Artificial Intelligence (AI) is playing a bigger and bigger role in many aspects of our lives. Even stock markets are not left untouched by it. The new breed of traders and investors are slowly turning towards technology-driven AI trading platforms to make their lives easier and give them more time to focus on other essential parts of their job.
AI in the Stock Market
The stock market has always been driven by human activity. It was never easy for traders to get on board with the latest technologies. However, with the advent of new-age AI trading platforms, the game has changed. AI for stock trading platforms is making investing more convenient for investors and traders alike.
In the US alone, 60% of stock trades in 2009-2010 were attributed to High-Frequency Trading (HFT). The use of Artificial Intelligence in trading stocks has evolved since. An increasing number of investors are turning to AI trading technology to help them make decisions about their investments.
AI trading helps traders better analyse the markets by making predictions based on pre-existing data and giving them a quantitative edge. It gives investors more accuracy in their trading, which helps them make more profitable trades.
The Basics of AI Trading Technology
Artificial Intelligence is a term that refers to a machine that has been programmed to do things that would normally require human intervention or intelligence. Investors and traders can use AI trading software to make quick and strategic decisions, analyse a large amount of data in a short period and make smart decisions in a split second.
While it is difficult to precisely define what AI trading includes, the general understanding is that it combines algorithmic trading (AT) and machine learning (ML).
How are AI-Powered Trading Systems Better than the Traditional Ones?
AI-powered trading systems are better than traditional ones because they can analyze data faster and more accurately than humans, and they do it 24/7. They can process huge volumes of information and provide better forecasts and predictions.
AI’s great capability to reason and learn is one of the most important aspects of AI trading. It helps identify patterns, relationships and correlations in past data, which is of great value for the decision-making process. Other important aspects of AI trading are predictive modelling and machine learning.
Predictive modelling is a process that learns about the future by analysing past data. It delivers predictions on what will happen in the future, based on what happened in the past.
All these aspects of AI trading help traders make better investment decisions and avoid costly mistakes made by humans.
How are Stock Investors taking advantage of the AI Technology in making Good Profits?
Many investors and traders are now using AI to trade stocks and take care of the routine and time-consuming tasks involved in trading. They are now able to concentrate on the more important aspects of their trading activities.
The advent of AI trading systems has led many investors and traders to make “big bucks” in the stock markets. They are now able to make better and smarter decisions and increase their profits through this new technology.
1. AI ETFs
With the introduction of electronically traded funds (ETFs), a passively managed index fund with low expense ratios and trade automation, Artificial Intelligence trading has seen a huge surge in popularity. The first AI ETF, AIEQ, has constantly been outperforming the S&P500.
2. Strategy Development
Investment banking giants use AI and deep learning for stocks to develop strategies that can help their analysts get ahead of the market. AI can read through a million pieces of data daily, including news stories and social media posts, to analyse and predict stock movements.
3. AI Advisors
Investment firms have also started relying on AI advisors for actively managed funds. Some of the largest investment management firms in the US have begun integrating self-learning AI stock algorithms that use big data to manage portfolios. The companies believe that human discretion in portfolio management and stock-picking has limited the performance of actively managed equity funds.
4. AI Investment Platform
Another example of how AI makes stock market investors smarter is through an automated investing platform for stocks, ETFs and mutual funds. The Artificial Intelligence behind trader technologies will analyse the portfolio of stocks that you have selected for your portfolio to find out if any other stocks are more suitable for you. The AI system will then use the data it collects to invest in those stocks that would suit your portfolio.
3 Real Use-cases of AI Trading Technology
1. AI Trading Platforms for Stock Algorithms
One of the most popular applications of AI in trading is the use of algorithms to make buy and sell decisions. AI-powered platforms allow traders/investors to create their own stock algorithms, which then trade automatically based on market conditions. This helps traders to take advantage of opportunities as they arise, without having to sit in front of the computer all day long.
2. AI Trading Bots for Customer Service
Another popular use case for AI trading is in customer service. AI bots can be used to help investors manage their portfolios, answer queries about stock prices and provide recommendations. This helps to free up customer service staff so they can focus on more challenging tasks. AI-powered bots can also be integrated with other AI software to provide a complete customer service experience. This includes AI chatbots and AI voice assistants, which offer customers different ways to interact with the platform.
3. AI Stock Screener
An AI stock screener helps investors find the best opportunities in the market. AI for trading screens stocks based on many parameters, including financial metrics like price-to-earnings (P/E) ratio and revenue growth, company fundamentals like profit margin and debt, industry trends, sentiment analysis of news coverage, and social media mentions, etc. AI stock screeners are available as standalone products or part of AI trading platforms.
As AI trading technology becomes more advanced, it will become the norm for stock market investors. It will provide them more time to focus on their core skills, which is why investors should consider investing in AI technology to stay ahead of the curve.