Artificial intelligence (AI) has been gaining traction since its inception. No longer is it just a fanciful idea confined to the pages of science fiction. Instead, it has become the next ‘great leap’ in modern technology, rivaling the introduction of mobile phones and the internet.
The desire to develop this technology and use it on the markets is evident, with Wall Street firms already starting to give greater attention to automated trading systems. Figures vary, but some estimates suggest that algorithms currently carry out 50-75% of all the stock market trades in the US.
With automated systems already so prevalent on Wall Street, analysts at IG – a leading spread betting, forex, and CFD trading provider – decided to take a look at how advances in AI might have changed trading by the year 2069. Read on to see their top predictions for AI, taken from the company’s full report: ‘A time traveler’s guide to the future of trading’.
1. AI assistants will revolutionize trading
IG’s study predicts that advanced AI assistants (AIAs) will be widespread 50 years from now. These would run off algorithms and could be capable of learning from their market experiences.
As an example, AIAs could produce trading algorithms automatically based on pre-specified requirements. A trader could say that they want an algorithm to scalp a company’s stock. The AIA would make this algorithm, and if the trader so wishes, the AIA would put the algorithm into practice and monitor its progress on the live markets.
The idea of an AIA is not entirely new. Swedbank and the Commonwealth Bank of Australia (CBA) have already set to work developing AI chatbots which can interact with traders – and the technology behind smart assistants like Alexa or Google Home might have the potential to be adapted for use on the financial markets.
2. Algorithms will carry out analysis automatically
Algorithms could be so advanced by 2069 that they are capable of carrying out technical and fundamental analysis on a trader’s behalf. Instead of humans carrying out an analysis which could be impacted by their own biases, robots that run on algorithms might carry out objective analysis based entirely on financial data and profit potential.
The algorithms could scan the markets, analyze an asset’s price movements and then recommend a strategy based on what they have found. It is possible that AIAs could then use this data to compile ‘smart reports’, which would update in real time by responding to changing market conditions. AIAs might even be able to open and close positions on a trader’s behalf.
While technical and fundamental analysis is generally carried out exclusively by traders themselves today, automated trading algorithms are already in use on platforms such as MetaTrader 4 and L2 Dealer. This suggests that the development of more advanced trading robots may not be too far away.
3. AI will suggest trades based on big data sets
Big data is already everywhere, with companies able to see our individual purchasing patterns and recommend products based on our spending or internet search activity. In the future, big data could be made readily available to everyone, which would make it easier for traders to identify hidden correlations between market forces that they might otherwise not have thought about.
For example, AI-powered quantum computers might use big data to highlight that gym memberships increase around the time of major sporting events, and they could recommend that a trader buys up stock in gyms or supplement companies. In turn, this could mean that trades become far more complex than they are currently, with several factors combining in order to make a good trade.
This prediction might be closer than we think, with companies such as Amazon and Google already using data sets to streamline their marketing and advertising algorithms. Equally, Microsoft, IBM, and Intel are already at work trying to develop a practical and accessible quantum computer.
4. Risk management will become automatic
In this scenario, it is theorized that AI systems could be developed to the point where they’re used to effectively identify and hedge a trader’s exposure to risk. These systems would monitor and protect a trader’s positions from adverse market movements with very little manual input from the trader.
The idea of computerized or robotic risk management systems is linked to the other proposals in this article, and collectively they all go some way to suggest that human input might be obsolete in the future. This is particularly true if AI technologies are developed to sufficient levels of sophistication.
Currently, established companies and start-ups alike are working around the clock to secure some sort of breakthrough in the AI marketplace. For example, Google bought DeepMind – a leading AI research company – in 2014, with the aim of applying AI systems to a range of industries.
Find out more about the future of trading technology.
By guest author, ‘IG’.