Written by Katie Gomez

One of the most valuable traits a trader can have is the ability to adapt and change. The markets are foundationally the same as a century ago, but the mediums in which we view it and can engage with it have changed dramatically. We’ve come a long way from the ticker-tape we used to read stocks and bonds on, especially with the further development of technology and artificial intelligence (AI). 

However, many people see AI as something we should fear, which is not surprising due to the negative portrayal in the media—like SkyNet destroying humanity in the Terminator movies. 

Artificial Intelligence is accelerating changes in the markets. AI powered by machine learning is the best chance traders have at predicting the future. Staying ahead of the market is a near impossible feat for a trader, but that is where artificial intelligence comes in handy. So, it is no surprise that the number of companies turning to AI is increasing. AIs are able to sift through massive amounts of data and find multiple insights and patterns in seconds. AI has been slow to develop, but it is clear that it has now made its way into virtually every market: stock, real estate, biotech start-ups, etc. Whatever your preferred form of trading market is, you have to stay ahead of the curve. In any business, to stay ahead and become more lucrative, you are required to learn, adapt, relearn, and evolve (or perish). 

So how exactly is AI helping predict the future? Well, the same way traders try to predict the ups and downs. AI uses technical analysis, which analyzes past movements of stocks to predict the patterns of future performance. While traders can also forecast the market and set predictions, AI is set apart with a rate of 87.4% accuracy (Wadhwa, 2022).

It takes time to find these patterns, so traders carefully research these stocks one at a time, while AI evaluates thousands in moments. Every millisecond counts, but humans can only move so fast, and that’s where AI surpasses the skill of a human trader. However, these abilities are not compatible with any AI program software; the three specific techniques used for successful predictions are neural networks (NN), super vector machines, and neuro-fuzzy systems. (Marwala, 2021). The use of this technology also offers the obvious advantage of speed over traders.

Nevertheless, AI is not only good for pattern discovery, but it also predicts trading based on sentiment analysis. This analysis requires a thorough scan through all media outlets (news headlines, social media comments, blogs, etc.) to categorize opinions or sentiments that people have shared in texts to enhance their predictions (Forbes, 2019).  

Perhaps the most overlooked and underestimated benefit AI has over humans is the freedom from emotional influence. Our primal human emotions, such as fear and greed, are the obstacles that keep us from greatness. AI isn’t hampered by these emotions—all it knows is what it finds and calculates (algorithms, logic, data, and subsequent patterns). That said, AI will help save you money by decreasing the number of impulsive/ emotional trades you make. (Wadhwa, 2022)

In conclusion, my intention is not to frighten you into believing AI will replace humans as traders, but to offer you an insight into the new trading era. AI is far from perfect, and neither are traders. AI can benefit as a supplemental source of automated trading, and increase your speed, accuracy, and profits earned with its market predictions. This kind of technology may be controversial, but it is the future. Whether you trade stocks, bonds, real estate, or commodities, AI will help you stay ahead of the curve and feel more in control amid the imminent uncertainty of the market. We will continue to learn, adapt, and evolve, and the market is no different. The words of Charles Darwin still ring true centuries later, “evolve or die.” 

REFERENCES: 

Baluch, A. (2019, April 15). Council post: Artificial Intelligence in stock market investing: Is it for you? Forbes. Retrieved September 21, 2022, from https://www.forbes.com/sites/forbesdallascouncil/2019/04/15/artificial-intelligence-in-stock-market-investing-is-it-for-you/

Foelber, D. (2022, March 28). 3 reasons why berkshire hathaway stock hit a new all-time high (and it’s not all because of Apple). The Motley Fool. Retrieved September 21, 2022, from https://www.fool.com/investing/2022/03/28/3-reasons-why-berkshire-hathaway-stock-hit-a-new-a/

Marwala, L. R. (2021). Forecasting the stock market index using Artificial Intelligence Techniques. https://core.ac.uk/download/pdf/39667613.pdf. Retrieved September 21, 2022, from https://core.ac.uk/download/pdf/39667613.pdf  

Wadhwa, M. (2022, July 7). AI in stock market: Predicting the ups and downs.                               DataToBiz. Retrieved September 21, 2022, from https://www.datatobiz.com/blog/ai-in-stock-market/