Artificial intelligence and automation are shaking up our lives and are not stopping at the financial world either: everyone is talking about AI trading, which is supposed to enable us to make high profits fully automatically. But what is the truth behind these promises, where can artificial intelligence support us and what should traders look out for? We have the answers!
The most important in a nutshell
- AI trading uses artificial intelligence to optimize or completely take over stock market trading
- AI apps and programs are already widely used as support and provide invaluable services
- Fully automated AI trading apps that handle the entire trade, on the other hand, are rare and fraught with serious problems
- Numerous providers lure you in with reliable winnings, but cannot keep these promises. We explain why.
AI trading: the future of stock exchange trading?
In recent years, artificial intelligence and automation have found their way into almost all areas of our lives. Fields in which a lot of data is already available are particularly predestined.
The financial sector is an ideal target for the use of AI:
- Stock market trading offers a perfect database for training artificial intelligence. Billions of data records (transactions, price changes ...) from over 100 years of recorded history are available!
- The use of AI pays off massively here and motivates developers. Anyone who develops a successful AI trading app can hope to make huge profits.
- Human traders are overwhelmed by the financial world and make losses more often than profits, as a look at our report on Day trading with shares shows. So there is a great need for help from AI here!
- Backtesting, i.e. checking planned trading strategies based on historical data, is an important part of successful trading. Here too, artificial intelligence can save a lot of time and work.
- Other areas of application include sentiment analysis (scouring the Internet to determine the mood of market participants), optimizing entry and exit times, automated warnings and much more.
AI trading is currently experiencing enormous hype as it promises automated profits without active intervention. The trader who uses such AI trading apps should never have to work again, as they earn money continuously.
However, as with other promises of success in the financial world, the same applies here: What sounds too good to be true is also too good to be true! All new technologies, strategies or insider tips that promise high profits become standard in the financial world within a very short space of time and their advantages are gone.
AI trading does not currently offer the average market participant any measurable, long-term return advantages either. However, artificial intelligence can support you at various points in your trading activities and thus optimize your approach and save a lot of time and energy.
How does AI trading work?
Whether chatbot, self-driving car or AI trading app: artificial intelligence needs as much data as possible to learn a skill (e.g. successful stock market transactions).
The world of finance offers precisely this kind of data and is therefore ideal for AI applications!
- AI systems are trained using data sets under the guidance of human experts ("supervised learning"): They learn to correctly assign simple correlations and patterns.
- With sufficient training, the systems are also able to recognize new correlations and can provide useful information.
- Data records must be available in a structured form (i.e. organized and in a predefined form, such as a table). Fortunately, this is often the case with financial transactions.
- In other areas of life, data is predominantly unstructured, which makes it difficult to use sensibly.
At Swing Trading With the trend-following strategy, traders try to take advantage of upward and downward movements during a trend. Recognizing this trend is the be-all and end-all - AI trading can help to discover the right entry and exit points.
Basically, all results, regardless of whether they are a text output, a trading recommendation or a computer-generated image, are always only an approximation. The systems output the answer that has the highest probability of being correct.
Due to their structure, current AI systems are therefore not, strictly speaking, artificial intelligence. They do not fulfill any of the aspects that are decisive for the definition of intelligence: Learning ability, problem solving, judgment, perception, deductive reasoning.
Good to know:
AI trading apps, chatbots and similar systems are not "artificial intelligence" in the scientific sense. The term is nevertheless used, primarily for marketing purposes.
Instead, the programs fall into the field of machine learning. This established itself as an independent field back in the 1990s, but is still considered a sub-area of artificial intelligence, at least in research.
Attention! Not everything is "AI trading"
Artificial intelligence (AI) is the most common buzzword of the current decade. No new start-up or app can hope to be successful if it does not include these terms in its business model.
The term "artificial intelligence" has been devalued to the point of absolute meaninglessness and is often only used for marketing purposes:
- Numerous providers offer simple, automated investment products (for example, an investment product that puts together an investment mix based on simple questions for the user) and describe them boldly as AI trading.
