8 Benefits of Using AI for Stock Trading – Hometown Station | KHTS FM 98.1 & AM 1220 – Radio Santa Clarita
Artificial intelligence is now used in trade and investment. But how much can we trust it? Read this article to learn more.
Artificial intelligence or AI is gradually becoming part of all industries. Some of us even use AI on a daily basis. From unlocking our phones using facial recognition to taking 3D photos, using smart assistants and navigation apps, we are now using AI in the simplest forms.
However, artificial intelligence can be used for much more complex tasks. One of them is an investment. By investment, we mean investing in the stock market. Trade has evolved over the past decade. Computer programs, software and algorithms can be used for forecasting, managing portfolios and completing transactions.
The stock market is a place of countless opportunities and possibilities, where AI can be used to reduce risk and maximize profits.
Benefits of using AI in trading
AI-powered tools and software can analyze large amounts of data, count large sets of numbers, data and calculate them in seconds. It can help with forecasting, fluctuation analysis, pattern identification, research and automated trading.
Here is a list of factors for which artificial intelligence can become an extremely powerful tool for novice traders and expert market makers.
1. Dramatically reduces search time
Research is frankly the hardest part of trading on the stock market. There are many factors such as company profile, financial statements, net profit, revenue, earnings per share, P / E ratio, dividends and past records that should be analyzed before to make a purchase and all for one company.
You need to do the same search for multiple companies or industries. You also need to do qualitative research and apply it to the context. It can take a long time if done by one person. And in the stock market, you can’t afford to spend a lot of time researching alone because the market fluctuates often. Stock prices can change in a matter of hours.
This is where AI can help. People can now use artificial intelligence to execute billions of instructions, perform knowledge graphs, spot opportunities, and analyze big data to research actions. This greatly reduces the time required for research.
According to a CNN report, some hedge fund companies are using AI to browse 300 million data points in a single hour of their daily trading on the New York Stock Exchange.
2. No room for emotions
Human reactions offer room for creativity and eliminating it with machine language and AI might not always be the best choice. However, people can also make mistakes because of emotional distress. Bad moods and health issues can lead to poor performance and increase the chances of human error.
With AI, you don’t have to worry about these issues because it only works on built-in logic and algorithms. This emotionless approach can help in making data-driven decisions in trading.
3. Better representation of reports
You can cut down on paperwork by letting artificial intelligence take care of your reports. AI software can create illustrative reports and custom graphics. Various filters can be implemented in these reports to easily find the required data. Your reports can also be viewed on other devices and updated in real time.
4. Ease of automation
AI can be used to perform routine and automated tasks, including buying and selling stocks. You can integrate the AI, put it in automatic mode and continue with your day. You don’t need to constantly supervise or coordinate it for your regular exchanges.
While it will require routine maintenance and checks, you can set up your AI for regular trading, short selling, stop-limit selling, and other trading functions for passive profit generation.
5. Can be combined with other technologies
Artificial intelligence is highly adaptive. You can combine it with other modern technologies like blockchain and big data for more complex analysis. It can make the transaction more secure and improve your overall trading experience.
6. Constant evolution
AI is evolving every day. NLP and Neural Processing Units are constantly updated to make them more efficient. The algorithms used in stock trading are also refined over time to automate the process of forecasting and trading.
We now have access to tools such as Trade Ideas for technical and fundamental analysis, Trade Spider for one-on-one training, Equbot which can analyze over 15,000 transactions every day and Tech Traders which can operate without any human intervention.
These are all AI powered and with such drastic technological advancements, who knows what more amazing AI powered tools await us in the financial industry.
7. Pattern prediction and detection
Forecasting is an important part of trading. Before making a purchase, we usually do some technical and fundamental analysis. Technical analysis is the study of historical data to discover trading patterns and fundamental analysis requires current information about market variables.
AI can do both scans. It can browse historical data to discover recurring trends in the stock market. He can also get information from news headlines, social media, blog posts, and understand the movement of stock prices.
The user can use this data to gain a price advantage and formulate a better strategy.
And as mentioned earlier, this data can be presented to the user in a simpler format so that the user can go through it quickly and make an informed decision.
8. Reduces the overall cost
If you use AI, most of the work related to trading will be automated. Of course, computer programs require costs such as maintenance and upgrades, but it drastically reduces the cost of brokers and analysts. Even the cost of research will be reduced.
Custom AI solutions for trading
There are ready-made solutions available in the market. However, we believe that tailor-made solutions are safer, easier to use and economical. With a customized solution, you can implement trusted sources for unbiased and accurate data collection. But when you use a ready-made program, you cannot be sure of the reliability of the data.
Custom software is also more user-friendly. It gives you the option to decide how information, charts, diagrams and spreadsheets should be displayed. Also, how often would you like to be updated on market information and conditions.
You can also run your software through countless tests to make sure there are no coding errors and insert the latest forecasting, analysis and deviation algorithms. All it needs is a team of skilled developers to customize the AI software according to your needs. It can get expensive, but it will be worth it.
Ready-made solutions are generally used by people who just want to make a quick buck.
But for big investments, hedging and trading, it is better to use a custom solution. You can start by creating a simple tool for day trading. Many newbie traders start their journey with day trading. It is a simplified form of trading, where the trader buys and sells a financial instrument on the same trading day before the market closes.
Day traders profit from the difference in the price of a stock. AI can be used to manage this activity. It can analyze possible actions by predicting price movement, use its built-in algorithms to make a buy, and sell it at the end of the day to generate profit.
This is just one example, better AI-based tools can be created to understand the intricacies of the stock market.
AI is not your one stop solution
We highlighted all the amazing work AI can do when it comes to trading. However, he cannot do it all on his own. With machine learning, AI can be perfected over time, but it still needs human interaction to implement these algorithms. Right now all it can do is auto trading or day trading where there is repeated actions and activity. But it will still take a massive amount of data to mimic human actions.
Artificial intelligence has come a long way, but needs time to move closer to accuracy as a financial advisor. No AI tool can create complex investment strategies so far and can only work on the data provided. Its forecasting capabilities are still at their minimum.
However, AI can help trade faster than ever. You can leave all the monotonous tasks to your AI-powered tools. It can take care of the data management and allow you to strategize on how to better trade on the stock exchange.
The stock market is unpredictable. There is no single formula to calculate all the variables and all the results. Even with the help of AI, one cannot predict all the uncertainties that prevail.
However, AI can perform difficult tasks and help us analyze, calculate, forecast, and trade faster than ever before. Beginner traders can use it to better understand the market. In the future, AI is sure to get even better and who knows, AI-powered tools may well become your personal broker.
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