Advantages of implementing Artificial Intelligence in trading
By: Agnesa Dubovci
Tags: Trading, Artificial Intelligence, Crypto, Cryptocurrency, Fintech

Artificial Intelligence can be summed up as the technology that can think and act for itself, and thus it is perfect for complex trading applications where speed and efficiency are key. Its application will change trading in many ways and this is already happening.

We can look at other industries AI has already shook up — Uber has disrupted the private transportation industry, Amazon has changed the retail landscape and AirBnb has forever changed the traveling and accommodation industry. Similar examples exist for nearly every industry. Additional evidence of the importance of AI as a disruptor of the financial services industry is a recent study by Opimas, which reports that financial companies will spend more than $1.5 billion on AI-related technologies in the near future and that number will rise up to $2.8 billion by 2021.

Simply put, the most obvious benefit of it is that it it considers parameters which are humanly impossible to guess. Artificial intelligence will run through a huge pile of data to give you the most profitable trading options when your flesh and blood adviser could take their sweet time.The future of trading is about processing information, developing and validating models in real-time.

How will AI disrupt financial trading?

AI makes a real difference in financial trading by mining important data and providing cheap and easily available tools that benefit everyone, not just corporates. The investment decisions made by AI will be calculated, accurate and unbiased unlike those made by humans, who are supposedly too emotional for the stock market.

The new generation of trading algorithms will incorporate AI which will enable them to learn from the trading logs of millions of historical orders and figure out the best way to execute new orders entered into the system. This is accomplished by using machine learning techniques that detect a pattern in the data and make predictions.

AiX’s system uses an auditable cognitive reasoning engine that makes inferences using both rules and data. This means it can provide a justification for every decision it makes and output this as a human-readable audit-trail — referred to as an Evidence Tree — containing, for example, every question we’ve asked a user, every answer provided and every data point and probabilistic reasoning path taken to reach a decision. AiX will be operating in regulated sectors where this audit-trail feature is critical. To guarantee the immutability of that audit-trail we intend to implement a distributed ledger based protocol that will guarantee that the data has not been tampered with.

AI and the financial world

Artificial Intelligence seems like the perfect tool for the financial market, using forecasts to make vital trading decisions. Financial success depends heavily on predicting where the market is heading. AI is predictive by nature, and can analyse mass data sets with incredible speed and accuracy, it’s not difficult to see why businesses in the sector have been quick to adopt AI and machine learning. AI is so valuable when it comes to maximising potential gain, especially when it can gather so much information about the financial climate and simulate risk scenarios.

Last year, it was estimated that 75% of global trade is handled by algorithms. This number is only expected to grow as startups and established businesses alike gradually implement AI as a financial tool. This is what AiX already did; it will be a powerful trading platform that operates across and within all global markets. AiX will disrupt the global Inter-Dealer Brokerage (IDB) role in traditional markets, and act as an exchange interface for cryptocurrency markets.

AI can learn from the patterns used here, and it can develop success algorithms that can change from time to time depending on the situation. While a variety of options and ideas are kept as proprietary, it’s safe to say that the return on investment can be great here, since AI can handle and manage all data in its own way.

Functions of Chatbots

Being a diligent conversational partner this AI remembers the history of the dialog and is continuously self-learning. Thus a chatbot can connect with a user on a more intimate level, it has the ability to get under a trader’s skin by adding value that improves their day-to-day lives. However, only a chatbot with a well-designed architecture and advanced functionality can enrich a company’s communications.

AiX is working on a sophisticated AI chatbot with built-in voice capabilities that traders will be able to use to get quotes and analysis, as well as execute trades.The way it operates is basically getting prices from market makers- both human and algorithmic, while also getting prices from exchange to get the best execution.

Let’s consider a scenario trading using AiX chatbot for instance.

The user or the trader in this case, messages the bot either asking for the current BTC price, for instance, beforehand or directly moving to trading offers. In either case,the bot will give you the updated price before asking what size you are looking to trade. After you give a number, the bot will work to find you potential offers while in the meantime it waits for other traders to respond. It collects offers and gives you the best one.

You will be shown several options of “bid”, “offer”, “buy” and “sell”. The “bid” is the amount you are willing to pay after you negotiate it by giving the price you are willing to buy when the bot gives you the offer, if the bot offers you a certain price and you hit “buy” then consequently you buy his offer, so you improve the amount you are willing to pay by tapping “bid”. After you decide on the buying and selling price the trade is seamlessly executed and you instantly receive a confirmation email. He in turn will improve the level he is willing to sell at “offer”. That’s how simple Artificial Intelligence makes it.