What Happens When You Add AI To Your Trading?

My goal as an educator of both professionals and retail traders is to provide my students with the best tools for trading that are available. As technology progresses over time, the tools that TechniTrader provides to students have evolved over the 25 years that we have been in business.

Right now, the Artificial Intelligence tools are a top priority to study and test to evaluate as a potential new tool to augment the scans and trading calculators we customize for our students with each course they take.

The purpose for AI in trading should be to enhance and streamline the process of finding stocks to trade based on each individual students’ trading style, personal strategies, goals and experience level.

What we have found so far is that most AI for trading stocks is based on technical analysis only, functioning on the premises of indicators, candlesticks, support and resistance and basic strategies to forecast the next day’s movement. It can’t take into account the sentiment of the market, which is a huge part of trading. So how is it better than a well-crafted market scan? 

The questions we, at TechniTrader, have is whether or not the AI is really going to enhance, improve or simplify the process of selecting stocks to trade for our students. My philosophy as an educator is that students should be trading stocks profitably, not wasting time building tools for their needs. A great education for trading stocks should include excellent tools that are easy to use and understand to help students analyze the market accurately and find excellent stocks to trade.

For now, this research is ongoing. I will keep my readers up to date as we complete this study.

Today, I want to introduce you to the primary ways that the financial markets are currently using Artificial Intelligence. What is the intent of the companies who are designing AI for trading stocks, Forex, ETFs, Crypto currencies, Bonds, Swaps, Futures, etc.?

Artificial Intelligence is currently being used for:

• Day and Swing Trading to find stocks to trade that are poised to move with momentum. 

There are many ways AI is being integrated to generate a list of stocks to trade. AI is being touted as being able to “predict the movement of a stock’s price for the next day.”  Is this hype or is it real? Can AI actually reduce workloads while increasing profits for retail traders? What happens when your broker uses AI to recommend stocks held in inventory that they want you to buy, using AI to influence your decisions?

• Portfolio Analysis for long-term investing to streamline the workload of choosing which index, mutual fund or ETF to invest in. 

How to determine the best way to diversify your portfolio or retirement account? The goal is a more customized, personalized experience and results. Will this actually help investors? Or, is this a means by which brokers feature stocks chosen by AI to influence your choices of which stocks or bonds to invest in? 

• Retail trading and investing is a huge income generator for Professional traders, High Frequency Trading Companies and Market Makers. 

What happens when AI listens in on chatrooms, monitors broker orders lit ahead of open, or tracks news feeds that trigger specific responses from retail investors or traders?   

These three AI uses have plenty of unknowns.  Artificial Intelligence is not yet regulated or monitored by the SEC, FINRA, the CFTC and other regulatory entities that protect investors and traders from scams, con-artists and exploitation via news, misinformation, etc.  Artificial Intelligence will become a focus for regulatory oversight as it expands into many areas of the financial markets. 

Additionally, there are other areas of the financial markets that are aggressively employing AI technologies:

• Buy-Side Institutions are incorporating Artificial Intelligence in a myriad of ways to improve algorithms used in selecting stocks for new products they will sell to their retail customers. How will this impact your trading?
• The Financial Services Industry is incorporating AI for cyber security, a key concern of the professional side of the market. Is your trading cyber secure?
•  AI is a new industry. It doesn’t yet have its own Industry status in the financial world, but that is coming eventually. There are over 18,000 AI companies–startups to big blue-chips, with plenty of IPOs coming. How will you know which to invest in or trade?

Choosing the right AI solution for you is a challenging task. Understanding what AI can and can’t do is the first step toward integrating AI into your trading.

So far, Artificial Intelligence is merely a new tool to BEGIN your search for optimal trade setups.

There are plenty of scams that promise instant wealth with no effort on your part. Use common sense. “Predicting” is always relative. You will still need to make the final decisions. 

AI is not a cure-all for bad habits in trading stocks, nor is it the holy grail to profitable trading. 

How do you know which signals will give the highest profit potential with the lowest risk to pull the trigger on? A proper trading education. 

Martha Stokes, CMT

https://www.technitrader.courses 

Image sourced from Shutterstock

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This contains sponsored content and is for informational purposes only and not intended to be investing advice.