Life is being automated. Now, all areas of the economy are being automated. Even economics, a field that seemed safe to disruption, is now seeing mechanization now more than always. Now, many robo advisors have come up and are running billions.
Have you seen how skilled traders do calculations in their brains? Or have you seen in movies how they actively register their recent deals while simultaneously controlling the current data? Such legendary trading methods are outdated and are slowly disappearing. Those who needed to keep up with the times and profit began to turn to technical experts.
Together with mathematicians and analysts, programmers have performed the market with a valuable tool — trading bots that manage operations using fixed algorithms and provided data. The popularity of algorithmic trading on modifications resulted in the rise of high-frequency trading.
Traders and investment funds can no longer do without bot developers because people cannot trade with small spreads at high speed and intensity. Some people create plans, others write algorithms, and bots trade using them — this is how trading operates nowadays. Or, more to the case, this is how it acted.
With growing competition in the market and the improvement of the Big Data field, the capabilities of bots have become insufficient. In programmed trading, they began to be repaired by machines that, with the same appearance, can also think like a human — models of neural systems and AI.
What is AI Trading?
The title ‘AI Trading’ is somewhat of a large one, not least because it can cover various aspects of automated trading. Artificial Intelligence trading typically refers to the buying and selling of assets without any human cooperation in its most basic form. Alternatively, the underlying software will trade on your behalf – based on the requirements it has been programmed to serve.
For those uninformed, the overarching idea of Artificial Intelligence is that it can analyse millions of potential situations in a split moment. It does so by assessing large chunks of actual data, and then it makes a decision based on the data it has available to it.
Although large financial organisations have access to some of the most high-level Artificial Intelligence trading robots, they keep the underlying software highly secured at all times. This limits their ‘Secret Sauce’ from getting into the wrong hands. As such, retail traders have limited access to the same AI trading algorithms as their institutional equivalents.
With that being said, several online platforms allow you to trade mechanically. While not as difficult as the AI bots held by financial organisations, these do at the very least will enable you to trade automatically – with practically no requirement to buy and sell assets on a standard base.
What are the Pros and Cons of AI Trading?
The Pros
- Artificial Intelligence has the potential to outperform the human brain
- No dependence on human emotion or gut-feeling
- Trade 24/7 – Artificial Intelligence never encounters fatigue
- Ability to trade multiple markets simultaneously
- Trade full-time in an independent manner
The Cons
- Artificial Intelligence trading software is only as great as the underlying algorithm.
- A part of manual activity needed to set up your trading parameters
How Does AI Trading Work?
So now that you have a summary of what AI trading actually is, let’s explore how the phenomenon operates. In a nutshell, Artificial Intelligence trading is focused on a pre-defined algorithm that can autonomously place trades – with choices based on historical data. As we quickly noted in the section above, financial organisations have some of the most exceptional Artificial Intelligence trading bots in the industry and thus – consistently exceed the markets.
But, you won’t have access to a robot as qualified as what the institutional arena controls in the retail trading space. Alternatively, you’ll be buying a software-based trading algorithm that somebody else has created. The underlying software will be created on a ‘what-if’ basis, meaning that the technology will make trades when certain requirements are met.
Let’s look at a fast sample to clear the mist.
Example of an Artificial Intelligence Trade
Let’s say you buy an AI forex trading software that practices in trading. The robot has been programmed to put a buy order on a major forex pair when the Fibonacci Retracement level hits 62.7%.
Here we have placed some of the ‘what-if’ methods the Artificial Intelligence robot might use.
- GBP/USD hits a Fibonacci Retracement level of 62.7%.
- This suggests that the Artificial Intelligence robot ‘what-if’ condition has been met.
- As so, the bot places a buy position on GBP/USD.
- The bot also places some stop-loss and take-profit orders.
- The bot is notified to close the trade if GBP/USD rises by 45 pips.
- It is also directed to close the trade if GBP/USD decreases by 10 pips.
- 2 hours after setting its trades, GBP/USD rises by 45 pips, so the trade is closed.
