Artificial Intelligence: The good and the bad witch in stock trading
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From the imminent influx of drones that deliver things, umbrellas that forecast the weather, the onesies that monitor babies to I-watches and circret bracelets that will dish information at a press of a button, life in general for us humans is slated to see benefits of high-tech in health, communication and entertainment.The dawn of such unbelievable technology trends are already revolutionising stock trading, capital market analysts say.
Stock trading pattern has already changed from 10 years ago; the investment advisor (broker) was the intermediator compared to the past decade when an investment advisor used to advise the investor and handled his/her trade execution, an analyst says. “With the introduction of Internet trading most investors have started trading on their own.” Still less than 50 per cent of investors trade through the net but the future will see the investor take over the order execution part, he said. The investor will make his own decision based on the research done by him or the stockbroker, he added. “Stockbrokers will have to rely on other value added services to keep them going.”
Dihan Dedigama, CEO Softlogic Stockbrokers says in 10 years share trading would see technology playing a much bigger role. “Clients would look at ways of using technology more and reducing cost for the fees they would pay. However I can see local clients shifting to trading online and so on,” he said noting that with the options available it makes sense to use advanced technology in a more professional way. Company research enhancements would also be a critical element for overseas investors, Mr. Dedigama said as this is their eyes to the local market. “This would be a critical element and in any brokerage.”
Analysts predict in 25 years the middle class will possess what the extremely rich have today and that’ll include a full-time personal investment advisor. This will most likely be an Artificial Intelligence (AI) platform dishing investment advice to a ‘distributed hash table’ which is a decentralised distributing system that assists research an alysts with look-up services. “This will be a possible life altering technology for researchers,” the analyst said.
AI will seamlessly vet investing opportunities according to client preferences and it’s already happening at a significant scale, he said. Already some hedge funds use AI to catch future trends in financial markets.
Analysts say that there may be a situation where there’re many classes of different shares of the same company – say an oil manufacturer’s shares in a subsidiary that’s only exposed to carbon neutral foot prints. Or firms which don’t trade with countries exposed to wars, etc.
Some AI trading systems for stock trading are currently being built by start-ups like ‘Sentient’ according to reports. Already start-up hedge funds such as Walnut Algorithms are working on AI. Analysts also say that there won’t be any late responses because AI will be doing it all for the investors within seconds.
On what’ll be trading trends in 10 years, many say that microinvesting that is done through mobile apps which channel virtual spare cash to small-cap stocks by linking them to a debit card will happen. This will encourage those with limited incomes to invest by making it simple.
What about Genotick which is a ‘free’ trading software where systems are created without the user’s intervention? This will be an important part of trading in the future, analysts predict.
Also investors won’t pay an army of analysts to do investing when it’s so much cheaper to invest in an index. So index investing will be big in less than a decade.
Analysts say that just as electronic trading succeeded many stock trading jobs, more electronic trading will zoom through the bond and foreign-exchange desks because AI will replace many analysts jobs as these jobs will be very difficult for humans. For an example, to sort through the massive amounts of information that are generated, AI will be deployed.
They also predict that boom-bust cycles will be shorter and more predictable with the fast-paced technology which is a good thing.
AI has already and stealthily made a foothold in most lives on a daily basis and with its basic intellect, it can do so much. While due to its far reaching claim in futuristic technology and how AI can be manipulated, it can be compared to the bad witch, or the Borg, a fictional alien race which is the enemy in the Star Trek franchise, but as with all else, experts say that it can be regulated to become the good witch only by human intervention.