Why are bots useful? For one, a good bot will handle much of the gory details (proper position sizing and money management, executing stop losses, etc), and it can place orders much faster (and without making silly mistakes) than a human can.
If you came up with a good idea for a trading strategy, implemented it as an algorithm (*), backtested it to find the "optimal" parameters (i.e. you curve
fitted it to historic data; don't do it too much), then backtested it with a wide range of parameters around that optimum (and it still worked), then you just got a life and a lot less headaches.
(*) If your trading strategy can't be automated, then you don't have a strategy, period.
There is some truth to your statements but like always there are exceptions, for example the Mexican peso lost value during the US election, how could a bot been able to predict such an outcome? Anyone that watched the elections knew why but it is not something that can be read in a chart or something.
It couldn't. Yes, there are legitimate foreseeable reasons to cut back on risk exposure: the US election, brexit, etc.
But then again, maybe it wouldn't need to. A good strategy can recognize volatility is going up and reduces positions to reduce risk. Even better (and maybe more relevant to the calm before the storm before big events), it could see volatility is frozen to death, so it would assume something may be about to blow up, thus reduce positions proactively (don't ask me to implement that one just yet though
; it's not easy to figure out how to place those kind of lines.)
Robust strategies are distinguished by how they manage money and risk exposure, not how well they can "predict." If you size your positions well and have solid exit rules, you can make money even if you randomly enter just about anything; entry rules ("prediction") may help to avoid idiotic mistakes, get a little better edge, but it can't drive a strategy by itself.
Oh by the way, predictions don't work. Don't get me wrong: predictions
do work most of the time; it's just, when they break, they break spectacularly. This is why, in a fundamentally unpredictable environment, trend following is better than mean reversion: the first is based on limiting your downside, the second on freediving dips (and you oxigene is running out.) Let's also not forget that trend following has an unlimited upside, while your upside is by definition capped for mean reversion. Basically, trend following uses unpredictability to extend the right tail of the return distribution, while mean reversion tries to instead push the mode to the right, while pretending that long left tail (a.k.a. "blowup") does not exist.
Marrying the two to an extent is a good idea, though: follow the overall trend, but scale in and out using the lows and highs. Now that is something you don't want to manage manually even on less fast paced markets than crypto.
