Warren Buffet once said, “the stock market is a device for transferring money from the impatient to the patient.” Now imagine, if everybody becomes patient, thanks to the advancing technology, the money wouldn’t move in the stock market, would it? What I mean to say is, regardless how much progress we make in the tech field, and how obsessively we use the innovative and advanced trading software, nothing can outpace and outsmart the stock market. (Excuse me for sounding so poetic and old-school. I have been in this game for more than 9 years now!)
To answer your question, yes, we can very well use Artificial Intelligence (AI) and Machine Learning in stock trading and stock market prediction. And in fact, we’re already using it. Today, we have a large pool of programs and advanced trading software that many professional traders employ. In fact, the most basic form of AI is automated order placement. We place two windows and go to sleep—telling the computer that once the lower limit is crossed, buy new stocks with *this much money*; and when the upper limit breaks, sell *this much shares*. And in case, if the program is cutting-edge that employs machine learning, it could very well understand our order placement pattern, as well as market trend, working independently in the coming days. We already do this!
However, AI and Machine Learning are still at their early stages—still evolving and getting better. So, the idea that AI should work on its own without human intrusion, this doesn’t still apply in the stock market. Since just a baby, such intelligent programs still require manual work from the traders and professionals. Meaning, we cannot 100% rely on them.
Coming to the other part of this whole topic—how efficient are these AI advanced trading software that we use in stock market prediction? The sweet answer is VERY. With the pool of data that’s available online, custom AI programs are quite accurate in making stock market prediction. And they, very adequately enough, bring big return to the traders.
But again, like mentioned, they cannot be relied upon blindly. And also, it’s interesting to see how things change once there’s a mass adoption of AI in the traders’ community. The institutional investors and traders would be benefited the most from this. And we might see hyper-competition among the players, fighting to win even the small pennies. Additionally, it would also be interesting to see how the stock market, as a whole, changes to the changing dynamics of trading and investment.