By Mr. Hemant Sood, Founder, Findoc
The financial sector is changing as a result of the extensive use of artificial intelligence (AI) in many different areas as we enter the “AI era.” Financial institutions are using artificial intelligence (AI) more frequently as a tool to obtain a competitive advantage.
The combination of artificial intelligence (AI) and algorithmic trading has accelerated progress in pattern recognition, data analysis, and decision-making. Algo trading with AI enhancements gives traders a competitive edge by speeding up data processing and enabling them to make educated decisions instantly. Artificial intelligence (AI) algorithms are proving to be useful performance enhancers in the financial market environment as they constantly learn and adapt.
Technological advancements and increased data accessibility are responsible for the spread of AI in trading. Because there is a wealth of market data available, AI trading systems can process data quickly and accurately, giving traders the ability to make well-informed decisions instantly.
By making decisions based on data rather than emotions, AI in algorithm trading helps to promote more logical decision-making by mitigating human emotional biases. Additionally, it transforms decision-making by bringing in dynamic, intelligent algorithms that adjust to market conditions, increasing precision and mitigating risk.
Because of increased trader productivity, less market impact, and transparent AI algorithms, there are now fewer barriers to entry for algorithmic trading, which has democratised learning and raised market participation. The consolidated algo trading market is anticipated to expand at a CAGR of 10.5% from 2023 to 2028 as AI becomes more widely available, providing new opportunities for a larger spectrum of traders and investors.
Even though there are worries about employment displacement, the financial sector’s adoption of AI has opened up new job opportunities. Data science, AI development, and algorithmic trading positions increasingly require proficiency in programming languages, machine learning/AI, and big data analytics. It is anticipated that the employment impact of automation will be counterbalanced by the emergence of new opportunities, which will increase demand for people with the ability to blend human expertise with AI precision.