AI-powered stock trading software is making massive changes in the sector. Investors can enjoy multiple functionalities with the use of such, such as helping in crucial decision-making processes. AI automated trading increases efficiency and allows for better predictions.
Is the use of AI new in stock trading? The answer is no. Some companies have been early adopters of the technology. A good example is Goldman Sachs that has been using the technologies for quite some time.
A 2019 report shows that Goldman Sachs planned to increase investments in AI models across the equity trading division. They had put aside $72.5 million towards machine learning and artificial intelligence.
For investors and stock traders, there is some good news. There are tons of options available when looking for AI trading tools. Yet, that in itself poses a challenge. How do you decide which is the best solution for you?
We will share some tips on how to choose the right one.
1. Understand the Different Types of AI Trading Software
As we have stated, there are tons of AI trading solutions available. But, some may have unique features, not available in others. Start by undertaking some basic research to familiarize yourself with what is out there.
Some are suitable for long-term traders. Other software will be ideal for day traders. A cursory search of the best AI stock trading tools will give you an idea of the different types.
In fact, there is an AI-powered Robo-advisor tool called Trade Ideas that churns out overnight scenarios with the greatest potential. That makes it ideal for short-term or day traders who depend on technical analysis.
The platform uses algorithms, research, backtesting, and analysis as the basis for providing insights. The advanced simulated trading platform also makes Trade Ideas a good choice for trading beginners.
When choosing the right AI automated trading system, go for one that best suits your risk levels and trading styles. If you are new to trading, stick to AI software that is simple to use. The developers ensure an easy-to-use interface and helpful wizards.
There are also tons of resources available in online forums. Some even have tutors or mentors to guide beginners.
2. Be Realistic About the Functionalities You Get
We can all agree that AI technologies have been a game-changer for many industries. But, there is no 100% guarantee of profitability every single time.
Market volatility can have a large impact on the trade signals. Black swan events have shown the fallibility of some of the automation. The software is unable to handle significant standard deviations. The traders must switch off the automation and go back to traditional human trading.
With that said, we cannot underscore the important role of AI stock trading systems. Their ability to handle large amounts of data with great accuracy is a fantastic point in their favor. Humans do not have the capacity to handle such work.
3. Check the Range of Stock Trading Strategies
You want to check out the type of trading strategies that come with AI software. Some options include:
- Algorithmic trading that reduces risk with small investment across a wide stock range
- Arbitrage is excellent for identifying profitable high-volume trades. The AI tool bases the recommendation after observing transactions between other parties. You can, in a matter of seconds, make a killing.
- Market-making algorithms keep a close eye on the marketplace. It will base buying or selling decisions depending on the prevailing price points.
4. Real-Time Information
The best AI stock trading software should provide real-time information. The advantage of this is that you never miss out on significant gains. You get a notification anytime the stocks break out. The AI tools keep a close watch on the market and can detect any pattern changes.
But that should not be all. The software should make it easy for you to make decisions. That means getting information on other factors like confidence intervals, correct prediction, and target price.
Some of the software can also provide further insights and opinions on the different stocks. Swing and day traders will, for instance, want to know whether stocks are bullish, moving sideways, or bearish.
Lack of real-time information can have profound impacts. You never want to miss out on trading opportunities.
5. Availability of Trend and Historical Data
The AI stock trading tool should provide technical indicators for purposes of making sound predictions. This typically depends on trends and historical data.
For instance, you need to know past trading patterns of a company before investing. Those that have performed consistently well over a specific period will be a good bet.
6. Look Out for Applicable Fees and Read User Reviews
Do take the time to understand the cost implications of the software you choose. There could be applicable fees such as withdrawal or transfer fees. Reputable companies will have no problem sharing such information upfront.
And, part of your responsibility should include a good amount of research. You will never run short of resources on the online platform. One of the stops you must make is user reviews.
Check what other users have to say about the software. You will be getting first-hand information from the users and not the developers. Take note of the pros and cons before making a choice. You could save yourself headaches and money with this simple due diligence.
Also, take note of whether the software has learning capabilities. The market conditions are never static. That means the technologies must adapt or run the risk of becoming obsolete. And, relying on the information they provide will place your investments at great risk.
AI stock trading has so many advantages. Automating the process provides higher reliability and efficiency. The platforms use data-driven algorithms to help with decision-making.
The first step you must take is to learn about the tools. That requires some research and a willingness to learn.
See what features you get and read plenty of reviews. And, do find out about applicable fees, if any.
AI automated software has a lot to offer, but it depends on which one you choose. Use our tips above when shopping for one.