By Kunal Nandwani
A seismic shift is currently underway in the world of finance. Why is this happening? The answer to this is simple: artificial intelligence (AI) is revolutionising the world of finance for traders and retail investors. Yet to understand and take advantage of it, one may require certain skills and knowledge. By granting them access to sophisticated investment strategies and insights, AI is turning out to be a powerful tool.
Initially, such complex investment strategies, analyses and insights were available only to hedge funds and institutional investors at a very high cost. But now, with the advent of AI in the financial world, the playing field has been levelled, and these are now easily accessible to retail investors and traders. AI has democratised almost “unlimited” intelligence across all fields including finance and trading.
Artificial Intelligence: The Future of Trading & Game-Changer for Retail Investors
Artificial Intelligence (AI) has taken over the world of finance at a swift pace. In the world of trading too, AI-powered algorithms now can execute trades automatically, optimising strategies and minimising human error. With the scope of AI expanding daily, more and more stakeholders are being empowered to take on more than what they could before. Certain advantages offered by AI include enhanced data analysis, algorithmic trading, personalisation and fraud detection and prevention..
First and foremost, AI has acted as an educator to retail investors. With access to concepts that were not easily understandable to them earlier, investors can now swiftly make informed decisions. After AI integration into chatbots and virtual assistants, financial information that was not easily understandable to retail investors and traders earlier have now been simplified to the level that they can comprehend and make decisions.
Secondly, AI-powered algorithms can help retail investors and traders to validate their trading thesis or strategies. By swiftly analysing vast amounts of data, AI helps traders identify investment opportunities and potential risks, thereby enabling them to make more precise predictions about the market.
Thirdly, AI-powered tools can understand trading history and analyse it to identify risk tolerance and trading goals. Accordingly, they can suggest strategies that align with the investment profiles of retail traders and investors. By giving personalised recommendations like portfolio diversification and reduction of transaction costs, AI can help retail investors refine their trading styles and achieve their goals.
Fourthly, by identifying trends, anomalies, and correlations in large data sets, AI can see the patterns in the markets. Retail investors and traders can take advantage of this knowledge of the patterns and make informed decisions. Not only this, AI can look out for emerging trends and sudden changes in the market by keeping a watchful eye on social media, news feeds and other real-time information.
Lastly, for a lot of retail investors and traders, company earnings calls are a valuable source of information. However, understanding, decoding and analysing the transcripts of these calls can be a time-consuming task. With AI-powered tools, the transcripts can be swiftly analysed for patterns, sentimental shifts, investment opportunities and potential risks. Hence, by using AI, retail investors and traders can gain valuable knowledge for informed decision-making.
Bridging the Gap: AI as the Great Equaliser
The biggest gap between retail investors and fund managers is data, insights, intelligence and tools provided to the latter by their data platforms and research analysts. However, with the advent of AI, this gap is being democratised and retail investors and traders are getting access to sophisticated investment tools and insights.
Retail investors and traders can gain a competitive edge over fund managers only by leveraging AI. AI-powered tools can provide them with real-time insights, personalized recommendations, advanced analytics and uninterrupted access to automated trading. Thus, it wouldn’t be wrong to say that AI has acted as a great equaliser, leveling the playing field for institutional investors and retail investors & traders.
With the role of AI expanding in the field of trading, retail investors and traders will be empowered even further. When they efficiently leverage AI, they will be empowered to make informed investment decisions, carefully manage risks and achieve their investment goals easily. The benefits fund managers and institutional investors historically enjoyed will now also extend to retail investors as well, all thanks to AI. AI is surely leading the way in revolutionising the world of trading for retail investors and traders.
(The author is Mr. Kunal Nandwani, Founder of uTrade Solutions, and the views expressed in this article are his own)
