Utilizing robots to enhance our productivity in daily life seemed like a far-fetched idea a decade ago. Still, nowadays, we all know how inherently these AI bots are helping us with their swift algorithms to complete any task with ten times more accuracy and speed than what we would do conventionally. In the financial realm of trading and online investing, these bots, commonly referred to as robo-advisors, have been there for quite some time. Some of them have started using artificial intelligence, thereby gaining more popularity and accessibility among investors.
Although these AI-driven search engines couch their picks in caveats, we cannot ignore the fact that with the integration of technology like machine learning, they are capable of crunching millions and millions of data points to produce results that legacy statistical models cannot. Financial institutions have maintained a record of being primary adaptors of these technological advancements. As projected, if the industry of online trading & online investments reaches a market value of $12 Billion, then a huge credit would go to artificial intelligence and its sub-branches.
Understanding AI stock trading:
AI trading is the process of using predictive algorithms, machine learning, and complex sentiment analysis over historical market data of stocks to get investment ideas to invest in shares and conduct the buying and selling of stocks at optimal prices. The purpose of AI trading is also to forecast markets with efficiency and generate effective returns while mitigating the potential risk associated with a particular financial instrument.
The AI wheelhouse works in conjunction with its efficient elements to calculate and interpret the price changes in the financial market and to decipher the reasons behind uncertain price fluctuations while carrying out trades and monitoring the ever-changing market with eagle-eye attention to detail.
Benefits of stock trading with artificial intelligence:
- Improved accuracy with minimal research: Traders who use artificial intelligence for researching and making data-driven decisions to invest in share market have observed a 10% increase in their productivity. Investors can utilize the remaining bandwidth for overseeing the actual trades of their clients to present some deep-level insights. Since the entire process is automated, there is no room for human errors and more space for accuracy.
- Using sentiment analysis to predict patterns: For the unversed, sentiment analysis refers to the process of gathering information from textual data sources, like the emotional tone of financial journals or articles or any subjective material by natural language processing. It helps in identifying the patterns and understanding of sudden market swings.
- Cost reduction: There are so many repetitive tasks that professionals in financial advisory and investment firms need to perform, for which they need to implement resources and time. AI trading tools can replicate many of them with less cost and time. Also, they operate round the clock and monitor the stock market with an unwavering focus.
Is there a debate between man and machine?
In terms of picking stocks to invest in stock and responding to the sudden fluctuations, there is an ongoing debate as to which of the two entities performs better. There is no point in questioning the raw intelligence of humans as they are the ultimate creators of these highly capable machines. Still, we cannot ignore the fact that bots are providing some surprising insights in terms of picking stocks.
So, an ideal solution would be to strike a perfect balance without depending too much on artificial intelligence and performing due diligence on the personal level to generate effective outcomes. There can be some flaws that need to be upgraded and eliminated from these machine-driven approaches, as technology is a dynamic entity. Still, we can always count on our natural intelligence, which we can use to research and analyze to make informed decisions.