Artificial Intelligence for Trading

Zeel Patel
4 min readNov 30, 2021

Artificial Intelligence is used extensively in fields now that more and more developments are done in this field; new algorithms, new methods, new models are being discovered, trained and exercised heavily these days.

Artificial Intelligence is used very particularly in the field of Trading as well, something which has been part of the traditional finance for a long time for humans. Artificial Intelligence has certain qualities that make it fit for something like this — since humans associate things with emotions and sometimes decisions are not just based on analysis or rationality but also driven by emotions which might affect the final outcome of a certain trade, buy order or market option.

Artificial Intelligence can be coded and trained to perform certain tasks very specifically and AIs don’t have emotions so no outer factors can influence the AI doing a certain task — including trades, buyouts or sell orders.

This particular quality of AI to perform extensive technical analysis in a traditional chart better than a human being, makes it reliable to do certain parts of trades, certain level of human intervention might be required at times but a lot of trades can purely become AI driven in this scenario.

To point out the technicalities of this, there are traditional indicators like Relative Strength Index, Moving Average Convergence Divergence (MACD), Moving Average, Oscillator, which can be used to make certain predictions in prices of a certain stock or currency, a lot of indicators have a high accuracy predicting numbers since it’s based on the data like the order book, buy-sell ratio, volume of trades etc, making it highly data-extensive which makes this even more suitable for AI to analyze.

A very simple way that a lot of companies and people use is to code a AI, train it under specific circumstances, make it work on the basis of the indicators, complementing the trades with the training data over a period of time.

These days a lot of market is bot-driven, big organizations use AI bots to manipulate the market and prices according to their benefits, capitalizing on the human greed and fear which is uniform in a certain way that it could be coded into an AI and money can be made respectively.

Bots like Equbot are used extensively in the trading space to maximize the trading outcomes of a certain asset. AIs regularly outperform humans in trades that require higher Technical Analysis and speed, sometimes grabbing a stock at a certain price also requires speed, where AIs could be found very useful.

An AI can be easily coded to price actions, momentum trackers and volume analyzer where the AI can act on its data accordingly to come up with a solution where a higher percentage of trade profit is engaged.

Firms like JP Morgan also use AI to manage their assets in certain exchanges which shows how credible and reliable the AI software has become in this age.

There are fundamental principles in traditional trading which includes analyzing Fibonacci zones, predicting support zones, analyzing resistance area and then performing trade analytics. This whole package could be done by a single AI bot that’s trained for a certain amount of time with these specific conditions.

Buy orders and sell orders could be arranged in a way through AI that it could trigger a selling chain reaction or a buying chain reaction on the basis of trading graph, certain positions could be liquidated using these bots, firms/people with a very huge amount of money/assets can trigger a price action purely through these bots, manipulating the market in a way that their orders are executed in big profits considering the amount of assets they are risking.

Risk analysis is also a very important part of trading, AIs are the preferred way to go for a lot of people considering that it’s real-time and also most of the judgements are based on the market-state and statistics not emotions or sentiments of a certain person.

Not just in stock markets, AIs are now used very heavily in crypto exchanges, since the principles of trading remain the same, AIs have the opportunity to maximize the profits considering the volatility of the market that’s with cryptocurrency.

Some cryptocurrency exchanges like KuCoin have their own AI bots that are free to use for their customers in which certain assets/price/goals could be inputted by the user and the bot will then proceed to achieve the following through daily trades by doing analysis by itself, since it’s a bot provided by the exchange itself, it has the necessary data to make certain decisions and book profits faster than humans do.

Index investing is also something that’s been used for a long time in traditional investments, AIs can now create their own Index Funds based on the market data and could easily estimate an APY of higher returns as compared to Index Funds created by Humans. Certain improvements could be made real-time by AIs to complete certain compounding goals which is very tough for a human to do, considering the limited scope of analysis a human brain can do at a time.

A lot of traditional trading strategies and investment techniques could be hard-coded into AIs which would make simple plain investing easier for the humans to do. This is something that is being developed very speedily in order for people to make more profits, which is highly understandable.

In a sense, AIs have made making money easier for humans, it has removed excessive labor work that used to be put into studying data and analyzing an outcome, predictions have been made a lot easier by AIs which makes trading and analyzing financial risks way easier for people.

To summarize, AIs have their flaws too but in markets and fields like trading and stocks, where most of the decisions SHOULD be made based on data, AIs could be found very useful, hence they are used very extensively as well. The more the technology develops, the more data analysis AI would be able to do — resulting into better predictions which would only help de-risk!