This Trader Believes Artificial Intelligence Needs to Enhance, Not Fully Automate Trading
Photo: Ben Bilski, True Labs co-founder.
Ask any successful cryptocurrency trader about how they consistently make money, and they’ll likely talk about the secrets of their sophisticated technical analysis and trading strategies. These guys spend hours pouring over candlesticks and line charts, they stay on top of the crypto news and they’re basically always plugged in and up to date.
These strategies pay off, but they’re not the only ones who do it, yet many of them fail and end up going bust. So why does it work for some, and not for (most) others? Because the reason for failure is not the technical analysis itself, but the way people respond to it on an emotional level.
In an ideal world, people would make rational decisions every single time, but here in the real world it’s impossible for humans. They’re too susceptible to emotions like fear and greed, leading to overconfidence, compulsiveness and recklessness, and this is at the heart of most bad trading decisions.
Emotions Eat Rational Thinking
“Anybody could be a successful trader in theory, because technical analysis really is a very good indicator of where the markets are headed,” said Ben Bilski, former CEO of the German fintech platform NAGA, who is now the co-founder of and core contributor to True Labs, an AI infrastructure firm developing LLMs for crypto trading. “But emotions like fear, greed and egotism kill their consistency and prevent rational thinking. People get greedy after a few successful trades and this can cause them to overleverage and lose out big time on their next trade. Fear causes people to exit positions too early, and ego makes them want to fight against the market because they think they know better.”
One of the curious aspects about trading is that most people initially perform very well. Someone new to it will start cautiously and act extremely rationally, betting only small amounts they can afford to lose. They’ll spend hours watching YouTube videos and reading books to learn about different trading techniques and how to read charts, and they’ll try to implement these skills very carefully.
Bilski said he’s seen this many times during the eight years he spent at NAGA, which he co-founded in 2015 and grew to become the “German eToro”, with more than two million clients. He explained that, for a time, almost every new trader seems to get a feel for the markets, make a string of good trades, and before they know it, they’ll have pocketed a decent profit.
But this success rarely lasts. Even the most experienced and successful traders lose out sometimes, but what makes them special is how they react to those losses. Unfortunately, the statistics show that more than 90% of traders react badly, and that’s when things start going wrong.
“Market trends can change quickly and people get caught out, and that’s when emotions start to eat away at your judgment,” Bilksi explained. “Losses inevitably cause stress, people start to feel as if they’re under pressure, and that’s when the brain stops thinking about probabilities and goes into survival mode. Emotions take over, and you start making stupid decisions.”
Losing isn’t the only reason why emotions can go into overdrive. There are so many factors that can set them off that it becomes very difficult for people to recognize that they’re no longer acting rationally. For instance, someone who goes on a long winning streak will struggle to keep their feet on the ground. They start thinking it’s easy, that they have it all worked out. Confidence morphs into overconfidence, and that’s when the foolish risks begin.
AI Bots Are Doing It Wrong
The prospect of artificial intelligence preventing this has been discussed for years, and many have tried to make it happen. But Bilski argues that they’re going the wrong way about it. He says the general consensus is that AI ought to be better at trading than humans, because its neural networks can’t be influenced by human emotions. That’s why most developers devote their energies on developing AI bots that try to replace humans altogether.
What many of them fail to appreciate is that humans have a lot of advantages over AI systems. Trading is an intriguing blend of art and science, and to be consistently successful at it requires a deep understanding of the market trends, razor-sharp analytical skills, resilience and a splash of intuition. These are all things that humans can be very good at.
AI, on the other hand, excels at pattern recognition and consistent rule following, which are things where humans naturally struggle at. Bilksi’s theory is that it’s better to augment human expertise with the logical analysis of AI in order to take advantage of both skill sets. He believes that humans should be the ones in charge, making the decisions, developing the strategies, but do so with an AI companion they can always lean on for help. More than that, the AI can also give them a nudge when it sees their emotions are starting to take over.
“We’re developing an AI system that excels at identifying behavioral patterns that suggest that someone’s emotions might be getting the better of them,” Bilski said. “It’ll act like your best mate, always looking out for you. It’ll see when you're making bad calls, timing your trades badly, reacting negatively to unexpected losses and things like that. When your decisions stop being rational and start becoming emotional, it’ll try and snap you out of it. That’s what it’s designed to do.”
The AI will be integrated with True Lab’s decentralized exchange platform True Trading, and its primary task is not to trade, but to sit and watch. It connects directly to the user’s account and watches for patterns, such as how often a trader adjusts their stop losses. The more someone trades, the more it learns about them, so it can identify their normal behavior and spot when they become more erratic.
“It’s like a friendly voice, sitting in your subconsciousness, warning you that greed or fear is taking over,” Bilski described.
Room For Everyone To Succeed
While its primary task will be to act as an early warning system, True Trading’s AI won’t be entirely passive. The more it learns about the user, the more it will be able to replicate their actions and automate trades on their behalf. Over time, it will be able to copy someone’s exact behavior, but without ever letting emotions get in the way. So it’ll be able to plan, size, time and execute trades based on the user’s personal behavior model, and justify the decisions it makes with explainable reasoning.
This is in-line with Bilski’s view that human traders should always lead, with the AI acting as a helper. Although fully capable of automating every single trade, it will follow the strategies that the human user designed, and won’t start going off and doing its own thing.
“It’s a very good observer and a very fast learner, but really we designed True AI to act like a true copilot,” Bilski pointed out. “We’ll integrate it directly into our exchange platform, so it can transform insights into actions whenever the trader wants in a way that’s fully transparent.”
It’s often said that one trader’s profit is another trader’s loss, but Bilski doesn’t believe that adage always holds true. He agrees that in traditional zero-sum markets there will always be winners and losers, but True Trading is not trying to be a conventional trading platform. Instead, it wants to be a springboard for everyone to succeed.
True Trading will change the equation, he said, because it’s designed to create value for the broader crypto ecosystem. It’s not just traders who will profit. It will generate value for liquidity providers and stakers who share trading fees, and the copytraders who accumulate enough followers. This value will be funneled into the wider crypto ecosystem, helping it to grow. As the market expands, so will True Trading, creating more opportunities for rational traders who put their emotions aside.
“We’re using AI to grow the pie rather than just reshuffling it, and that means there are many more slices to go around,” Bilksi stated. “Everyone can sit at the table and eat.”