The future of AI in Investing

What is AI?

Firstly, you will need a better understanding of what it entails. AI- ‘Artificial Intelligence’, is also known as “Cognitive Computing”, defined as simulating human thought processes by using computer models in order to create alpha, from which we can learn from.

There are two types of AI:

• Software models: completely built out of software, which can run on any desktop computer.
• Hardware models: hardware built to be completely optimized for cognitive computing.

Surprisingly, AI is already at play in many aspects of everyday life…

Have you ever received an email asking you if you have made a specific purchase on your credit card? Many banks send these types of communication if they think there’s a chance that fraud may have been committed. Artificial intelligence is often the technology deployed to monitor for this type of fraud.

How does AI work for investors?

AI engines have the power to scan myriads of data to learn about the world. They can then use this data to make informed predictions around stocks, bonds, and commodities.

An example of this is by using AI for sentiment analysis, investors can gain an insight into the markets from this analysis, allowing them to make informed decisions, faster.

Sentiment analysis uses…

• Natural language processing- concerned with the interactions between computers and humans.
• Text analysis- for extracting meaning and insight from textual and visual content.
• Computational linguistics- where techniques of computer science are applied to the analysis and synthesis of language and speech.
• Biometrics- used as a form of identification and access control.

All of which systematically identify, extract and quantify the meanings of messages being shared online.

As AI machines are capable of ingesting data from tweets, financial data, news reports and earnings numbers, to name a few, trends over time can be used to inform predictions of possible market movements.

AI monitors are scanning the web 247, without ever tiring and are constantly improving on their data mining skills. This means their predictions are much faster and accurate than those of humans.

AI in action

Financial giants Goldman Sachs alongside, many other big hedge funds are all switching on AI-driven systems in order to foresee market trends and make more informed trades and investments.

It’s been slowly happening over time, however, according to Mark Minevich, NYC based investor, AI is about to dominate the industry completely.

Goldman Sachs, is a great example of how AI is taking over and revolutionising the trading and investment industries. In 2000 its New York US cash equities trading desk employed 600 traders, today there are two, with AI doing the rest.

Further to this, according to data from the US Bureau of Labor Statistics and O*Net, 45% of jobs in all sectors during 2016 were replaced by AI machines.

What about the future of AI in investing?

Daniel Nadler, CEO of Kensho, states, that the full brunt of AI has yet to happen, “In 10 years, Goldman Sachs will be significantly smaller by headcount than it is today” and that’s saying something!

Many argue that we can expect this to be the case on every trading floor. So it seems that AI has a big part to play in the future of investing.

Why AI?

A report from Eurekahedge monitored 23 hedge funds utilizing AI and found they outperformed funds relying on people.

Human traders and hedge fund managers don’t stand a chance against AI machines for one reason, that they are human! “Humans have biases and sensitivities, conscious and unconscious,” argues Babak Hodjat, co-founder of Sentient.

Not only this, AI can work faster, with less potential for error, as well as longer and more efficiently than humans.

So, how can I use AI?

Look no further! Trading.co.uk can help…

Explore our unique news feed, curated by AI, which filters out the noise from millions of sources each second, to surface only actionable insights that matter to you. Giving you more time to act on investment decisions.

Our unique performance index is created by proprietary AI engine, which combines:

• Volumetric data
• Sentiment data
• Real-time price data

How can this give me an edge?

You will see events affecting a company, commodity or forex pair of interest, as they unfold in real-time, in one place. Our AI only locates articles that are relevant to you. It scans the web and writes a story based on multiple sources giving you the maximum insight in the smallest amount of time. Allowing more time to make smarter, better-informed decisions surrounding your investments.

Interested in using AI for you Investment Strategy? Sign-up to trading.co.uk for FREE now!

Author of this article: Becki Leighton from Trading.co.uk