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Trading with Artificial Intelligence

H As the power of technology evolves, the ability to use A.I to automate your investment decisions is becoming ever more popular amongst traders. Here’s why having a robot hit the go button for you is so advantageous in today’s market conditions:


How does A.I Fit into Trading?

Artificial Intelligence (A.I) has the ability to evolve its algorithms over time, self-teach and gain advantages in areas of statistics. In the trading world, says host Andrew Baxter, more and more traders are using A.I to evolve their trading decisions based on back-tested results over a given period of time. The ability for A.I to automate specific entry and exit points as per a trading system is based purely on logic and statistics which is rarely something a human can do effectively and consistently.  In any game of statistically based outcomes, computers will always have the upper hand compared to humans and so factoring this into your trading is certainly a worthy inclusion for those in our traders circle. 



Advantages of using A.I

The advantages of using A.I becomes ever more apparent during times of market uncertainty. The main benefit, says Andrew Baxter, is that using A.I to trade removes all of the emotion. As the single biggest weakness in most traders, the ability for A.I to remain purely objective in all areas of decision making is a huge plus. Secondly, the ability to back test a trading system is massively advantageous. A back test can provide a hopeful trader with a snapshot of the A.I’s performance over a given period of time – including the number of trades, average length, biggest drawdown and net profit factor over time.

For anyone looking to make future decisions, based on past performance, there is no beating the accuracy and level of detail from something based on A.I. Lastly, A.I based trading can effectively be put on autopilot. As people who value their sleep and lead busy lives, the ability for the robot to hit the go button when it needs to, on your behalf, makes things very time effective. The trick is building a system to do so, which is something Andrew is looking to offer for those in his traders circle. 



Disadvantages of A.I

By the very nature of computers, having an A.I system complete your trading for you is tough. Realistically, the biggest challenge with A.I is actually understanding how it works and how to build it. Simply throwing some indicators on a screen and overlaying some fancy oscillators is not what system-based trading is about and it sure as hell will make things more confusing than they need to be. Host Andrew Baxter says having few indicators which measure primarily price and volume is the best way to program A.I for effective trading systems. Secondly, a trap for newbies in auto-trading systems is the desire to want to over gear. Yes, you may have created an awesome system that has had very strong results in the past. The future of this market is unpredictable, so it involves taking a risk.

The temptation is to want to use leverage via CFD’s or other methods to trade with borrowed money. Increased potential returns yes, albeit increased potential risk. Lastly, the risk of relying on a system to execute your trades for you can be easily compromised with little hiccups, such as unstable internet connection or a couple of days away from the trading screen. Your trading may be on autopilot, however if something doesn’t quite fire up or the internet drops out – do you have the capacity to pick this up quickly and make changes accordingly?



How to Use A.I to Trade

Using A.I to trade isn’t easy. Building systems to execute trades profitably on your behalf is tough, managing the downfalls of the systems is tougher. As host Andrew Baxter says – having a process to build these systems, with proven results and is something that is easy to execute is the triple whammy of a successful A.I trading system. For those in Andrew’straders circle, he’ll be looking to roll out some education and training on this in the new year via Australian Investment Education.

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