1/25/2024

Why does a trader need AI technologies in 2024?

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Microsoft reaches new records – and largely thanks to the development of OpenAI. Meanwhile, artificial intelligence is becoming an increasingly popular tool also in finance and investing. AI can be used to automate many tasks associated with portfolio management, including stock selection, forecasting market movements, and risk management. This helps investors and traders save time and money and increase their chances of success.

Let’s figure out in which aspects of trading AI technologies will be most useful.

 

Selecting stocks

Artificial intelligence can help you pick the right stocks by analyzing large volumes of data about companies trading on the US stock markets. This data includes fundamental indicators such as accounting ratios, market capitalization and trading volume, as well as technical indicators such as moving averages. Stock screeners allow you to filter by these criteria, allowing you to select those that suit your investment goals.

 

Portfolio optimization

AI is also becoming an assistant for investors in developing and adding to their asset portfolios. New technologies learn to perceive personal risk tolerance and time horizons. This can be done through tools that use AI to analyze data on different assets and determine the type of portfolio that provides the best balance of risk and return.

 

Data and forecasts interpritation

Since the technology itself involves working with a large amount of data, it can be used to predict market movements in order to make a profit. This is achieved by developing algorithms that analyze large amounts of data and identify patterns that can indicate future trends. However, it is important to note that not all AI models are accurate and even the most proven ones can make mistakes. Therefore, also rely on monitoring market trends by yourself.

 

Risk management

As a consequence of the previous aspects, together all the benefits of AI in trading can improve your risk management. For example, AI can be used in combination with modern portfolio theory that provides the best balance of risk and return. AI is also relevant for risk management in active trades, such as the use of complex order options. Technology can also help you balance by reducing overexposure to individual stocks in your portfolio, or to create automated options strategies to help manage risk.

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