If I were to ask you one word that comes to your mind when you think about stock markets what would that be?  Probably volatile. Stock markets are known to be extremely unpredictable often driven by human sentiments. Stock markets are also affected by global markets. Even the best trader can pick a bad stock that gives them losses. This is where AI comes into play. It helps to reduce possibilities of human error and provide better options for picking the right stock.

Artificial Intelligence has become the latest buzzword in stock markets.

The simulation of human intelligence processes by machines, particularly computer systems, is known as artificial intelligence. Expert systems, natural language processing, speech recognition, and machine vision are examples of AI applications.

Artificial Intelligence can be used for performing tasks and take decisions similar to that of humans. Stock market analysis is very complicated but it can be simplified by using machine learning algorithms and artificial intelligence.

For predicting future trends on past values time series analysis can be done and this is where machine learning algorithms and artificial intelligence can be used. Artificial Neural Networks and Support Vector Algorithm can be used for time series forecasting. There are various platforms available like Auquan ,Equbot and Trade Ideas. These are used to predict the volatility of a stock and portfolio analysis. They use financial statements and financial news for making accurate predictions.

Algo trading is considered to be the most recent trend. Computer algorithms and chart analysis are used in algorithmic trading to enter and exit trades based on predetermined parameters such as price movements or volatility levels. Algo-trading continuously watches markets and places orders only when certain circumstances are met, such as volume, price, resistance, support, or any other element that the trader or market participant is comfortable with. One of the benefits of algo-trading is that it can easily and rapidly discover a continuing trend by utilizing existing data. Otherwise, it is difficult for market participants to act quickly by analyzing a vast amount of data in a short amount of time.

Needless to say AI  would certainly solve all our problems related to stock market analysis. Easy right ? Well probably not. Stock Markets like I said earlier are driven by human sentiments. Of course AI can also be used for sentiment analysis but it is very difficult to gauge human sentiments. It also depends on how one views a particular stock . One person may overvalue a particular stock and another may undervalue the same stock. It is very difficult to predict human emotions.

What I want to say is that even AI cannot make the most accurate predictions. Stock market is dynamic and  it is constantly evolving. Machines have failed to protect against large standard deviation swings linked with black swan events because the modern market environment has grown so volatile. There is no foolproof mechanism for making the most accurate prediction and pick a stock that would not ever give us any losses. The best way to go about it would be to use AI and our intuition together to try to pick stocks that would give maximum profits and minimize the losses.