- Various trading bots are also advertised as "AI trading bots". In reality, however, they are often just simple signal services that react to market changes using predefined rules and have no form of intelligence.
- Another popular deception method is the integration of artificial intelligence at a non-critical point (for example, automatically answering support requests) in order to then be able to offer the entire product as "AI powered".
Such attempts at deception and the low quality and security risks of various AI applications have already attracted a great deal of attention. More and more users are now cautious or avoid such offers altogether.
We also recommend exercising healthy caution when using AI trading: AI trading bots and similar services should be carefully scrutinized and initially used in a secure environment such as a Paper Trading Account be used!
How you can use AI trading
AI-assisted trading can generally be used for all strategies. However, depending on how and where you trade, it may be harder or easier to switch to artificial intelligence. We present the most important areas of application below.
AI trading apps / bots
- Trading bots are the pinnacle of artificial intelligence in the financial sector: they inform us about lucrative trades. We can then open corresponding positions.
- Some of these AI trading apps even take over trading fully automatically - a service that is sometimes associated with higher costs.
- The range of functions and success rates vary greatly.
- The costs also vary greatly: some AI trading bots are free to use, while others cost hundreds of euros per month!
The best-known AI trading bots currently include:
| Name | Price |
| Trade Ideas | Free of charge, powerful packages from $89 per month |
| TrendSpider | from $51 per month |
| Tickeron | from $72 month |
| Cryptohopper | Free of charge, up to $108 per month |
Almost all AI trading bots are executed with a broker of your choice. You can therefore easily execute the trading recommendations in your CapTrader securities account. The use of a Paper Trading Accounts is possible.
Unfortunately, AI trading bots do not show any measurable advantages in practical tests. Their results usually lag far behind the profits of an experienced trader. Several possible reasons for these poor results are being discussed in the financial community:
- Too much data: In principle, artificial intelligence benefits from many data sets, which it can use to learn the task at hand. However, the financial markets flood the programs with thousands of key figures and millions of assets. Such a high number of inputs can no longer be distinguished from random numbers ("white noise") and does not allow meaningful forecasts.
- Extraordinary events: Market volatility and the frequency of crashes and crises have increased sharply in recent years and are likely to accelerate further in the future. AI trading apps are not able to navigate such events and often cause losses in difficult market phases.
- Application error: A popular theory for the poor results of AI trading is the incorrect use and lack of skills of the users. Problems such as insufficient capital, incorrect settings or using the wrong bot could explain the frequent failures.
Sentiment analysis through language models
Machine learning in the form of natural language processing has made headlines in recent months. ChatGPT in particular, an application from the AI company OpenAI, is enjoying great popularity.
- By processing huge amounts of text, the simple AI was able to learn to hold conversations, write texts and search the Internet for information.
- Such Large Language Models (LLM) also play an important role in the financial sector: they can capture market sentiment through internet research as part of sentiment analysis.
- For example, aspects such as: How many traders are talking about a stock company? What recommendations are made by analysts? How do trading communities react?
- LLMs are not limited to a single language and can also search parts of the Internet that would not be accessible to a single retailer.
Numerous long-term investors already use sentiment analysis to discover interesting stocks. In active trading, however, the analyses play a rather subordinate role: private individuals do not have access to real-time information, as LLMs generally provide time-delayed data.
This creates a time disadvantage that makes it extremely difficult to use for trading. However, similar systems are used in the professional sector that do not suffer from such a delay.
Support for retailers
Artificial intelligence can be used to monitor key figures, detect trading signals and answer questions quickly. This form, in which a trader takes action themselves and only uses AI for support, currently appears to offer the greatest advantages.
It can be used, for example, for
- Preparation and presentation of required data.
- Calculation of key figures, from simple values such as the P/E ratio for shares up to complex formulas.
- Help with the Chart analysisfor example with Day trading charts. AI can help to draw lines, pennants, wedges and the like correctly.
- Artificial intelligence can also process information and thus help people who Learn to trade want.
The areas of application are extremely diverse! Artificial intelligence already plays an important role for many active retailers today, and this is likely to increase further in the future as the range of functions increases.
