Everything You Should Know About AI Trading

 

Artificial intelligence (AI) is an emerging technology that has not yet reached its full potential. The possibilities that artificial intelligence will one day achieve are almost endless. However, AI still plays an important role in several key industries.

Whether Facebook is recommending content that matches your past activity or Amazon is recommending products based on previous purchases, artificial intelligence can outrun the human brain by some distance.

 

However, AI variants have also been used in financial markets for nearly three decades. Large banks and other financial institutions rely on these algorithms to consistently outperform the markets. Therefore, it was only a matter of time before the AI trading phenomenon reached the retail space.

 

What is AI Trading?

 

The term 'Artificial Intelligence Trading' is somewhat of a broad term, at least as it can encompass many aspects of automated trading. In its most basic form, AI trading typically means buying and selling assets without any human interaction. Instead, the underlying software will trade on your behalf based on the conditions under which it is programmed to be tracked.

 

For those unaware, the comprehensive concept of AI is that it can analyze millions of potential scenarios in one second. It does this by evaluating large chunks of historical data and then makes a decision based on the information it has.

 

What Are the Pros and Cons of AI Trading?

 

Pros

• AI can surpass the human brain
• No trust in human feelings or instincts
• 24/7 trading - AI never gets tired
• Capacity to trade multiple markets at the same time
• Trade autonomously full time

 

 

Cons

• AI trading software is only as good as the underlying algorithm
• An element of manual activity required to set up your trading parameters
  
  What Are the Benefits of AI Trading?

 

Now that you have a good understanding of what AI trading is and how the underlying software can work in practice, let's look at some of the key examples AI trading has to offer.

 

Unlimited Data Analysis

One of the key advantages of using an AI trading robot is the ability to conduct unlimited amounts of data exploration. If you are an experienced trader, you will know firsthand how important technical analysis is. Online trading. Without it, you wouldn't have the tools to consistently place successful trades.

 

For example, let's say you are a keen commodity trader. This can include gold, silver, platinum, oil, natural gas, wheat and much more. In reality, it is almost impossible to spend the necessary time analyzing historical data. On the contrary, experienced traders will typically aim for up to a single asset.

 

However, a well-programmed AI software program is capable of performing advanced technical research on as many asset classes as you want. As such, the bot does all the hard work for you and then lets you take over the reins once you have the necessary data findings in front of you!

 

Never Stop Trading

Whether you're a novice trader or an experienced trader with years of experience - there's a lot of time you can devote to your trading efforts. This includes not only the data collection phase but also the actual trade placement process. Those who try to burn the engine will eventually find that the trade is done irrationally.

 

This is no different from air traffic controllers who need to take a break after deploying every hour, especially since the role requires extreme mental and physical dedication. However, using an AI trading program allows you to trade 7 hours a day, 24 days a week. Most importantly, it can do this without facing real threats of fatigue and irrationality.

 

Trade on Any Market

Similar to trading fatigue, you will only have the capacity to trade on a certain number of marketplaces at any given time. For example, you cannot trade on the Tokyo Stock Exchange.

 

This also applies to the London Stock Exchange and the Australian Stock Exchange. Therefore, you should trade in marketplaces that reflect your local time zone.

 

However, using the capabilities of an AI trading robot, you can access as many markets as you want - 24 hours a day, 7 days a week!

 

No Emotional Trading

One of the main reasons that close to 75% of all online merchants lose money, in the long run, is the inability of individuals to cope with the emotional effects of the ups and downs. In other words, when a well thought out trade goes in the wrong direction, novice traders have a hard time accepting that it's just part of the trade. In response, you find that inexperienced traders make irrational trades with the "recovery" view. This ultimately results in a downward spiral that sees the trader losing all their money.

 

Once again, AI trading robots are not hindered by the emotional roller coaster of financial markets; this is only because the underlying software is based on predefined conditions. AI software only places buy and sell orders based on these conditions, so it cannot act outside of these parameters. 

 

Perfect for Beginners and Advanced Traders

AI trading bots are suitable for both beginner traders and experienced traders. Regarding the first, the basic software gives you access to the financial markets without the need for any prior experience. Instead, you will authorize your AI trading bot to buy and sell assets autonomously.

 

When it comes to experienced traders, AI trading programs allow you to take your online trading efforts to the next level. You can analyze a significantly larger set of historical data, trade as many hours as you see fit, and access an unlimited number of markets.

 

What Are the Risks of AI Trading?

 

While the benefits we presented in the section above make robots an attractive prospect, you also need to consider some risks. After all, if AI trading was that easy, wouldn't we all be doing it to guarantee endless profits? Unfortunately, AI trading is not a 100% foolproof phenomenon, so be sure to review the risks below.

 

-Only As Good As Basic Software

As we've mentioned in our guide so far, robots are only as good as the underlying software. For it to perform in the open market, someone has to manually design, build and train the software.

 

Therefore, the software is likely to lose money if the AI ​​trading bot is not designed effectively.

 

-Shady AI Trading Providers

If you Google the term 'Best AI Trading Platforms', you will be presented with thousands of providers promising guaranteed profits. These AI providers will make exaggerated claims beyond reality. Therefore, you need to be extremely careful before allocating your money.

 

Most importantly, you have to ask yourself why the AI ​​trading provider would share its 'Secret Sauce' with the public if the underlying software was so profitable.

 

- Markets Can Change Anytime

If you are lucky enough to buy a successful AI trading bot that has been giving you steady profits for months, there is no guarantee it will happen. always be in the situation. On the contrary, the structure of financial markets can change at any time.

 

That's why you need to consistently adapt and change your AI trading robot to ensure its strategy is still effective. In this sense, AI trading is not 100% autonomous as you need to devote some time to ongoing maintenance.

 

To sum up, if you've read our full guide to AI Trading, you should have a solid understanding of how this phenomenon works. In summary, using an AI-driven trading algorithm offers several benefits such as 24/7 trading, accessing multiple markets, analyzing large datasets, and emotionless trading. However, you still need to do some serious thinking about the risks.

 

Most importantly, there is no guarantee that the AI trading provider you choose is fit for the purpose. Rather, the underlying algorithm is only as good as the person who designed it. That's why you have to ask yourself why a developer would reveal their secret. if trading strategies were making a lot of money. All in all, make sure you do advanced due diligence on the AI trading provider before you part with your money.

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