How to Build an Efficient AI Trading Platform

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Artificial Intelligence (AI) has emerged as a major theme in the world economy today. Platforms like ChatGPT, Bing AI, and Google Bard have become extremely advanced recently such that they can do unimaginable tasks. For example, they can now write essays, generate code, and even draw images.

Analysts believe that most industries will be impacted by AI. For example, we have seen media companies like Buzzfeed generate AI content that is structured well. The same is true with platforms like Reuters and Bloomberg,

The financial industry is also expected to be disrupted by AI. Some of the top areas that AI can help is in summarizing long financial statements, doing in-depth analysis, financial advice, and even in the creation of bots.

Related » Best AI Stocks to Day Trade

In this article, we will explain some of the steps to follow when building an AI algorithm for day trading.

Quant trading is highly profitable

A fact about artificial intelligence use in the financial market is that it has been in existence for a long time. Historically, it was known as quantitative trading. It involves using large datasets to predict the price of an asset.

One of the best-performing hedge funds in the industry is known as Renaissance Technology. It is a quant firm that was started by Jim Simmons, a leading mathematician. His Magellan Fund has had over 30% annual returns for more than two decades. Interestingly, unlike other hedge funds, it employs mathematicians and computer scientists.

There are other highly successfu quant and high-frequency trading companies. Some of the most popular of them are Two Sigma and AQR.

Why use AI in day trading

Ther are several reasons why you should use AI in day trading. First, AI, unlike humans, does not get tired. It can work on a 24-7 basis without rest. As such, if you have a good AI bot, it means that you can use it to trade profitably for a long time.

Second, it is possible to incorporate risk management strategies in AI tools. For example, you can create a bot that has a fixed trigger for a stop-loss. You can also direct the bot to open trades only when certain conditions are met.

Therefore, these risk management strategies can help you to make money well while reducing the risks involved.

Third, these AI tools can help you to diversify the way you make money. You can have one account that is fully maintained using AI and the other one where trades are implemented manually.

It is worth noting that AI will be important for research. You can create an AI that does research on hundreds of assets and gives you quality trading signals. This can simplify how you trade and then save you a lot of time.

Benefits of developing an AI trading platform

If you search the web, you will find plenty of existing Ai platforms. Some of them also work very well and might be worth a look. Or you can opt to create one yourself (or with your team) by taking advantage of the no-code tools available in some environments.

We already know the next question is: “But why do I have to waste my time and make it myself”?

First of all, you would create it tailored to you and the trading style you intend to adopt. Therefore, you don’t have to compromise to make the pre-existing ones work a certain way.

This initial investment of time will also allow you to increase its effectiveness, accuracy and let you save your energy later in the research phase.

No less important, you may run into some scams. This should not happen with well-known brands, but it might happen for some new tools.

Not easy

We are in the early days of artificial intelligence. As such, building a successful artificial intelligence tool to automate your trading is not easy at all.

In fact, you need to understand that it will take a significant amount of time to build and test a new AI platform. It will also take a lot of time to learn and come up with a code that will help you in this ( though ChatGPT and other chatbots can help you).

You also need to put your focus on repairing mechanical failures, a task that is yours alone. Just as all the other monitoring activities.

To develop the AI platform, you also need to have some background in computer science. If you don’t, We recommend two things:

  • You can partner with someone who has a background in software engineering.
  • You can use the ‘traditional’ algorithmic trading platforms which are provided by your broker.

Steps to set up your AI platform

Data source

To develop a successful AI platform, you need high quality data. This data should be fast and accurate. In automated trading, traders deal with micro-seconds. The faster the data source the better it is for you.

Therefore, you should ensure that you have the best data source that is not only fast but also accurate. You should now incorporate this data to your AI platform.

The data itself is not useful if you don’t know how to use it. In AI, you need to understand how to read the data and how to incorporate it to your trading thesis. There is a lot of data in the financial market. You should know the data that is useful and the one that is not.

Come up with the code

After finding a credible data source, you should now come up with a code. This should be a code that will control your trading. The code should be integrated with the data that you intend to use.

In the code, you should have a set of parameters that will guide your trading. For instance, a code can state that when PMI manufacturing data exceeds 50, then a buy trade on DOW should be opened.

Test the code

Creating the code should take a few months. You should not develop the code in a hurry. This is because the code will determine your success.

After creating the code, you should spend a few weeks or months testing it. This is probably one of the most important steps in this process. An AI platform that is not tested is a trap. After testing, you should now execute it on your trades.

How to Build a Successful AI Trading Platform – Useful Links:

  • 10 AI Platforms to Build Your Modern Application – GeekFlare