Can AI Help You Make Money From Stock Markets?

While AI can predict stock price movements, it is impossible to achieve 100% accuracy

Artificial intelligence (AI) and Machine Learning (ML) can learn from vast data sets and identify specific patterns. These can then be used to make predictions about future events and possibilities. Already, there are investment firms and other entities that are utilizing AI and ML to maximize their earnings from stock markets. Some examples include Bridgewater Associates, Minotaur Capital, etc.

Such developments make us wonder if we can dominate the stock markets by using AI. Why don’t we just ask AI and invest based on the recommendations provided? To answer such questions, here are some important things to understand.

Deep human influence – Human behavior can be difficult to predict even for an AI. And it is common knowledge that stock price movements are not always dependent on the technical and financial analysis of the enterprise. There are many situations when investor sentiments determine the price movement of stocks. For example, even a rumor can impact the price of a specific share. Herd mentality is also present, where retail investors may follow the actions of the others. Such decisions may be difficult to predict by AI, especially during live trading sessions.

AI vs. AI – When more people start to use AI, the stock markets will essentially become a battle of AI vs. AI. There can be various groups, using different AI platforms to predict the stock price movements. In such a scenario, booking profits could become just as hard as it was without using AI. Such a scenario is not happening in a big way right now. However, AI vs. AI is likely to be a reality in the future of stock markets.

Incomplete data – AI platforms can accurately make predictions when they have all the relevant data. While AI can access all the financial data, stock price history and industry and economic trends, these alone may not be enough to make 100% accurate predictions. Stock markets are often influenced by constantly changing, real-time data, which can be difficult for even the advanced algorithms to process in a beneficial manner.

Emerging events – While AI is smart, it cannot predict unforeseen events such as industrial disasters, social and political turmoil, military coups, natural disasters, etc. The impact of such events on investor sentiments will be difficult to predict with 100% accuracy.

As is evident from above, one cannot expect 100% accurate stock price movements from AI. At best, AI can be effective when asked to work with predetermined variables. If there are new developments, the AI can make mistakes or be less accurate. In effect, you can certainly use AI to assist with your stock market investment decisions. But ensuring profits in every trade may not be possible.