AI is reshaping the world as we know it. Virtually every business process in every Industry is being transformed by Artificial Intelligence. Capital markets are no different.
Artificial intelligence has dominated the Human Financial Traders, forcing companies to reconsider what the future of stock trading will look like and whether human-financial-traders have any place at all.
Will Artificial Intelligence eventually take the place of Human Financial Traders in the trading world? Let’s take a closer look at this.
How Does Artificial Intelligence Help in Trading?
AI is significantly shaping the future of stock trading, it will continue to make trading profitable in the coming years. Rabo-advisers, for example, are automated systems that analyze millions of data points in as little time as possible and forecast prices based on them. Furthermore, because of its ability to execute several trades per second in the stock market, it executes trades at the most profitable time. As a result, AI plays an important role in Human Financial Traders, forecasting, timely trade execution, and risk mitigation.
Let’s take a look at how artificial intelligence is used in trading:
Pattern Formation
Artificial intelligence is a powerful technology that can analyze large amounts of data in seconds. This enables it to quickly recognize and replicate historical trading patterns for smart trading. Humans, on the other hand, are incapable of identifying and constructing patterns at such a rapid rate.
Predictive Trading
Artificial Intelligence can forecast the moves of other traders as well as the direction of stocks using sentiment analysis, which is based on the analysis of news headlines, social media comments, and other platforms.
Increased Trading Speed
Because we live in a fast-paced technologically oriented era, AI is useful because it allows for millisecond trading. Furthermore, AI enables such rapid-fire automated trading that does not require human intervention.
Is AI Beneficial for Individual Traders?
Larger investment firms and corporations have reaped the most benefits from incorporating artificial intelligence into the trading world thus far. These businesses can afford to pay a high price for sophisticated software. They can also hire a technical team to help them run and interpret the software.
AI software, on the other hand, is now available to help anyone interested in trading, including individual investors. These advancements are good for individual investors, but they are bad for brokers, who may lose customers to an algorithm that can provide better advice based on data-driven predictions.
Traders may now perform an oversight duty analogous to airplane pilots, monitoring the autopilot and intervening only when something goes wrong, the route changes, or the landing is more difficult than usual.
Will human traders become redundant?
Despite advances in artificial intelligence and data analytics, traders remain in authority.
The primary conclusion is that humans must continue to program the ‘robots,’ or algos, and interact with actual people.This is what is driving the increased importance of quantitative analysts and, increasingly, data scientists in the trading industry, in addition to programmers.
The trader will not become obsolete very soon. However, as machine learning models improve at making accurate predictions based on data, their roles will likely grow more specialized.Traders will continue to meet AI halfway until it reaches a higher level of intelligence and understands all human nuances, market volatility elements, and socio-cultural trends.