Tuesday 12 November, 2024 – AI technology has revolutionized various industries and sectors, providing new tools that save a significant amount of time by generating ideas and automating daily tasks. In light of this, award-winning broker Alpari has released a comprehensive report detailing the impact of AI on the world of trading, highlighting the significant advancements made since the introduction of computer-assisted trading in the 1970s.
The report, now available to all Alpari customers, examines the four main categories of AI tools that traders can utilize in today’s market. These include language processing, MetaTrader expert advisors, high-frequency trading, and simulations.
Language processing tools, such as Crowd Insight offered by Trading Central, analyze news outlets to provide an overview of market sentiment. This includes an assessment of the rationality of the sentiment and the credibility of each media outlet. Alpari customers have access to these tools, allowing them to make more informed trading decisions.
MetaTrader expert advisors are developed by independent developers and are available for traders to use on MetaTrader 4 or 5 trading platforms. These bots use AI to analyze opportunities and even execute trades on behalf of the trader.
High-frequency trading, commonly used by large hedge fund companies, involves using algorithms to execute millions of trades in just seconds. As AI continues to advance, this method is expected to become even more effective.
Simulations are also made possible through AI, allowing traders to test potential trades based on a multitude of variables before committing. This is particularly helpful for beginner traders, providing them with a controlled environment to practice in.
In addition to exploring current AI tools, Alpari’s report also includes a timeline of the development of computer-assisted trading since the establishment of Nasdaq, the first electronic stock exchange, in 1971.
In the 1980s, program trading, which uses computer systems to execute large orders, gained popularity. However, the Black Monday stock market crash in 1987 was partly attributed to its use, sparking debates on its true impact.
The 1990s saw significant advancements in technology, leading to the launch of REDI, one of the first electronic order systems. The SEC also ruled that Electronic Communication Networks could compete with traditional stock exchanges.
The early 2000s brought further developments, such as the decimalization of stock prices in 2001, making it easier for algorithms to trade in smaller quantities. In 2005, the SEC introduced the Regulation National Market System, promoting faster trading. By 2007, algorithmic trading accounted for over 30% of equity trading volume in the US.
The 2010 Flash Crash, in which the Dow Jones Industrial Average dropped nearly 1,000 points, was potentially caused by a large sell order carried out by an algorithm. In 2012, an algorithmic trading error resulted in Knight Capital Group losing $440 million.
The release of Michael Lewis’s book “Flash Boys” in 2014 raised awareness of high-frequency trading. By 2016, approximately 80% of FX trading was algorithmic, and in 2019, 60-73% of US trading was algorithmic.
One of the most notable developments in 2024 is the integration of chatbots in trading, with companies claiming to offer informed recommendations.
Alexey Efimov, Market Analyst at Alpari, advises traders to research available AI tools to save time and trade more efficiently. However, he also reminds traders that trading is inherently risky and that AI tools should not provide a false sense of security.
In conclusion, Alpari’s report highlights the significant impact of AI on the world of trading and encourages traders to explore the potential of these tools while remaining aware of the risks involved.
For more information and to read the full report, visit http://alpari.com/en/market-analysis/ai-changing-trading/.
About Alpari:
With 25 years of experience in online financial trading, Alpari is a leader in the industry. They were the pioneers of online forex trading for retail clients and continue to focus on providing individuals with access to global financial markets securely. Alpari’s clients are risk-takers who are willing to invest in building their trading skills, and the company’s promise is to provide them with the same level of service and client protection as a regulated business, regardless of their location. For more information, visit https://alpari.com/en/.
Derick is an experienced reporter having held multiple senior roles for large publishers across Europe. Specialist subjects include small business and financial emerging markets.