A Beginner’s Guide to AI-based Trading Platforms
Artificial intelligence has been advancing at an incredible rate in recent years and one of the most exciting, rapidly evolving areas of AI growth is in the world of market investments, where AI capabilities have been introduced into algorithmic trading systems.
Common features of AI trading bots are the creation of alerts, strategy testing with simulated trades, as well as entry and exit suggestions based on your asset preferences and risk tolerance. The bots may also perform historic price and volume analysis, incorporating a wealth of technical and fundamental data.
Different platforms will support different assets, offering signals or executing trades from various financial markets like stocks, bonds, commodities, indices, forex, and increasingly, emerging markets such as crypto.
How AI Trading Works
Whether you prefer indices trading, or AI commodities trading, AI trading software identifies profitable market opportunities by crunching a mass of information from a variety of sources. Some platforms will set proprietary algorithms to perform complex technical analysis and then set alerts for you, based on real time data, so you can make the right moves at the right time. Others will look at historic price information, a range of technical indicators, market news and other data sets and then execute trades on your behalf, so all you have to do is sign up, deposit funds and let the platform take it from there.
One of the most significant recent developments in AI is machine-learning, which enables the bot to learn as it goes, improving its capacity to identify market patterns, support and resistance levels, trends and drivers and predict price shifts more effectively with every subsequent trade.
AI Trading Benefits
One of the primary advantages of AI trading platforms is their capacity to analyze huge volumes of data almost instantly. Even the world’s most experienced traders have no way of matching the processing speed of a machine and keeping up with daily market activity. In contrast, AI-based bots can absorb the masses of data generated on the global financial markets at any given time in a split second, incorporating it into its databanks and gaining an increasingly in-depth understanding of market trends and patterns to predict catalysts for market shifts.
As a result, an AI-based trading bot will also be more agile and adaptable than a human, able to pivot in response to new data and switch strategies quickly in reaction to new information and emerging trends.
Their speed and efficiency, enable AI trading platforms to free up traders to get on with their day, without having to spend hours in front of screens performing complex analysis, tracking price movements across multiple markets simultaneously and then executing trades.
In addition, a bot will not be emotionally triggered by high risk and/or high profit opportunities that can lead even the most rational market participant to act out of fear or greed as opposed to basing decisions on pure data to make the optimal move at any given time.
Bots are also exceptionally democratic. You don’t need to be an accredited high-level investor, with sizable funds to hand over to a hedge fund manager to get in the game. With pre-programmed bots you also don’t have to have any sophisticated coding capabilities as the strategies are determined by the AI trading system and implemented, automatically. There is also no need for extensive market knowledge or time-consuming research, as the bot will trade on your behalf, automatically analyzing technical and fundamental data, examining historical price information, and learning from its own trading activity, to mitigate risk and maximize profit potential.
AI Trading and ChatGPT
It has long been argued, and rightly so, that regardless of the advantages, no artificial intelligence can replace human creativity, judgment and intuition. But this too is changing with the recent explosion of ChatGPT.
A language model developed by OpenAI, ChatGPT uses machine-learning capabilities to continuously evolve and to provide human-like responses, recommendations, and solutions to textual prompts. The potential use cases for this technology are far reaching, from creating visual and text-based works of art to providing legal advice to someone wishing to challenge a parking ticket, and of course, offering actionable insights to traders. Within the financial arena, ChatGPT is gaining a lot of attention for its revolutionary potential as a predictive trading tool.
ChatGPT works by analyzing huge amounts of data by means of natural language processing, deep learning algorithms, and predictive analytics. By incorporating the ChatGPT capabilities into an algorithmic trading system, a bot would be continually learning and improving, refining its understanding of the factors impacting market conditions, so that the trading system could make smart decisions, based on a vast pool of real-time market information, about when to buy and sell various types of financial assets.
The Best AI Trading Platforms
There are a number of different factors to look for when picking a platform and each AI trading bot will have unique strengths and weaknesses. A good broker will over a broad range of trading strategies from market-making and arbitrage to trend following and mean reversion. It will also provide access to the markets and assets that you are interested in trading in. Pricing is also important and ideally, you want a free platform, that charges low commission fees and has no hidden charges for maintenance or inactivity. Not all bots offer customer support, but it should be a priority for beginners. If you want to program your own strategies, you may also want to think about whether your preferred programming languages can be used.
While a human-like AI trading bot capable of experiential learning could possibly do a better job than most traders, considering its speed, innate rationality, and processing capacity, as well as its flawless memory and ability to adapt instantly to changing market realities, there is always a danger. What if there is a technological glitch? However smart a bot becomes it is still a machine, and machines can malfunction. So, the best AI trading bot provider will also provide human oversight so that if the need arises they can use real-life judgement and expertise to intercede so client trading balances are not negatively affected.
Here are some of the best AI trading bots on the market. Coinrule is one of the best AI trading software providers for those trading cryptocurrencies, MetaTrader 4 is a top trading choice for forex traders and Trade Ideas is the leading platform for day traders, particularly those investing in U.S. stocks. One of the best options for experienced algo traders is Interactive Brokers, while QuantConnect and Trality are ideal for developers and engineers. AlgosOne has incorporated machine learning technology including generative AI models like ChatGPT, with its own proprietary code to create an automated trading system that can predict market trends with ever-increasing accuracy. TrendSpider is a top pick when it comes to technical analysis but if you are prioritising pricing and low trading fees, Pionex is a definite front-runner.
Automated investing is becoming more advanced by the day and AI trading bots are making expensive middlemen like wealth managers and financial advisors obsolete as they kick down the doors to global market investing and make it accessible to those without exceptionally high net worth or extensive financial and technical know-how.
If this article interested you and you want to learn more about a range of topics related to trading strategies, crypto assets and a wealth of other emerging technologies in world of online investing, browse the ArbiSmart blog.