Is AI trading worthwhile? Advantages and disadvantages explained
AI trading offers a range of new opportunities for traders. Used correctly, the apps promise a significant improvement on previous returns! The most important advantages of such programs are
- Can optimize existing strategies: AI trading is most effective when combined with the existing expertise and common sense of an experienced trader. The various apps offer ideal support with which you can improve your existing approach.
- Can take work off dealers' hands: Numerous time-consuming tasks, from backtesting to managing a Trading Journalscan be shortened or even completely automated using artificial intelligence.
- Can help you learn to trade: You would like to Trade options or with other assets the Learn to trade? AI trading apps help you to open your first sensible positions and thus internalize the basics.
Attention!
We strongly recommend that beginners first try AI trading on a Paper Trading Account before you invest real capital!
- Can process large amounts of data: Artificial intelligence can process even the largest amounts of data in a matter of seconds and can also access content in other languages. In this way, AI apps help to discover desired information that would be inaccessible to human traders or only accessible with great effort.
- Can compensate for human weaknesses: Emotional reactions, excessive greed, moments of carelessness or slow reaction times jeopardize our returns. An AI system does not have such weaknesses and can therefore be an ideal complement.
- Simple connection (with a high-quality broker!): Professional brokers offer suitable interfaces to connect AI trading apps easily and without high technical effort. CapTrader not only offers a direct connection; you can even create your own trading algorithms with AgenaTrader!
However, there are also some disadvantages that arise when using AI trading apps that traders should be aware of before using them:
- AI trading requires continuous adaptation: A trading algorithm that is still highly efficient today can generate massive losses tomorrow. Constant monitoring, adaptation and security mechanisms are therefore necessary and can quickly eat up any savings.
- Really effective models are not available: Anyone who develops a trading algorithm that reliably generates high profits will not share it under any circumstances. Because if other traders copy the approach, this success will quickly disappear. You will therefore not find any offers from AI trading service providers that are really effective.
- AI trading also has high requirements: To be successful in AI trading, traders must have good specialist knowledge and sufficient start-up capital. In addition, programming skills are required (depending on the AI trading app used). Getting started is therefore just as difficult as with "traditional" trading.
- There may be a risk from the provider: Some AI trading apps require you to register with a specific broker, make a deposit into an account or similar measures. There is a risk of high costs, fraud, data theft, tax problems and more!
- AI trading does not demonstrably lead to higher profits: Trading with the help of artificial intelligence does not bring any measurable advantage for the average trader. A switch is therefore generally only worthwhile for people with exceptional computer skills.
Signing up to an AI trading app carries numerous risks, ranging from high costs to a lack of security for your capital. We therefore strongly recommend that you check the offers carefully and, if possible, use AI programs with an established broker.
Conclusion: New opportunities through AI trading
Hardly any other topic is currently attracting more attention than artificial intelligence. AI has also become an integral part of the financial sector. However, promises of fully automated wealth thanks to AI trading apps are absurd: there is no technology, strategy or secret knowledge that can be used to outperform the market in the long term!
While AI trading cannot generate reliable profits, experienced traders are using the technology to great effect! For example, it is possible to:
- Data preparation
- Monitoring of key figures
- Help with the Chart analysis
- Creating trading algorithms
- Explanation of strategies to learn trading
- Sentiment analysis: Internet research to find out the mood of the markets
A healthy dose of caution is always required with all AI trading applications! False results, data theft, excessive costs and other dangers can threaten.
In addition, terms such as AI trading, AI trading, trading bots etc. have become almost meaningless buzzwords. They are used for marketing reasons and often have little or nothing to do with artificial intelligence.
You should therefore check the AI Trading app before using it. Particular caution is advised if you are to switch to a new broker/crypto broker in order to use their AI trading. You can often expect high fees and low security, which makes the offers rather unattractive overall.
If you are prepared to navigate the many pitfalls of AI trading and have solid computer skills, you can definitely achieve success with the common apps. However, most AI traders will probably decide to develop their own bots or trading algorithms.
