how AI influences financial markets

Few technologies caused such controversy as artificial intelligence. Our emotions towards AI range from excitement to raw fear. Indeed, we do not have a clear idea where our “natural” intelligence comes from. And, at the same time, we are trying to create an artificial one. We have met AI in science fiction books, looked it in the eye on the movie screen, talked to it via chatbots. We have seen a computer beating the chess grandmaster, a robot obtaining citizenship and a chatbot going rogue.
Of course, with technology leaping forward as it does, we cannot help but try to predict which way it is going to take. When it concerns AI, the experts are completely opposite in their forecasts- enthusiastic, like Mark Zuckerberg and Ray Kurzweil, or downright pessimistic, like Elon Musk and Stephen Hawking.
The AI enthusiasts say that AI is not going to replace humans, on the contrary, it will enhance our lives. True, some people may lose jobs to artificial intelligence. However, other jobs will appear, and businesses may even save costs. The pessimists warn the humanity against embracing AI too greatly before we know everything about it. For every step we make in developing AI, we must have sufficient “checks and balances” to make sure AI remains our servant.
One of the industries AI is disrupting is finance and trading. Here the impact of artificial intelligence is significant and brings billions to early adopters.

AI trading algorithms

AI trading techniques

This is the main advantage of using artificial intelligence in the trading industry – applying a machine algorithm to the tasks performed by human traders. Simply put, financial trading is about analyzing the past market behavior and the current trends. And on the basis of such analysis, it makes the investment forecasts.

 Obviously, a machine can do all these operations faster and more accurate than a human being. Imagine, processing the market data for years backwards to identify long-term trends, analyzing data in different languages, performing complex calculations? An AI algorithm can do all that in the matter of milliseconds and come up with the most optimal investment recommendation. In the finance market, time matters, and the speed that AI provides can sometimes win the game for its user.
Moreover, AI algorithms can also take into account the investor’s financial behavior patterns and suggest the actions that suit them best.

Elimination of human factor

The speed of processing is not the only benefit AI brings to the financial market. By taking the humans out of the equation, the artificial intelligence also purges the decision-making process of the human factor. People get tired, distracted, or outright opportunistic which may influence their investment decisions. Artificial intelligence is free of fatigue or greed. It pursues no personal gain, thus, its recommendations are the most transparent.

Besides, AI algorithms can perform much better than humans when the financial market is shaken by extreme volatility. At such times, people may be driven by emotion – fear, worry, anticipation – and do things they regret afterwards. Artificial intelligence, devoid of emotion, will stay cool even under pressure and may even find a similar situation in the past and act accordingly.
Needless to say, the 24/7/365 availability of AI also plays its role. The financial markets work on all continents, and a sudden volatility in China may cause shockwaves in Europe and America hours later. At the same time, an AI platform will process the news immediately and adapt the strategy.

Human resources shift

how AI eliminates human factor

Of course, the implementation of artificial intelligence causes certain restructuring of the trading personnel. AI algorithms may replace some floor traders and they may lose their jobs. In this respect, some people cannot compete, as their brain capacity limits them.
Another trend here is the increasing demand for software developers. Many financial institutions recognize the benefit of implementing an AI-based platform. They engage the development professionals to create AI trading solutions. At the same time, here comes the issue of data security, as there may be billions of dollars at stake. This boosts the market for software security solutions and pushes their improvement and adaptation to the new threats.

Identity management and fraud prevention

Artificial intelligence is already widely used by regulatory authorities. They effectively apply the KYC (Know Your Customer) procedures. AI algorithms are able to process the identification information and calculate risk scores. All these on the basis of the historical and statistical data. Using AI helps greatly reduce the costs and time while increasing the accuracy.
An artificial intelligence is able to process large amounts of data, so it also helps to detect and prevent financial fraud. It identifies and analyzes any unusual behavior that does not correspond to the established patterns.

Customized investment portfolios and strategies

One of the strengths of AI is its ability to learn from past data and project this learning to the future. This includes studying the customer’s investing patterns and creating the strategies matching their usual behavior.
At the same time, you can use the AI capacities to generate the best investment strategy according to your goals and risk tolerance. It would select the assets that are likely to bring the profit matching the goals. It will consider posing no more risk than you are ready to take.

A glimpse of the future

As we can see, artificial intelligence causes quite a disruption on the financial markets. It opens new possibilities and takes the “luck” out of the equation. Fast processing, high transparency, personalized strategies – this is the future of trading, and the future is now. Artificial Intelligence-based investment is a perfect solution for those wishing to try it but not knowing where to start.
Using an AI-driven investment platform, such as WiseWolf Fund, allows making the most of the current market situation with minimum knowledge and experience. With artificial intelligence running the investments, customers can be sure that it will make the most effective, profitable and secure decisions.