Financial markets are constantly changing, as are the variables that influence asset valuations. The greater involvement of retail traders, a global pandemic, unconventional monetary policies, and fiscal support, are all just a few of the factors behind changes in asset prices recently - ironically, not what major investors were expecting just a few months ago.
In a world that's constantly changing, using efficient tools when trading becomes important and that's where artificial intelligence can come into play. Technology is part of the financial industry, reshaping how it operates, which is why you should get to know AI, and its potential, a bit deeper.
Automated trading software
Faced with more complex markets, retail traders are constantly looking for new solutions to enhance their abilities of spotting new opportunities from an early stage. Automated trading software using machine learning, neural networks, and other similar techniques can be quite handy for that.
Also, if you are trading Contracts for Difference (CFDs) online, there may be some advanced tools in the form of Expert Advisors (EAs) compatible with your trading provider. EAs can be used with platforms such as Metatrader, available from brokers like easyMarkets and others. Those in favor of these tools will probably argue that human decision-making is bound to make mistakes, due to the involvement of emotions. By automating the process, traders remove the emotional barrier and rely solely on numbers.
But one should also not forget the fact that Artificial Intelligence is limited in terms of potential, and even advanced software cannot factor in all of the variables that can impact valuations.
Natural language processing
When it comes down to it, technology deserves the credit it is given. Over the past few years, new tools have emerged that try to overcome some of the shortages listed above, and one of them which is already applied in finance is Natural Language Processing. Important news such as monetary policy statements, government press releases, etc., can impact asset prices, but for you to digest all of the relevant information can take a long time.
Applications that use natural language processing are able to comprehend even nuances of such documents within a few seconds, outpacing human abilities by large. The global NLP market is projected to grow at a CAGR of 20.6% between 2020 and 2027, showing the great interest companies have in this field.
Is human decision-making still better?
You should be aware that there are areas in which software and robots are not yet able to outpace humans. As a result, online trading can be done properly if you are seriously committed to learning how the industry functions, and to developing a rules-based trading system for yourself.
Trading requires a certain skill set that can be developed over time and with proper work. Technology can be used as an additional tool to enhance abilities, but in its current stance, is not fool-proof and able to completely automate the process.
To conclude, Artificial Intelligence will be growingly present in the online trading world in the near future, both in the retail and institutional sectors, but there are doubts regarding its efficiency and whether it can completely replace the human mind and instinct.
* This is a contributed article and this content does not necessarily represent the views of sciencetimes.com
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