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AI Investing Trends In 2022: Man VS Machine
The application of Artificial Intelligence (AI) is being expanded into the financial industry — but how well can it perform? Our article on ‘AI Trends in 2022’ emphasized that this technology mimics human intelligence through computer programming so that it can streamline complex processes. Thanks to this innovation, humans are benefitting from automated medical treatments, cybersecurity solutions, vehicles, and more.
Recognizing the potential of AI, fintech companies are leveraging technology to streamline financial strategies, such as investing. Though AI has a sizeable presence in most industries, the stakes are much higher when one’s finances are involved. So if you’re interested in the role of AI in investments, here’s what you need to know:
What is AI in investing?
AI has already been utilized in algorithmic trading since the 1970s, according to a study on ‘The Impact of Machine Learning on UK Financial Services. Financial institutions utilize complex AI systems so that they can make quick trading decisions based on an analysis of multiple market conditions.
Since AI handles the analysis of trading data, brokers can execute trades at more cost-effective prices. Given its efficiency and cost, AI algorithms generate about half of equity markets, futures, and Treasury market trades in the country.
How is AI changing the investing process?
AI makes trading services affordable and quick, which may sound too good to be true for some. However, AI is efficient because it’s programmed to understand investment algorithms, which typically requires a lot of time and experience on the part of brokers and investors.
As such, the technology is changing the investment process by forecasting asset performance with a precision that only computers can provide. Even inexperienced traders can limit their risks and increase their profits since FCXM’s MetaTrader 4 platform illustrates that AI can automate part — or even all — of your investment strategy. Investors only need to set up stop loss and control their positions, and the technology will do the rest of the work by balancing your trading portfolio based on advanced market analytics. Traders can benefit from data-based investment decisions while reducing any risk from emotional biases or inexperience.
Can AI beat the stock market?
AI is more precise compared to classic stock market tools like ordinary linear regressions. A research group backed by Man Group was able to create a machine-learning algorithm that provides an 80% success rate in just 30 seconds of live trading. By leveraging natural-language processing principles, the program was able to buy and sell investments at preset prices at record speeds.
Though AI can offer data-based suggestions, experts state that the stock market remains unpredictable. Unexpected events, like the COVID-19 pandemic can affect the stock market at unpredictable rates. Nevertheless, it’s still possible to beat the stock market if you combine human ability to analyze the future catalysts of an asset with AI’s faster performance in analyzing past and present market data.
Will AI replace human stockbrokers?
Investment platforms that utilize AI offer significant benefits that human stockbrokers may not be able to match. To illustrate, share-trading app Robinhood provides greater market access by allowing investors to buy on a margin. Rather than being limited to equities, bonds, and funds, small investors can buy digital assets like bitcoin and Ethereum. Plus, they can avail these services without paying extra fees.
Conclusion about AI Investing Trends
Despite its many advantages, however, at this moment, AI cannot fully replace human brokers. While AI platforms offer precision and cost-efficiency, they work better as a complementary tool to human judgment. AI is limited to automating processes based on data and patterns, but human traders can provide adjustment methods for your trading portfolio whenever the stock market changes. On top of that, human traders can create personalized trading strategies based on your financial goals, while AI is mostly used as a complementary tool in making precise steps towards your target.
The stock market is unpredictable, which is why you need the best of both worlds. Through combining the high-speed analytical skills of AI and the unique perspectives of stockbrokers, a more profitable and efficient trading process is quite clearly within reach.