Participation of artificial intelligence in exchange trading
Professional traders are periodically forced to upgrade their skills, as progress makes trading more difficult. From 2000–2015 they had to compete with trading bots, and then learn how to tune them to even out the forces. Since around 2015, traders and their bots have had to compete with artificial intelligence.
Over the past 5 years, the number of trading systems with AI has grown significantly. You can try bitcoin360ai or any other similar service, just google it, it’s tons of them available already. As they spread and influence the market, traders using outdated automation are seeing a drop in income. Conversely, those who use artificial intelligence to trade on exchanges get better results than the market average.
AI abilities in stock trading
Compared to bots that need to be constantly reconfigured, artificial intelligence is able to act on its own, without human intervention. He can come up with trading strategies, and test and refine them. Can take market trends into account to improve with newly acquired knowledge. That is, AI can imitate the thinking of analysts.
Here are some more AI capabilities that are being used to benefit traders, brokers, funds, and their clients:
collection of information from news, social networks, and thematic sites for its application in fundamental analysis;
processing of market data, and stock indices for their application in technical analysis;
advising on medium-term investments;
asset portfolio management, its diversification;
rating analysts, checking their performance when choosing the best strategies for mirror trading;
building behavioral models during periods of market turmoil;
detection of cases of collusion and manipulation in the market.
What AI is not capable of, although these are still advantages, not disadvantages: does not show human emotions, such as greed and fear; Doesn’t make irrational guesses. AI on the stock exchange performs better than algorithmic bots, not to mention superior to humans.
Creating trading strategies with artificial intelligence
Artificial intelligence is becoming a major component in the development of trading strategies for hard-to-predict markets. He does not just trade according to a written algorithm, but constantly collects and processes huge amounts of data, analyzes events and trends, and makes decisions himself. You can read more about it.
Today, AI is being applied to deep learning to intelligibly collect unstructured data from various sources, such as news and social media posts. Usually, the incoming data looks like a chaotic structure. However, even in such a structure, it is characteristic that past events can influence present and future trends.
AI uses historical data to understand how the current market would have reacted to past events. So he will be able to adjust his trading strategies. Although this does not immediately bring a profitable result, in the long term it allows AI to learn how to be productive in future market conditions.
The principle of operation of programs with AI for trading on the stock exchange is not much different from the approach used by analysts. The next step after collecting the data is to organize it and divide it into specific groups. There are two sets of data:
A training set is designed to train and tune an algorithm before testing.
A test suite that drives the calibrated algorithm.
Artificial intelligence on the stock exchange compared to a human trader
Today, with the spread of AI, the operations of traditional traders account for 10% of the total trading volume, and yet in 2012, their operations in the US accounted for 55%. At the same time, more than 2,000 hedge funds (for a total of about 11,000) use AI in developing most of their trading strategies. This is a high indicator of the use of artificial intelligence in trading and investment activities.
Trained machines are capable of processing countless amounts of data in minutes. In the same way, they can find and process historical data and repetitive patterns for smart trading that are often hidden, inaccessible, or not obvious to people.
Traders are not capable of processing this amount of data or even detecting it. For example, when it comes to high-frequency trading, some use AI to decipher over 250 million different data points from the New York Stock Exchange in the first hour of trading.
Although AI is not a revolutionary technology, it significantly speeds up trading operations. Today, every millisecond matters. If you are a broker or an investment fund manager, then AI will make your work easier: clients do not need to call and make orders, because trading will be automated.
Sentiment analysis and forecasting
By studying the headlines of articles, news, social media posts, blogs, and other thematic sources, AI can predict the movement of stock prices and the possible actions of other traders. It conducts sentiment analysis, which is the process of categorizing the opinions (or sentiments) that people actively share online.
AI is not perfect from the first days of work but is able to improve its skills. He will learn from his own mistakes and constantly improve. To do this, there are automated trading advisors, with the help of which AI works to improve performance, not only by fine-tuning existing data but also by adding and analyzing new ones.
Modernizing trading with artificial intelligence
Many traders and investors are confident that in the near future, the use of artificial intelligence by companies on the stock exchange will spread everywhere. Systems based on it are easy to use, they operate transparently and trade accurately.
Artificial intelligence has already begun to change the rules of trading. Take advantage of it and modernize your brokerage firm or investment fund. It will help your clients invest rationally and manage their assets wisely.