Does AI Stock Trading Really Work?

This very minute, artificial intelligence is reshaping virtually every major industry—and finance is no exception.

AI stock trading, in particular, is emerging as a game-changer. Let's dive into how AI is redefining stock trading and why it's capturing the attention of seasoned investors and newcomers alike.

What is AI stock trading?

AI stock trading harnesses the power of artificial intelligence and machine learning to analyze vast amounts of market data, historical trends, and similar factors in real time. By rapidly and accurately processing this information, AI algorithms can identify patterns and predict market movements.

But that’s just the beginning. AI can also be used to uncover new stock ideas, conduct stock research, build trading algorithms and even execute trades, allowing for unprecedented speed and precision—a crucial advantage in high-speed modern markets. 

Still, if AI trading sounds complex and exclusive, we’ve got good news for you. Through Composer’s innovative software, everyday people can build and execute their own algorithmic stock-trading strategies with no coding skills needed.

It’s true: With Composer, you can create, test, employ, and refine trading strategies using intuitive interfaces and simple, natural language. Forget Python, Java, and Ruby; programming expertise is no longer required.

How does AI stock trading work? 

AI stock trading operates on the principles of algorithmic trading (aka “algo trading”), in which predefined rules guide the execution of trades based on historical data analysis or similar factors. Let’s look at specific ways you might leverage the tech.

1- AI-assisted trade strategy creation

With Composer, you can use the unprecedented power of AI to devise timely investing strategies based on vast data sets, transcending human intellectual capacity and reducing emotion-driven decisions.

2- Machine learning for trading strategies

“Machine learning” refers to how AI learns from data to make predictions or decisions. So, not only can investors use AI to devise trading strategies, but that same tech can help investors refine and optimize those strategies to improve their performance over time.

3- AI-powered research

AI can analyze much more than just numbers. It can process news, social media sentiment, news coverage of economic indicators, language-based financial statements, and even more esoteric types of data. All this research simplifies and streamlines your investment research process.

Of course, AI can also scour the NASDAQ and NYSE to evaluate individual AI stocks—such as MSFT, NVDA, PLTR, GOOGL, or even AI-focused ETFs—potentially landing on artificial intelligence stocks trading at advantageous prices. The possibilities of AI are nearly endless.

4- Application of ChatGPT4

At Composer, we harness the power of OpenAI’s internet-enabled ChatGPT4 to provide investors with real-time insights, forecasts, suggestions, and more—all with the potential to improve your investment returns. Input your goals using simple, natural language, and OpenAI will give you the answers you need.

5- Risk management

AI-driven tools can use predefined risk parameters that act as stop-loss mechanisms. This can help cut down on your risk exposure. 

AI stock trading vs. regular stock trading 

AI stock trading and regular stock trading are distinct approaches with their own strengths and weaknesses. Consider the following factors:

Decision-making speed and accuracy

AI-driven algorithms process vast amounts of data. Likewise, trading bots execute trades at lightning speed, ensuring quicker and more accurate decisions. Regular stock trading and manual decision-making often introduce blind spots and cognitive biases, which can lead to slower execution and errors.

Consistency and discipline

Algorithms consistently follow predetermined rules, adhering to a disciplined approach even in the most volatile market conditions. Human traders, on the other hand, are prone to deviating from their set strategies based on emotion.

Data analysis and insights

AI can rapidly analyze extensive historical data and identify patterns that human traders overlook or outright miss. Manual analysis is necessarily limited by the volume of data a human can process and how much time an analyst has at their disposal.

Complexity of strategy

AI can handle complex, elaborate strategies with laser precision. A human trader must put forth extensive effort and research when manually developing and executing complex strategies.

Efficiency and automation

Algorithms don’t require sleep or breaks, allowing for continuous monitoring and instant execution of trades. Human traders must actively monitor the stock market, and their focus is necessarily limited by the need for rest, recovery, and downtime.

Risk management

AI programs can implement strict risk management rules, minimizing potential losses. Human traders might struggle with adhering to risk management protocols because of indecision or simple oversight.

The bottom line

In short, AI stock trading offers the advantage of speed, accuracy, and the ability to analyze vast amounts of data, which helps you make informed and disciplined decisions. Regular stock trading allows for gut feelings and human intuition, but this can also harm your returns because of biases and misreading.

Think of how you’ve executed buys and sells in the past, likely within your brokerage account. It’s a lot of labor. It sucks up brainpower, time, and energy.

That’s just the nature of the game. But algo trading could simplify your process, saving you time and angst. Given the advantages of AI-driven investing, it’s no wonder many investors are turning to it as a simpler, easier, better solution.

How to get started with AI stock trading

AI stock trading is an endeavor that combines technology with your investment acumen. As you gain experience, you will develop an understanding of the platform and market dynamics. If all goes well, you’ll grow more confident while you grow more wealthy.  

AI stock trading using Composer is a seamless process. Here's a simple guide to help you embark on your journey.

1- Sign up and explore

Create an account on the Composer platform. Take time to explore the interface, familiarize yourself with features, and understand how AI-driven strategies are designed.

2- Build based on your goals

Think through what you’re hoping to achieve and determine your investment goals. This will guide you in creating strategies that align with your specific objectives. What’s more, because Composer uses ChatGPT4, you can express your goals in simple, natural, straightforward language.

3- Use and customize pre-built strategies

Composer offers more than 1,000 pre-built trading strategies you can customize to your preferences. Start by selecting a plan that matches your goals. From there, tailor the strategy parameters to fit your risk appetite and time horizon. Consider adjusting indicators, rules, and other elements to refine your strategy.

4- Backtesting and optimization

Before deploying your strategy, backtest it on historical data to assess its performance.

5- Monitor and adapt

Once your strategy is live, monitor its performance. Adjust parameters as your needs and goals change. 

Trade smarter today with AI and Composer

AI stock trading is transformative, with a clear potential to enhance your investing process. Don’t wait until the investing herd catches up; start exploring AI strategies now. Composer empowers you to deploy AI's paradigm-shifting power, allowing you to invest smarter and more efficiently.

Head to composer.trade to see what strategies are out there and to create your own.