“I’m sorry, Dave, I can’t do that.”
– The HAL-9000 computer from the film 2021
Some of us may still be able to recall that iconic line uttered by an artificial intelligence system possessing seemingly human (and, therefore, flawed) traits. Ironically enough, we are now living in a world that is already being transformed by the role that artificial intelligence (AI) has begun to play. From using automated algorithms to create the next generation of online games to asking ChatGPT for assistance when writing a university term paper, AI now enjoys an increasingly ubiquitous presence. This is why it only stands to reason that these systems are making their way into the investment community.
Could artificial intelligence provide the edge that you have been looking for? What are some potential benefits that traders can enjoy? Are there any potential downsides? How will AI shape the future of the financial markets? Whether you are an active investor, or simply a fan of science fiction, the observations highlighted below paint a rather interesting picture.
From theory to reality: The emergence of artificial intelligence in trading
The concept of leveraging computing power to expedite investments is nothing new. This idea first began to emerge in the 1970s as personal computers made their presence known within the workplace. After all, why not use massive processing power to execute a profitable trade in a fraction of the time that would normally be required? This seemed like a great idea at the time. However, the Wall Street Crash of 1987 put these visions in check.
While there were many underlying reasons for this market collapse, one involved automated portfolio insurance trading that lead to massive sell-offs; catching the majority of investors by surprise. As prices began to fall, more shares were sold. This created a domino effect that caused the value of the marketplace to decline by more than $1.7 trillion dollars. Automated trading still had a number of “bugs” that needed to be worked out.
However, things began to change during the latter half of the 2010s. Advanced algorithms were augmented with fail-safe features to prevent a similar crash. This caused some investors to take notice. If we then fast-forward to 2025, it is not uncommon to come across a demo account for trading at least partially powered by automated algorithms. These provide a more streamlined end-user experience, and they open up numerous investment opportunities for relative newbies.
The next leap forward
To be clear, early iterations of artificial intelligence were rather rudimentary when it came to the tasks they could perform. Anyone who accessed automated chatbots in the past can attest to this fact. We are now entering into an entirely new era, and this is largely thanks to a quantum leap forward known as generative artificial intelligence.
Generative AI is a rather complicated topic, but it is still important to highlight the fundamentals. Generative artificial intelligence employs systems such as large language models, and machine learning to scrape the Internet for massive amounts of data based on the input of a human. It can be used to create stories from scratch, to produce highly detailed images, and even to write original music. The same holds true in terms of investing. Let’s use an example to cement this point.
Imagine that you want to determine how Bitcoin will perform in the next financial quarter. Artificial intelligence algorithms will search for various metrics, such as:
- Macroeconomic trends
- Historical Bitcoin price points
- Moving averages
- Fibonacci retracements
- The performance of similar mainstream tokens over a given period of time
This data can then be employed to make future price predictions with a fair degree of accuracy. Furthermore, the amount of time needed to obtain such information is often measured in a matter of seconds. This is obviously attractive to investors who want to take full advantage of the latest market conditions.
No experience needed?
Becoming a successful trader is no easy task. Time, patience, and perseverance are all prerequisites. Occasional mistakes will also need to be made so that unique skills can be honed. So, could the next generation of artificial intelligence all but eliminate this learning curve? Might a future commodity or CFD trading platform forever transform the concept of business as usual? This is another way of asking if a day will come when no experience is needed to enjoy financial success.
The issue here is that artificial intelligence has not yet evolved to the point where it can accurately replicate human decisions. Furthermore, let’s remember that algorithms can still be incorrect from time to time. This opens up very real risks in terms of losses. Others rightfully argue that investing without an inherent knowledge of the markets is a dangerous proposition. This is not altogether different from an individual who never learned to drive a vehicle relying solely on artificial intelligence when travelling between two destinations. If the program fails, an accident could very well be just around the corner.
What can we expect in the coming years?
Artificial intelligence continues to evolve at a frenetic pace. Assuming that this momentum continues, it should enjoy a bright future. Analysts currently predict that the value of the AI trading marketplace could reach as high as $35 billion dollars by 2030, and this might actually be a conservative estimate.
We are not only referring to how quickly the algorithms are reshaping themselves. Artificial intelligence has already begun to adopt decidedly human overtones. It is becoming increasingly difficult to tell the difference between a bot, and a human counterpart. It stands to reason that this very same sense of utility will translate into the world of investing.
Should you rely on artificial trading bots?
We now arrive to what is arguably the most relevant point of this article. Might it be a good idea to incorporate AI trading into your current investment strategies? There is no simple way to answer this question. While these systems are indeed advanced, it is always better to embrace a more well-rounded approach. For instance, you can always analyse a specific asset before evaluating your observations with the help of an AI-assisted platform. There is also absolutely nothing wrong with using AI to collect big data before interpreting this information based on your goals. However, the efficacy of artificial intelligence should still be taken with a grain of salt (at least for now).
To be clear, this article was not intended to disparage artificial intelligence in any way. There are plenty of advantages that can be attributed to AI trading tools, and like any technique, it is just as logical to highlight a handful of drawbacks.
Regardless of personal opinions, there is little doubt that artificial intelligence will continue to feature prominently throughout many investment circles. Might the day come when all trades are executed automatically based on predetermined parameters with near-complete accuracy? While no one knows the answer with any degree of absolute certainly, we are only beginning to scratch the surface of what AI has to offer.
