22 April 2018
Amy Matthews

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Amy Matthews - Vibrant, Inc.

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Trends in Financial Services

Trends in Financial Services

A community to discuss the future of financial services and any other interesting trends, strategies, ideas, views.

Impact Of Artificial Intelligence And Machine Learning on Trading And Investing

22 February 2018  |  11877 views  |  0

Investing and trading are activities that can benefit quite a lot from automation. In fact, using artificial intelligence and machine learning can be very handy here, to the point where you can easily replace many human tasks with automated, repeated tasks that can be performed by machines.

Can artificial intelligence and machine learning impact technical analysis?

Since technical analysis focuses on volume and price analysis, it seems natural that ML and AI can help here. AI can learn from the patterns used here, and it can develop success algorithms that can change from time to time depending on the situation. While a variety of options and ideas are kept as proprietary, it’s safe to say that the return on investment can be great here, since AI can handle and manage all data in its own way.

How can you use AI and ML for trading/investing?

The way you can add artificial intelligence to trading and investing all comes down to creating proper algorithms that the artificial intelligence can use and build upon. The focus is on long-term investments, but AI and ML can be used for short-term investments as well.

What artificial intelligence and ML does is it allows you to get lower volatility with your investments. This means you will not have to worry about subjective evaluation, and instead, you can enjoy the benefits that come from such investments!

Moreover, AI and ML bring in a way to avoid luck based trading. They focus on data mining and studying the current and previous algorithm and results. The best thing about using artificial intelligence and machine learning in forex trading is that it learns based on previous results. It can capture data signals and process information that humans would not be able to use or access adequately.

But the value here is not in the algorithms used, instead, machine learning’s value comes from the predictors it uses. The problem with human-based investing and trading is that the predictors are limited. Most regulated forex brokers and investors use the same type of predictors. With artificial intelligence and machine learning, the possibilities are limitless. AI and ML opt for feature engineering, and this makes the results a lot easier to understand, with a much more comprehensive benefit in the long term.

Does someone lose due to artificial intelligence and machine learning integration?

Investors may find it easier to use AI, just because it offers a better way to understand potential benefits and challenges that can appear. At the same time, traders that are using the old methods can still work well, but artificial intelligence will eventually get faster than them, and those that use it will rack up the better profits.

The issue is that banks and financial institutions have a moral hazard that can be bad for artificial intelligence and ML in general. But right now we are not ready to use machine learning and AI, as the current solutions are still developing and in research. The future is bright though, as you do get plenty of unique benefit and possibilities. Whether those will pay off immensely or not shortly, that remains to be seen. But the value is indeed there, and artificial intelligence, as well as machine learning, have a huge potential. Hopefully, they can live up to that and offer us a way where it’s easier to devise stock market strategies and not win out of pure luck!

 

TagsArtificial Intelligence

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