Why Should You Use Artificial Intelligence for Trading Stocks?
Artificial intelligence is rapidly growing with more and more industries replacing humans with algorithms. AI has made its way to investing, with a few investment firms like ours using algorithms to build a portfolio. Here are the top 5 reasons why you should use artificial intelligence to trade stocks.
1. Saves time
Picking stocks is not an easy task. Investors need to do their homework and figure out whether a particular stock is a suitable investment that fits their financial goals. To do this, investors will need to understand a company’s financials. They need to know if it’s a profitable company.
What is their price-to-earnings (P/E) ratio? Do they pay out dividends to their shareholders? Are they in too much debt?
These are a few of the many questions that need to be answered. In addition, investors need to keep up with the news and understand the current macroeconomic conditions.
Now imagine doing this for many companies. If only one person is doing this, then this is a very time-consuming task. The stock market will not wait for you and prices will fluctuate quickly. AI can do all of these tasks in seconds. Additionally, AI can determine the optimal price to buy a stock using technical analysis.
2. AI doesn’t have emotions
Humans can make mistakes while trading stocks and many of these reasons are psychological. For example, you are upset that you’re down on a certain stock and so you sell it for a 10% loss. Being in a bad mood or having health issues can also cause human error in stock trading. With AI, these concerns are nonexistent as the built-in algorithms execute trades.
3. Convenience of automation
AI can buy and sell stocks easily. You don’t even have to monitor it. Just integrate the AI, set it on automatic mode, and let the AI do its magic. Of course, you will need to do a check-up and perhaps perform routine maintenance on the AI to make sure it keeps functioning properly.
4. Forecasts and detects patterns
Before purchasing stocks, investors do fundamental and technical analyses. Fundamental analysis requires understanding the current market variables, whereas technical analysis uses historical data to spot trading patterns. AI can do both fundamental and technical analysis. It can quickly go through historical data and detect patterns in seconds. AI can also gather news about the stock to better understand the price movements. The data is then used to form a better strategy.
5. Reduces overall cost
Since AI is automated, there is no need for brokers or analysts. The only costs incurred are the costs of maintenance and upgrades. Additionally, the cost of research is reduced as the AI has access to research.
Written by Jay Devon