Futurists talk about the further development of AI and its global impact on the world economy. In particular, artificial intelligence trading, which uses sophisticated algorithms to automate and, consequently, intensify the investment process, has significant prospects. Let’s have a closer look at all the possible risks and benefits of using AI to conduct transactions in the financial markets.

How Does It Work?

AI trading is a computerized system that uses artificial intelligence to simplify investment management. It’s important to understand that AI bots can be different depending on the area of use. For example, brokers, banks, firms, and retailers will use different software.

This is possible because the system is programmed to perform certain actions and knows when to buy and when to sell. At the same time, traders can set the conditions under which the program will operate by selecting them from a list of options. Traders can also use the programmer to create their indicators. In any case, the AlgosOne solution will help in working with AI.

After that, artificial intelligence trading works automatically, which provides a faster reaction to changes in the market. Thus, traders can use technical indicators based on market analysis, including volume, price, and interest in a particular asset. This makes it possible to predict future changes in the market and, accordingly, make the right decisions.

It’s important to remember that to use artificial intelligence for trading, you need special software. It is connected to a direct access broker, which has the advantage of fast order execution.

The Main Advantages of AI Trading

Artificial intelligence trading has many tangible advantages that are worth considering in more detail.

  1. Automation of investment when human intervention is not required at all.

  2. Higher speed due to a significant reduction in market research time. Artificial intelligence qualitatively analyses opportunities for potential investments, which is especially useful for inexperienced traders. Moreover, the situation in the financial markets can change instantly, making some bankrupt and others incredibly rich. AI can react to any changes immediately. As a result, as soon as the trading criteria defined by the trader are met, algorithms quickly generate orders.

  3. AI technologies provide improved reports and forecasts of possible market fluctuations. Artificial intelligence performs fundamental analysis of information and evaluates market trends and trading history. It also analyses news and social media content that can have a significant impact on the state of a user’s assets. In this way, it quickly identifies patterns that help create effective strategies. At the same time, high-quality digital reports make it easier to perceive information in real time.

  4. Much lower costs, even though additional software still requires money. However, artificial intelligence further helps to save money on investment management, as it replaces the work of analysts and consultants.

  5. Higher trading efficiency. The program’s decisions are not influenced by emotions. Unlike humans, AI calculates all possible risks and makes quick decisions without wasting precious time on hesitation and doubt.

  6. The continuous development of artificial intelligence opens up prospects for significant benefits in the future. Therefore, to stay ahead of your competitors, it is important to master this technology now and keep abreast of all the latest developments.

  7. Possibility of testing before using AI. After all, these are logically controlled programs that should work according to clear instructions. Before such software starts operating with real money, it is necessary to check whether the rules defined by the trader work effectively. This can be done by testing AI on historical market data. It is also a good chance to check the effectiveness of your trading strategy.

Types of Bots with Artificial Intelligence

There are different types of AI-based programs. The following are the most commonly used in trading:

  • Forex bots operate mainly on global currency markets.

  • Leveraged and margin trading programs maximize profits by using credit and borrowing.

  • Crypto bots are more effective for cryptocurrency markets.

  • Arbitrage programs are designed to find and analyze inefficient intermarket prices.

  • Market makers — these bots place sell and buy orders outside of exchange spreads to make a quick profit.

  • Advisory programs are not intended for the practical implementation of any trading strategies, but they provide detailed information on the state and trends in the market, as well as offer advice on the specifics of the user’s investment portfolio.

How Can Artificial Intelligence Technologies Be Used?

There are several ways to involve AI in trading. The simplest is to set basic parameters. They tell artificial intelligence what actions to take when the market changes. So, under the right conditions, it starts selling or buying assets.

However, AI can also be used to build more complex trading strategies. In such cases, a bot, which is a special computer program, performs automated online tasks. Here is a short list of what artificial intelligence can do in trading:

  • Predict future price changes in the market;

  • Research buying and selling trends;

  • Provide recommendations for diversifying an investment portfolio;

  • Monitor the market for investment opportunities that are of particular interest to the user.

Risks of AI Trading

There are also disadvantages to using programs based on artificial intelligence. AI relies too much on historical data, which, in most cases, is useful but sometimes can lead to errors. Also, a bot can behave quite strangely in the event of non-standard situations or completely unexpected sharp changes in the market that the algorithm cannot calculate.

Operational Features of AI-based Trading Bots

Before making any decision, a bot goes through several stages. The first of them is the search for information related to trends and prices according to the parameters defined by the user. The bot generates signals. After identifying opportunities for successful trading, there are two scenarios, depending on the user’s requirements. In the first one, the system places an order to buy or sell assets on its own. In the second case, it simply informs the investor about new opportunities in the market.

Artificial intelligence trading significantly increases investor success. This system quickly analyses current market trends and historical data and then makes logically sound decisions, which is what makes it so effective in the financial markets. In addition, AI trading eliminates the emotional element that often hinders the work of many investors, especially inexperienced ones.