As you can see from the above case, the Artificial Intelligence trading bot could place a number of orders without you requiring to do any of the hard work. In fact, not only was the bot scanning volumes of historical data on GBP/USD, but it was able to ‘pounce’ on all important currencies. As such, this model illustrates just how intelligent a well-programmed bot can be if planned correctly.
What are the Advantages of Artificial Intelligence Trading?
So presently that you have a firm grasp of what Artificial Intelligence trading is and how the underlying software might perform in practice, let’s look at some of the significant samples that Artificial Intelligence trading presents.
Limitless Data Analysis
One of the most notable advantages of using an AI trading robot is its ability to make an unlimited data analysis. If you’re an experienced trader, you’ll understand first-hand just how critical technical analysis is in the case of trading. Without it, you would not be armed with the needed instruments to place successful trades consistently.
For instance, let’s say that you are a keen products trader. This can cover anything from gold, silver, platinum, oil, natural gas, wheat, and much, much more. It would not be easy to spend the necessary time analysing historical data on all of the commodities above. On the opposite, experienced traders will typically niche down to a unique asset.
On the one hand, this is helpful as it enables you to gain expertise in a unique asset class, rather than attempting to be a ‘Jack of All Trades’. But, this also means you are likely to miss out on lots of potential trading possibilities.
With that being said, a well-programmed Artificial Intelligence software application can produce advanced technical research on as many asset categories as you wish. As such, the bot does all of the challenging jobs for you, finally allowing you to take over the reins once you have the required data decisions in front of you!
Never End Trading
Whether you’re a newbie trader or an experienced investor with years of practice under your belt – there is only so much time that you can apply to your trading efforts. Not only does this cover the data collection stage, but the actual method of placing trades, too. Those that strive to burn the engine will eventually find that businesses are being placed irrationally.
This is no separate from air traffic controllers that are expected to have a break after every hour of deployment, not least because the role needs extreme mental and physical commitment. With that being said, utilising an Artificial Intelligence trading program will let you to trade 24 hours per day, 7 days per week. Crucially, it can do so without facing the very real threats of burnout and irrationality.
Trade Any Marketplace
In a similar nature to trading fatigue, you will only have the ability to trade a definite number of marketplaces at any provided time. For instance, you won’t be able to sell both the Tokyo Stock Exchange and the NASDAQ, not least because of a 14 hour time interval.
This is also the position for trading the London Stock Exchange and the Australian Securities Exchange. As so, you’ll need to change marketplaces that reflect your local timezone.
But, by utilising the skills of an Artificial Intelligence trading robot, you can enter as many markets as you wish – 24 hours per day, 7 days per week!
An End to Emotional Trading
One of the main ideas that close to 75% of all online traders lose capital in the long-run is because people cannot handle the emotional impacts of ups and downs. In other words, when a well-thought-out trade goes in the wrong way, newbie traders try to accept that this is just part and package of trading. In reply, you will often find new traders place irrational trades with the sense of “winning back what they lost”. This eventually results in a downward spiral that sees the trader lose their whole bankroll.
Once again, Artificial Intelligence trading robots are not regulated by the emotional rollercoaster of the commercial markets, not least because the underlying software is based on pre-defined conditions. The Artificial Intelligence software will only buy and sell orders based on these requirements, so it cannot act outside of these parameters. As such, by utilising an Artificial Intelligence trading robot, you can relieve one of the biggest threats to your long-term bankroll – emotions!
Ideal for Beginners and Advanced Traders
Artificial Intelligence trading bots are fit for both newbie traders and seasoned investors. The underlying software enables you to access the financial markets without requiring any prior experience about the former. Alternatively, you will empower your AI trading bot to purchase and sell assets in an independent manner.
Artificial Intelligence trading programs allow you to take your online trading efforts to the next level when it comes to qualified investors. You’ll be able to investigate a significantly larger archival data set, trade as many hours as you see fit, and entrance an unlimited number of marketplaces.
What are the Dangers of Artificial Intelligence Trading?
While the advantages presented in the section above make robots an attractive possibility, you also need to think some of the risks. After all, if Artificial Intelligence trading was that easy, wouldn’t we all be doing it to ensure indefinite profits? Sadly, Artificial Intelligence trading is not a 100% fool-proof aspect, so be sure to review the next risks.
