Automated Trading and Artificial Intelligence
Many people are excited about the prospects of Automated Trading systems. These computer programs automatically buy and sell stocks, options, currencies and other liquid assets like a human trader. The big improvement is that they can consistently generate positive returns without the emotional reactions of human traders.
There are many different strategies to developing Automated Trading systems. Some people try to encode the strategies of successful traders into a computer program. Although this approach is perfectly viable, we believe there is a better way. What if it were possible to develop Artificial Intelligence that could generate it’s own trading systems. Would it be possible to create systems that work better than those designed by humans?
We believe the answer is yes. We are using Artificial Intelligence to let the computer generate its own trading strategies. These strategies have the potential to provide better returns with less risk than human traders. How is this possible?
The biggest problem for human traders is their emotions. Since they are human, virtually every trader is at the mercy of their emotions. When they win, they are elated. When they lose, they are dejected. It may not sound like fun, but it is a great rush for many people. This behavior is know as gambling. People do it at the casino, and they do it when they invest. It requires a very special mindset to remove our emotions from our trading. Nearly all traders never manage to do this.
The reason that Artificial Intelligence generated Automated Trading systems can reduce risk is that they can measure it better than any human ever could. Computers are great at computational work, and that includes the statistical analysis that can be used to measure trading strategies. We believe it is possible to integrate a risk management system that leverages off the computer’s number crunching ability to create Automated Trading systems that have less risk.
Another major advantage to using and Artificial Intelligence approach to developing Automated Trading systems is that computers are getting faster all the time. As computing power increases, so do the results of Artificial Intelligence systems. Right now, the price performance of computers is doubling every year. That means that even if we do nothing else, the results of an Artificial Intelligence system will improve just from better hardware.
Although Automated Trading systems are largely unknown as an investment vehicle at this time, we believe that there will be a paradigm shift on a global scale. It was not long ago that communicating in real time halfway across the world was a fairly expensive proposition. Now, it is free. Perhaps there will be a similar massive revolution for Automated Trading systems in the near future. Artificial Intelligence programs that develop Automated Trading strategies may be just the technology that make this dream real.
Related posts:
- Automated Trading and Futures
- Accelerating Technology and Automated Trading
- Automated Trading and Options
- How to Prepare for Artificial Intelligence in Finance
- What is Automated Trading?
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This is the future of trading. Artificial intelligence is a reality today and it is being perfected with neural networks. It is an exiting time indeed. A system designed with a strategy that has even a 70% accuracy and proper money management will be successful. The key to these robot systems are the lack of human emotions that leads to more consistent gains.