While it might take some time until we see them reaching widespread adoption, disruptive technologies like Artificial Intelligence and blockchain have proven to be game-changer for many industries. Trading is not an exception.
Almost half a century ago people realized that the capabilities of machines far outperform those of humans in most aspects when it comes to trading. Indeed, advanced trading technology and algorithmic trading have existed for a long time and have been developing ever since their inception. Today, more than 90% of orders on the forex market are performed by algorithms.
Fairly recently, AI made its way into the trading landscape, resulting in immediate attention gained by big players in the industry. Theoretically, the potential offered by AI and AML technologies in quantitative analysis is endless, which has prompted many companies to start diving deep in the subject and coming with innovative solutions that were not thinkable merely a decade ago.
Are there any current limitations of AI in trading? The answer is yes and is mostly due to one single factor – data. While the accessibility to data and our ability to process it has risen dramatically, there is still a lot of room for improvement. For an AI to be reliable, it needs to go through an enormous amount of information 24/7.
In this article, we will take a look at 5 of the most prevalent use cases of AI in trading today and in the foreseeable future.
Use cases of AI in trading
Deep quantitative analysis and prediction
When combined with big data technology, an AI can scan multiple databases simultaneously, keep track of thousands of variables and metrics and immediately design risk assessment conclusions, price predictions, pattern recognition and many more.
Personalized trading tips
Going beyond the purely quantitative analysis of AI, once the data has been processed and evaluated, a so-called Robo advisor can design portfolio adjustment strategies and suggestions separately for every investor. This means that the AI will analyze the profile of each investor (is he a risk-taker, how has he performed previously, how much are his decisions influenced by emotions and many more) and then propose specific actions that are aimed at maximizing his gains. This ultimately results in your own personal broker that tells you when to push the button and when not.
Dohrnii brings AI to crypto trading
A recently announced blockchain initiative by the Swiss non-profit organization Dohrnii Foundation could prove to be a trendsetter for crypto trading in the future. Dohrnii and their team of fintech and trading experts have been working on a solution for the cryptocurrency market for years. Thanks to their experience with advanced portfolio management software products used by some of the largest investment management companies in the world, as well as their expertise with cryptocurrencies, the team has come up with an AI infrastructure that is applicable to the crypto market.
Designing a reliable system of AI working in conjunction is not easy. A lot of backtracking and constant testing of historical patterns is necessary to make sure the AI is optimized over time. Dohrnii combines a complex set of AI modules that help crypto traders achieve better outcomes by providing them with advanced quantitative analysis and a high level of trade automation. Five different AIs analyze the cryptocurrency markets by taking into account a multitude of price influencing factors such as macroeconomic, political and sociological aspects known to have a correlation to the price of cryptocurrencies. These AIs are constantly running simulation scenarios to test and perfect the reliability of their models.
Once the data has been processed, the information gathered is then conveyed to the traders in the form of suggestions, price predictions and many other trading signals. From there, a Robo advisor designs portfolio adjustments based on the specific profile of each trader. Users can place automated orders that are executed through third-party exchanges. Note that Dohrnii is focusing on providing traders with the tools and analysis they need to make informed decisions and improve their performance – it is not a trading platform or an exchange, however, it can push the orders by communicating with such through APIs.
Another important characteristic of the Dohrnii project that transforms it into an investment ecosystem is its crypto trading academy. Both beginner and seasoned traders are evaluated at the registration and throughout their interaction with the platform. Dohrnii then automatically suggests a personalized training plan composed of the various lesson formats available.
Accessing the various trade analysis tools on the Dohrnii platform is done with their native DHN token. The token can also be earned by completing lessons in the trading academy – successfully answering all questions at the end of a learning cycle yields free DHN to the user depending on the difficulty and length of the module.
Technology is the way forward for the trading industry
Algorithmic trading and AI have proven that they are here to stay. Projects like Dohrnii are potentially setting the pace for the whole industry to follow by becoming pioneers in the tech-driven future of trading and investing.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.