Artificial Intelligence for Trading

The principles of AI-based programs are similar to the approach used by analysts. The next step after collecting information is to organize it and differentiate it into certain groups. Two sets of information are known:

• Training. Designed to configure and teach the algorithms before testing begins.
• Test. Triggers already after the algorithm has been calibrated.

The basic idea of the algorithm is to be able to predict the dynamics of the value of the assets traded by the trader or investment manager. There are many variants of the algorithm on the forecasts, but most of them simplify the problem, then work on a two-class model, which is based on the factors of predictability and signaling. The signal shows an increase or decrease in value, and the predictability shows confidence in the signal. As soon as the output is generated, the trader will receive the desired signal.

IT and financial markets are subject to frequent changes, which is why machines need to be improved. Over the past decade, many companies have offered traders AI-powered services and tools, but 50% of them usually ceased to exist after just a few years. There are a number of projects that continue to function.

Walnut Investments, representing France, quantitatively manages investments using AI in those strategies that have absolute returns. It combines financial expertise with machine learning techniques to create profitable, self-learning trading systems. Walnut builds trading strategies as follows:

Machine learning. Allows you to analyze large amounts of information accurately, quickly and continuously, allowing you to achieve a pedantic process for measuring and controlling statistical reliability without having to follow rigid rules.

Quantitative investing. Used for trading as a result of weighted decisions, not using intuition and the randomness factor. It increases statistical significance through the consistent application of market reasoning and mathematics.

Diversification. Gives the opportunity to reduce risks, especially in those moments when there is a correlation in times of crisis. It contributes to effective protection of positions and control over the level of risk exposure.

Singularity. This is a system-controlled short-term futures program. It uses artificial intelligence and machine learning to be able to detect long and short impulses and return-to-average signals. Futures trading is done exclusively during the day and waiting until nightfall.

Those who have plans to develop or order a similar project should know that since the summer of 2016, Walnut Investments SASU has attracted venture capital investments and received a grant of one and a half million euros for 12 months.

Numerai, a hedge fund from California, manages a variety of investments through AI. The idea of its creators was to act as a global crowdsourcing hedge fund, which is able to make quality forecasts of the stock markets. Now a network of anonymous information processing professionals is working on its support. They have already developed about 2,800 models on data pre-cleaned and sequenced by the hedge fund.

Machine learning can process an enormous amount of information in a few minutes. Similarly, they are able to detect and process historical information and patterns for intelligent trading that tend to repeat themselves. They are often hidden and not obvious to most people.

Traders are not able to process such volumes of data or elementary to find them. When it comes to high-frequency trading, some consumers will use AI to decipher more than 250 million different data points from the New York Stock Exchange from the first minutes of trading opening.

By examining the headlines of articles, news feeds and posts on social networks and blogs, the AI predicts changes in stock prices and the possible actions of other bidders. For this purpose, it analyzes the sentiment - the opinions of Internet users.

AI has not been a perfect system since its earliest days, but it is capable of improving by learning from mistakes that have already been made. This is ensured by automated trading advisors, which increase performance not only by adjusting existing information, but also by analyzing and adding new information.

Most traders and investors are convinced that the use of AI companies in the stock market will become even more widespread in the coming years. Systems based on it are very easy to use, they work transparently, and trading is prudent.

The AI has already begun to change the rules of trading. Therefore, it is worth taking advantage of its benefits to modernize the functioning of your brokerage company or investment fund. It will also enable your clients to invest rationally and invest assets wisely.