Stock Market Prediction with Machine Learning and Artificial Intelligence

 

For people who are interested in stock market investments from the past to the present, it is very difficult to predict and analyze the stock market, but it is also a necessary issue. Investors want to be able to predict the future situation of the market so that the investments made will progress and be successful in accordance with the planned investment strategies. The systems used to make accurate predictions help investors to manage their algorithmic trading plans well and achieve success.


There are many parameters that affect the stock market. Large fluctuations may occur depending on these parameters. However, with today's developing technology and artificial intelligence applications, it has become easier to make predictions for the future compared to the past. Nevertheless, it is debatable how successful artificial intelligence and machine learning systems work in stock market prediction.

Nobody can make 100% accurate predictions about the stock market using artificial intelligence because the stock market is a living environment and can be affected by many unpredictable factors such as daily events, natural events, politics, etc. If this were possible, there would be too many millionaires thanks to the stock market. But in any case, using A.I for stock market recommendations makes you much ahead of those who don't. Making 100% correct predictions is not possible even with A.I and machine learning, but it is very useful for investors to make the right decisions. Technology now has a big place in the financial sector. Therefore, if you are an investor, trader, researcher or interested in the financial sector, we will show you how Artificial Intelligence and machine learning are applied in the world of finance.

Neural Networks and Artificial Intelligence

Analysts and researchers are trying to develop different systems to predict stock market indexes. Artificial intelligence systems used to predict the future behavior of indices can be compared to a neural network framework. These systems use different tools to create an output for each input, link the results and create an environment for prediction. To put it in a nutshell, it is a computer-based brain that will help you find tendencies and patterns.

Working on the recurrent neural network and LSTM model, Aniruddha Choudhury stated that the estimation techniques produced by the model will not only help researchers but also investors and anyone interested in the stock market. Choudhury, who gives investors and analysts the opportunity to make accurate predictions thanks to his studies and models that help to predict stock indices, stated that more and more neural networks are applied for stock prediction and that they have a great future in the financial community.

As a result of the study of Tesla's stock price estimation made by Juan Luis Ruiz Tagle with the LSTM model, it is shown how the model makes predictions in which situations. Tesla stock is an interesting stock for using AI prediction models as it varies significantly even with a Tweet from Elon Musk. When the graphs shown in the study are interpreted, it is seen that the model predicts the upward trend well, but completely misses the big price decrease. Because in March, due to the Covid19 epidemic, the American Stock Exchange fell 26% in one day.

 

Market Trends

Investors who are new to the market or those who do not want to take risks have determined their own trends many times and did not feel obliged to use stock data. This ensures that investors can only earn a market rate of return. But for those who want to grow and diversify their portfolio, predicting trends using data allows them to increase returns. For example, in the Covid19 epidemic, many investors were negatively affected by the collapse of stock prices.

But for investors who know how to use data, even this negative situation has returned them as a profit. As Michael Brush points out, investing in remote working shares such as Zoom has become a trend during the pandemic. Zoom stock has been one of the most invested and winning stocks during the pandemic. The share, whose value has exceeded 150% since the beginning of the year, was considered a strong buy by Yahoo Finance.

 

The Tale of COVID-19

Because of the unpredictability of what will happen in the epidemic, it is very difficult to say how useful it will be to use A.I for market prediction. However, those in the market still commonly use machine learning and interfaces such as Stock API to assist decision-making processes, provided that they create proactive responses to changes during the pandemic process. Jonas Cho Walsgard recently wrote about a Swedish firm that uses artificial intelligence called Volt Capital Management AB, which doubles investors' returns, saying the company promised investors 10% returns and delivered a 24% return. They came out 12% positive from March, when the rest of the world suffered huge losses in the stock market.

The Volt model uses more than 200 models to make predictions that will increase their returns, but when a situation arises against their predictions, they act proactively and protect them from the negative effects of the market. Volts CEO emphasized the importance of being proactive with A.I., saying "The market is always right. We don't think we know better than the market."

 

Conclusion

Although it may seem difficult to integrate artificial intelligence and machine learning into the world of finance, the future lies in this method. Thanks to technology, you can expand your portfolio by making your stock estimates in the most effective way. But there is always one point to be aware of. This means that stock market predictions will never be 100% accurate. Over-reliance on machine learning-based predictions can hurt your earnings.

Investors who want to maximize their earnings must be proactive by finding a balance in machine learning. It is really exciting to see how exactly A.I can predict the stock market in the future. With a strong understanding and proactive use of artificial intelligence and machine learning, you can become a millionaire.