searching different websites and reading what experts say, but you still have to compare between currencies and decide which one to buy. You must also determine if it is a short-term trade or if you must hold that currency for a while. By asking AI tools to compare currencies, you can easily make decisions in your head. 

Let’s ask AI to compare two different currencies regarding their fundamental potential. For this example, I chose JASMY and SEI. Below is the response I got. 

Market focus: Sei has a more specialized focus on trading applications, while Jasmy targets a broader IoT and data management market. Sei’s narrow focus could be an advantage in capturing a specific market segment, but Jasmy’s broader approach could potentially tap into a larger market.

Technological innovation: Both projects bring innovative approaches to their respective fields. Sei’s focus on optimizing for trading could give it an edge in the DeFi space, while Jasmy’s data management solution could be significant in the growing IoT sector.

Adoption potential: Sei might see faster adoption in the crypto and DeFi community due to its focus on trading. Jasmy, being more oriented towards traditional businesses and IoT, might face a longer adoption curve but could potentially reach a broader audience in the long run.

Competition: Sei faces competition from other high-performance blockchains and layer-2 solutions, while Jasmy competes with various data management and IoT projects. The level of competition in both spaces is significant.

Regulatory environment: Jasmy, being based in Japan, might have an advantage in navigating Japanese regulations. Sei, as a global DeFi-focused project, might face more regulatory scrutiny in various jurisdictions. 

As you can see, AI provided factual facts about two currencies and compared those facts. Remember that when we compare two currencies, we aim not to determine which one is better but to determine which one is more fit for our financial and trading goals. It is hard to decide with abstract ideas in your mind. Sometimes, we need facts to sit next to each other to make a solid decision. 

3. High dependency ( AI Trading Bots )

The last model is highly dependent on AI, which occurs when you use trading bots to trade with your money. AI trading bots became very popular after the emergence of ChatGPT, and AI-monitored trading bots gained excellent momentum in the crypto market. AI bots use indicators and valid data and offer various trading methods, such as Grid trading, spot trading, and futures trading. There are many articles around the web about the details of these bots and how they work, so we like to explore the psychological aspects of using AI trading bots. 

When you put the phrase AI trading bot in the Google search bar or on YouTube, all the results manifest or try to show only one thing, and that profit. But not just any profit, a profit that you don’t have to work for, and it seems like you can gain a significant amount of profit in a short time. Now, you have to be familiar with risk management and market strategies, market trends, and other concepts in crypto to adjust these bots, but what others are advocating for AI bots sounds a little like a dream that is just too good. As an experienced trader and content creator of the crypto market, I assure you that if something sounds too good in this market or any other markets like Forex or stock markets, it is going to end up being actually too bad. So you should avoid falling for the baits that claim you can gain a lot of profits in no time with a small amount of funding. 

Before you start using AI trading bots, you have to be honest with yourself about your intentions. What do you actually expect from using AI trading bots? Do you want to take advantage of new technology and make a steady and reasonable profit? Or do you think that AI trading bots are going to make you richer than Elon Musk? Your expectations, or better said, dreams, are important because they dictate what you decide to do in real life. As long as you are sure about answers to those questions, you can use AI trading to the extent that you see fit based on your trading plans and financial aims.

The crypto market is known for being a market of opportunities. First of all, it is a 24/7 market, and there are many different fields, such as airdrops, that are beneficial for traders. You have to look at AI trading bots as opportunities that you can use to gain what you want and need. So you shouldn’t just ignore these bots as well; you have to be aware of the risks. Below is the list of verified AI trading apps with exchanges that support them.