AI in Trading Financials
Artificial intelligence is paving its way into our everyday lives step by step. Companies in almost all industries are now using the new technology. And also in trading, completely new possibilities open up thanks to AI and machine learning systems.
Because especially in areas where (as in trading) large amounts of data have to be analyzed, the use of AI has many advantages. And even if development is still in its infancy, AI can already do many tasks faster and more reliably than humans.
Emotions influence human decisions
The goal of every trader is, of course, to generate the highest possible profits. However, a certain risk of loss cannot be avoided. Be it takeovers, political events or natural disasters - there are numerous reasons that can lead to fluctuating prices.
One aspect that is often overlooked, however, is distortion caused by emotional decisions. Because even though traders are generally convinced that they make their judgments solely on the basis of the facts at hand, emotions quite often lead to wrong trading decisions.
Examples of distortions in trading
Non-professional traders in particular often hold onto their portfolios for a long time instead of regularly adapting them to changes in the markets. But even professionals often trust their intuition too much, rather than focusing their actions solely on facts.
A well-known example of distortion in trading is the disposition effect, in which traders tend to hold stocks with falling prices and sell stocks with rising prices. However, statistics show that both developments are relatively constant, which often leads to losses due to the disposition effect.
The study “Do Losses Linger? Evidence from Proprietary Stock Traders ”also concluded that financial losses at the beginning of a trading day increase the trader's tendency to act aggressively in order to try to offset the losses before the close of trading.
Algorithms have long been indispensable in trading
Due to the increasingly complex financial markets, professional traders are already using algorithms to make around 90 percent of global trading. Tools for high-frequency trading quickly decide on purchases and sales.
By using AI, such a tool is able to recognize when the best time to trade is in the future and also takes into account possible market distortions.
Where AI is already used in trading
Well-known players in the industry have long been working on using AI in trading. In addition to the British hedge fund operator MAN Group (annual turnover 2016: USD 831 million), this also includes the world's largest asset manager BlackRock with an annual turnover of more than USD 12 billion.
Babak Hodjat, CEO of Sentient Technologies, has even developed a hedge fund that is fully managed by artificial intelligence .
Artificial intelligence for mobile trading platforms
Mobile trading platforms are now increasingly based on AI. There they analyze the trading behavior of the users and recognize distortions. Based on this, the user of the trading platform then receives recommendations that he can include in his trading decisions.
The idea behind this is that the user interacts differently with such an app over time and incorporates the recommendations of the AI into his decisions when trading.
In addition, the offer of some mobile trading platforms includes training courses that enable their users to continue their education in the financial sector, which should provide additional routine when making trading decisions.
Advantages of artificial intelligence in trading
AI can quickly record, analyze and analyze huge amounts of data that are relevant for decisions in trading and draw the right conclusions from them. Thanks to machine learning, the tools continue to learn within a given framework.
These properties make artificial intelligence the ideal tool to support traders in their activities and to help them make their trading decisions on the right basis.
AI makes trading tools more powerful
AI is perfect for being used in trading. Already today there are algorithms that make trading much more effective and efficient than humans.
Due to the continuous further development of artificial intelligence and self-learning systems, the performance of AI-based trading tools will increase in the future.
Tailored AI systems for trading
As in many other industries, AI is increasingly becoming a key success factor in trading. If you want to benefit from the advantages that artificial intelligence and machine learning systems offer you when trading, you should act now.
The AI-United team not only supports you with the necessary technical know-how, but also with practical experience that we have gained in the business world and in the development of powerful AI systems.
We would be happy to develop tailor-made AI solutions for you and integrate them into your existing processes so that you too are well equipped for the future of trading.