The investment and trading industries are rapidly evolving thanks to advances in technology, particularly in the area of artificial intelligence (AI). With the increasing complexity of the markets, AI is giving traders and investors new opportunities to gain a competitive edge. Here we take a look at how AI is changing the landscape of investment and trading, and why AI will be so crucial for the future of these industries.
The Markets
With the rise of new technologies, the globalization of markets, and the increased interconnectedness of the world economy, the financial market has become increasingly complex. This complexity has made it more difficult for investors to understand and navigate the market.
There are a number of factors that have contributed to this outcome.
First, the rise of new technologies has made it possible for financial instruments and transactions to be more elaborated. For example, the use of derivatives has become more common, and these instruments can be very complex.
Second, the globalization of markets has made it more difficult for investors to understand the market. There are more players in the market, and the market is more interconnected. This has made the market more volatile and difficult to predict.
Third, the increased interconnectedness of the world economy has made more challenging to link the causes to the effects of market events. For example, the financial crisis in one country can have a ripple effect on other countries.
With all this complexity, it becomes challenging for investors to take advantage of profitable opportunities while also taking investment risk into account for a steady return.
The Technology
Artificial intelligence has already been a part of our world for many years, and it is constantly reshaping and changing various businesses and industries. Thanks to machine learning, computers are now able to extract complex patterns from the massive amounts of data that we produce every day that are otherwise invisible to humans. In addition, many deep learning algorithms have been developed since 2015 thanks to the research of numerous large corporations, including Google and Facebook. These algorithms are completely autonomous because they don’t need humans to describe the input’s features. As a result, they can understand ever-more complex patterns and analyse all different kinds of unstructured data, including images, video, audio, and so on.
These types of algorithms are currently used in a variety of applications in the investment and trading industry to extract market knowledge from financial and non-financial indicators and provide investors with the opportunity to make more informed strategic decisions.
Companies to keep an eye on
We will take a quick look at two businesses that are making a difference in this industry in order to identify the real players who are driving this change.
The first one is the enormous “The D. E. Shaw Group” from the USA, an investment company that has been in business since 1980 and is credited with being the pioneer in quantitative finance. By utilizing statistical models and technology to aid their staff in making daily investment decisions, this company has revolutionized the way investments are made. Since the entire financial sector has adopted AI and
Deep Learning algorithms, the company is focusing its research on implementing cutting-edge algorithms to give itself an advantage over rivals in this fierce competition.
Another interesting is “MDOTM”, a small company, which is the European leader and pioneer in developing AI-driven investment strategies for institutional clients such as Banks, Insurance Companies, Family Offices, Pension Funds, Wealth and Asset Managers. They created its own AI engine, which continuously analyses millions of market data points using deep learning techniques to take advantage of shifts in market inertia and risk premia.
Conclusions
The need for cutting-edge technologies to understand and possibly predict these chaotic markets is growing. The investment industry is rapidly adopting AI, and the vast majority of companies claim improved performance and, as a result, increased investment in technical advancement. Additionally, there are many new, young investors that seek more individualized and sustainable investments and are often more open to solutions where AI makes the decisions. Last but not least, emerging markets like cryptocurrency are gaining popularity and are excellent candidates for algorithmic prediction due to their inherent correlation with the internet and social media.
INNOVATION WAVES 