Artificial intelligence is quickly dominating various industries in today’s world. From medicine to drone technology, there is no doubt that AI has allowed humans to gather immense amounts of data. This has changed the way thousands of companies interact with their employees and customers. But what is AI, and how can you employ it in your day trading?
AI refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. It also refers to human-like problem solving and self-learning that has never been possible before. Just imagine you are sitting at your desk and deliberating a trade execution. Imagine a piece of AI that can analyze millions of pieces of historical data and tell you whether or not you should make the trade. In today’s blog post, we will discuss how you can use artificial intelligence to boost your trade success.
What are specific ways AI can give me an advantage over other traders?
Artificial intelligence, which is growing at a rapid rate, has various ways it can impact your trading. For example, one way AI helps traders is by analyzing historical data and predicting its future movements in real-time. Let’s say the price of oil moves up 3 points. Wouldn’t it be nice to know what historically happened to the S&P 500, and how many times that event occurred? As a human, our brains don’t have enough room to store the information, and we certainly can’t synthesize all the data to make accurate predictions. Using AI software, we can access and analyze patterns that are most likely to lead to financial success.
Another way AI can help you is that it can predict how human sentiment influences trade actions. There are some artificial intelligence softwares that have gathered every influential news headline, article, social media review, comments, etc., and seen how traders have reacted in the past. So, next time a similar piece of news comes out, the AI can tell you how various securities have reacted. In essence, the technology uses large pieces of information to compose human emotions. This will not only help you discipline your emotional trading, but it will help you leverage it.
What are some concrete ways AI has benefited the trading sector as a whole?
One of the most underrated problems for day traders and stock marketers is trade settlements. Thousands of trade settlements occur a day, but we never give them any thought. The process of transferring cash from the buyer’s account to the seller’s account is a trade settlement; it is made automatically. However, a reported 30% of businesses get declined or see some other issue.
The manual presence of a human is required to act as the intermediary. But AI is quickly changing this.
Recent AI has been programmed to find out and analyze the details on the trade decline; it also knows the reason why the issue arises. The software learns more as it fixes more trades (equate this to a human intermediary learning more and more about fixing trades as he/she works at the post). Trade settlements used to take between 5-10 minutes; now they take less than half a second.
What are the current drawbacks or negative aspects of artificial intelligence?
First and foremost, artificial intelligence is expensive. It is expensive to create (a company has to hire the most intelligent computer engineers in the world) and expensive to use. AI also requires constant software development and software updates. It is never “done,” and many users get frustrated because it may feel like the software is constantly under maintenance. And, in the case of critical failures, the process to reinstate the system can be expensive and timely.
Another issue that many traders fear is in the near future is that there will be an uneven distribution of power. In essence, the fear is that a few AI or tech companies will control all of the technology, giving the individuals who control it too much power. This is also problematic because AI then carries the risk and takes away control from humans. No one quite knows the long-term effects of this.
In this blog post, we explored what artificial intelligence is and how many traders are using it to boost their trades and have more success. Artificial intelligence has influenced and helped individuals at exponential levels, and will likely continue to change lives. Just imagine what you could do if a machine looked at millions of pieces of data, analyzed them, drew connections, and told you what to do? But AI is not perfect; not only is it expensive, but the future of machine control over humans is nerve-racking. Only time will tell how this will unfold.