Role of Artificial Intelligence in Automated Trading Systems

by Josh Biggs in Finance on 5th January 2021

Artificial Intelligence is bringing fundamental changes in the way the world works. It has become imperative to investigate how it impacts algorithmic trading systems, mainly when the market is so volatile and vulnerable. AI uses intelligent computerized programs to reason, calculate, solve, adapt, and learn from situations. 

Apart from the disciplines of Computer Science, Engineering, Biology, Mathematics, Linguistics, and Psychology, Artificial Intelligence is drastically shaping the realm of stock trading. Trading can be made extremely profitable using AI, as it can analyze vast amounts of data within seconds, forecast prices, and predict the most suitable time for buying or selling. Therefore, AI plays a significant role in accurately analyzing, predicting, executing the trades timely, and mitigating any risk involved.

Overall, Artificial Intelligence can solve plenty of issues in the trading field, mostly related to analysis, forecasting, and optimization. Here, you will deeply understand the role of Artificial Intelligence in the automated trading system.

Identifying and Analyzing Factors Affecting Stock Price

AI uses neural networks and varying learning methods to identify and analyze factors resulting in the decrease and increase of specific stock prices. Based on these factors, AI can predict stock prices in the future. 

Faster Trading

In the era of fast-paced functioning based on technology, Artificial Intelligence facilitates profitable trading each second. Ultimately, it leads to high-speed automated trading without any human intervention.

Decisions Made Based on Facts

Artificial Intelligence in an automatic trading system helps make decisions based on facts, unlike humans, who tend to make decisions based on their emotions of greed, fears, hopes, and plans. When decisions are made based on facts, trading becomes profitable for market traders.

Usage of Chatbots

Artificial Intelligence has added value to the lives of traders by including advantageous features like chatbots. These features have made it easier for the traders to do trading since it has become simpler for traders to communicate with chatbots and access the statements’ history. Moreover, educating chatbots does not require any human intervention, as they learn on their own based on standard practices and results.

For instance, when you ask a chatbot about the latest trading offers, it can update you regarding the latest prices per the trade size you are trying to participate in. The bot can also consider other traders’ responses and give you information about the field’s lucrative offers. Once it collects details about all the offers, it recommends the best one.

Multiple Markets Monitored Simultaneously

Artificial Intelligence allows a trader to monitor and respond to several markets at the same time. The more markets you can monitor, the higher chances you have to gain profits. Hence, AI can increase your profits with its implementation. 

Accurate Risk Predictions

While AI can forecast stock prices in trading, it is also a lucrative tool to predict risks accurately. AI can gather data points, analyze them with exceptional accuracy and speed, and make predictions. Based on these, a trader can make decisions and avoid risky endeavors. Therefore, Artificial Intelligence has converted trading into a more profitable business for traders. 

Accelerates Search for Lucrative Trading Strategies

Unlike manual processes, where it takes multiple experiments and trials to develop an effective trading strategy, AI in automated trading can easily help optimize strategies with minimal efforts. With models like linear regressions, deep learning, neural networks and so on, algorithmic trading strategies provide you with a competitive advantage to optimize profits and simulate risk. This enables us to predict which strategies will work and which won’t, so that you can calibrate your positions in real-time.

Overall, AI has impacted the trading culture with heightened profitability like never before. Now that you understand Artificial Intelligence’s role in the automated trading system, embrace it through reliable platforms and maximize your trading benefits. 

Categories: Finance