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Which Reigns Supreme: Algorithmic Trading vs. Human Traders?

Algorithmic Trading vs. Human Traders

According to statistics, only 20% of stock traders will survive, with the other 80% likely to lose their jobs. Of those that survive, only 1% will succeed. Just like the stock market, there are more losers than winners in the cryptocurrency market.   

For cryptocurrency, traders who have little knowledge in trading use “trading robots” or “trading algorithms”. They mean the same thing and refer to automatic trading through artificial intelligence (AI).  

After chess-playing AI AlphaGo beat the world Go champ, China banned the broadcast of the game between a human and the AI because it could not accept the loss. From now on, we can see AI winning against humans in many fields, including trading. 

In fact, human abilities can surpass the trading robot. Each robot is created for one purpose such as for trading, while humans can do many jobs in various roles. However, humans are easily distracted and thus, they cannot focus 100% on things, including trading. 

Full-time traders can win or lose equally like trading robots in a one-day competition. In the long run, however, the robots can win.  

A human’s weak point is the mind. With a disciplined mind, humans can win. Without a disciplined mind, “discipline” in trading declines. Robots, on the other hand, do not lack discipline, and trade strictly according to the logic or parameters set. 

Robots can trade faster because they are programmed in advance. Once signs of trading and buying occur, robots will do as commanded. In contrast, humans are slower because they need time to process their thoughts and make decisions. HFT has been developed and it is fast so that commands can be executed in seconds.   

Of course, robots also have weaknesses, and they can be defeated in cases such as when market analysis is beyond the analytical capabilities programmed in the robots. 

Trading robots currently make up the Quant system. Once the trading robots are developed with AI, it can adapt and trade like humans, following a certain logic to trade. When that time comes, it will not be easy for humans to defeat robots. 

In a nutshell, trading robots can beat human beings at stock trading. Traders can win in the short term but not in the long run.

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