How AI is Helping Investors Make Better Trading Decisions

Artificial intelligence (AI) has transformed many industries, but investing is an industry well-known for being set in its ways. As AI has gradually made inroads into investing it’s enabled traders to make more profitable trades.

For the world of investing, AI is the final frontier. Adoption has been relatively slow, but we are already witnessing the difference AI is making.

Here are just some of the ways AI is empowering investors to make better investing decisions when they enter the markets.

Better Predictions Result in Better Investments

AI and machine learning work together to gather information faster and enable data to be implemented in the form of better trades. This ultimately results in more profitable investments because AI can work faster than a human can.

New investment tools like TrendSpider are already using AI to empower investors outside of institutional spheres.

For example, TrendSpider will not only use AI to screen stocks, it learns from the user’s input, so it gets better over time. The opportunity to train regularly used investment gadgets is a gamechanger and puts retail investors on a more even playing field.

To find out more about AI-powered investing tools, read this review on TrendSpider.

Defend Against Emotional Biases

Humans are emotional creatures, and this has an impact on the way we invest. Emotional biases overcome logical reason and result in poor decision making.

For novice investors to succeed, they need to learn to banish those emotional biases. Previously, it was a skill learned exclusively through experience, but AI is helping investors to prevent phenomena like loss aversion bias.

AI is not swayed by emotion and concentrates on hard figures. Investors who put their trust in AI will increase their odds of investing success.

Faster Reaction Times

When managing your own investment portfolio, you need to react faster than the rest of the market. The advantage large Wall Street firms have always had is access to more data and the opportunity to outflank their competitors.

AI is a big part of reducing reaction times because it can gather information faster, it can hold a greater amount of information, and it can operate 24/7.

Faster response times to local, national, and global trends can reduce losses and increase profits.

Optimized Portfolios

In addition to faster reaction times, this also allows investors to better optimize their portfolios. Robo-advisors have gone from strength to strength because they utilize AI to automatically adjust client portfolios according to set parameters.

AI can track specific indicators and automatically adjust portfolios based on these numbers. By optimizing your portfolio, you reduce wastage within your portfolio and remain on the cutting edge of the latest market trends.

Proactive Portfolio Management

The vast majority of investors are considered to be reactive. They make decisions based on what’s already happened, rather than what might happen going forward. It’s why most investors make their trades late and miss out on the lion’s share of the profits.

Making the switch to proactive portfolio management is a great way to save money and dramatically increase your profits.

AI services can now use predictive analytics to track both macro and microeconomic indicators. With this information at its disposal, it can accurately predict future market movements.

Naturally, this is not something you should rely on exclusively to prepare for the future, but it’s slowly getting better. Investors can use the results of AI’s predictive capabilities to inform proactive trading decisions.

Is AI the Way Forward for Investors?

There’s no denying that AI is a gamechanger for investors. However, the need for machine learning means an out-of-the-box AI solution cannot be relied on. AI works best when it’s processed thousands of market movements across a long period.

Furthermore, AI can only provide indications of specific outcomes. It cannot predict the future with 100% accuracy.

Investors are recommended to only use AI as an advisory tool to help them make informed decisions about the way the markets will turn.

One area where AI is yet to succeed is in the field of fundamental analysis. Since fundamental analysis is typically based on sentiment and emotion, it’s not something that AI can take into account.

Even though AI-powered services have demonstrated startling accuracy, a sudden scandal could derail any previous predictions.

What AI can do, however, is factor in the resulting market fallout to help you to manage your investment portfolio. Together with other strategies, AI can be an extremely powerful tool that helps both institutional and retail investors make better decisions.

Final Thoughts

In the past, the main barrier to a successful AI rollout was accessibility. Recently, organizations have incorporated AI characteristics into their retail investment products. Not all AI products are created equal, however, and investors must continue to perform due diligence before adopting any new platform.

One thing is clear. AI will drive the world of investing forwards, and quick footed investors should be looking into how they can bring AI into their trading strategies now.

Do you use AI to help inform your trades?

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