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Only as Good as the Underlying Software
As we have recorded throughout our guide thus far, robots are only as great as the underlying software. Don’t ignore, and somebody has to manually create and train the software to operate in the open marketplace.
As so, if the Artificial Intelligence trading bot has not been created effectively, the software will likely lose you capital.
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Shady Artificial Intelligence Trading Providers
If you search in Google the term ‘Best Artificial Intelligence Trading Platforms”, you’ll be offered thousands of providers that guarantee you assured profits. These Artificial Intelligence providers will make metaphor claims that are behind the realms of reality. As such, you require to tread exceptionally carefully before parting with your money.
Crucially, you need to question yourself why the Artificial Intelligence trading provider would give their ‘Secret Sauce’ to the global public if the underlying software were so successful?
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Markets can Change at any Given Time
If you are lucky enough to buy a successful Artificial Intelligence trading bot that has been giving you consistent profits for months on-end, there is no guarantee that this will ever be the case. On the opposite, the make-up of the business markets can change at any provided time.
This is why you are expected to consistently adapt and amend your Artificial Intelligence trading robot to ensure its strategy is still valid. In this reason, Artificial Intelligence trading is not 100% independent, as you still need to dedicate some time to continuous maintenance.
How do I Prefer an Artificial Intelligence Trading Bot?
So now that you understand the advantages and risks of using an AI trading bot, we will now explore how you can find a provider to meet your individual investment needs. Finally, no-two AI trading software programs are identical, so you need to waste some time thinking about what you’re looking to accomplish.
Required Input
First and foremost, you require to evaluate how much input you will be expected to commit to getting your Artificial Intelligence trading bot operational. On the one hand, some software algorithms are pre-packaged, indicating that you need to stimulate the robot and it will begin to trade. Once again, you require to ask yourself whether or not the developer would deliver their successful approaches if they make consistent earnings.
You might be required to set up your own trading requirements for the Artificial Intelligence robot to follow at the other end of the spectrum. Although this will need an element of know-how in the online trading space – such as assuming technical indicators and signs, you likely won’t need any coding experience. On the opposite, most Artificial Intelligence trading providers offer a drag-and-drop design method.
Where can Your Artificial Intelligence Trading Software Operate?
It would help if you now considered where your Artificial Intelligence trading robot can actually work, not least because you will still need a third-party broker to enter the financial markets. In an ideal world, the Artificial Intelligence trading robot will be fit with both MetaTrader 4 and MetaTrader 5.
This is because numbers of established online brokers recommend these trading platforms, meaning that your Artificial Intelligence algorithm can have an unfettered way to your preferred marketplace.
Supported Asset Types
On top of getting an Artificial Intelligence trading bot approved by well-known brokerage programs, you should also examine the types of assets you wish to trade. After all, while an Artificial Intelligence robot might analyse major forex pairs, it might not fit with traditional stocks and shares.
Pricing
If a developer is qualified to release their ‘Secret Sauce’ to the open marketplace, they will charge you for the opportunity. In fact, you would require the best Artificial Intelligence trading providers to charge generously for their services if they can demonstrate that the bot has been making earnings consistently.
If they can, this typically comes as a monthly approval. You’ll need to keep funding the subscription for as long as you want to use the Artificial Intelligence trading bot in the wild. We actually favor providers that charge every month instead of a one-off flat fee, ensuring that the developers offer ongoing maintenance to the underlying software.
Public Reports and Historical Trading Results
So, you’ve got an Artificial Intelligence trading bot that you like the look of – but how do you understand whether or not it is going perform in the open marketplace? The fact is you don’t know until the bot goes live. But, there is a couple of items that you can do to improve your chances of purchasing a particular bot.
Firstly, waste some time assessing reviews available in the public domain. If you’re going to use a reviews website like TrustPilot, make sure that the ratings are based across thousands of authenticated users. Secondly, credible Artificial Intelligence trading platforms will always publish past results that can be verified. As such, ensure the bot has been working well over a number of months at a point – but rather, at least a year.
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