The world of finance can be convoluted and complex, with problems that aren’t easy to fix. Complex problems require complex solutions. Thanks to advancements in technology, financial challenges no longer prove a difficult hurdle. Computational applications allow those involved in financial markets to utilize applications that offer forecasting, modeling, and trading solutions. Now more than ever, artificial intelligence is changing the face of financial markets in the US and abroad. Let’s examine three key ways artificial intelligence is changing financial markets today.
What is Artificial Intelligence?
First, let’s start with the basics. What exactly is artificial intelligence? Simply put, artificial intelligence stands as a pattern-emulating technology that can automate repetitive tasks with ease. Unlike the human brain, artificial intelligence can indulge in such tasks error-free. As technology progresses, artificial intelligence is becoming more entwined with daily life.
More and more people are relying on AI to accomplish daily tasks and boost productivity. While some still picture AI as a futuristic endeavor, the technology is here, and it is being used daily in sectors such as healthcare, transportation, and addressing environmental concerns. Additionally, artificial intelligence is truly changing how financial markets operate. Let’s take a look at the role AI is playing in finance in 2020.
Three Ways Artificial Intelligence Is Changing the Financial Markets
#1. Aiding in Risk Management and Effective Decision Making
Artificial intelligence in financial markets may be most transformative in aiding in risk management and decision making. Making sound financial decisions and creating diverse portfolios requires solid judgment. Traditionally, the task of making such broad decisions rested upon human shoulders. While people are great, their judgment can easily become impaired or swayed. Not exactly sustainable in the modern-day. After all, making mistakes is a simple part of being human. There’s no way around them.
With the use of artificial intelligence, this is no longer an issue. Developers have crafted sophisticated algorithms that can model various risk management scenarios. This ensures that only rational decisions are made. Additionally, AI companies have developed neural networks, which are effective in performing risk management. Simply put, artificial intelligence is allowing humans to make sound decisions without relying solely on their own assumptions or judgments.
#2 Intelligent Trading Capacities
Trading is an integral part of the financial markets– yet humans can easily tire of the process, affecting their judgments. Artificial intelligence has allowed for intelligent trading systems. These systems are capable of crafting consistent profiles in the financial markets without complaint.
Unlike their human counterparts, AI robots are trained to learn from their mistakes, thereby avoiding making repeat mistakes in the future. Not only does this bring peace of mind, but it leads to an overall accuracy in trading decisions. AI robots have also been known to identify market patterns, make accurate forecasts, and reduce common Forex trading mistakes.
#3 Enhanced Fraud Protection Capabilities
There are few sectors of business more susceptible to fraud than the financial markets. Thanks to Artificial Narrow Intelligence, a niche area of AI research studies, computer systems can be trained to detect patterns in data. This is absolutely paramount in detecting fraud.
Any slight change to the data would signal an abnormality, prompting the AI to alert the necessary parties. For example, if someone were to transfer a very large sum of money, something that is not normal for them to do, AI would detect that large transfer as a threat. It would even go so far as to provide location details of where the transaction took place. Identifying these abnormal behaviors could make financial markets far more secure.
AI is quickly integrating into all aspects of human life, including the financial markets. While some were apprehensive at first, many are finding that AI allows for greater peace of mind in the financial sector. Better decisions are made, transactions are more secure, and risks can be assessed with ease.