Date
21 September 2017
AI-based trading systems are often promoted as offering high profitability, based on paper trading results, but clients can only find out how good the systems are by betting real money. Photo: internet
AI-based trading systems are often promoted as offering high profitability, based on paper trading results, but clients can only find out how good the systems are by betting real money. Photo: internet

AI investing – is it the real deal?

Artificial intelligence is becoming a buzzword in the financial sector.

But is it the real deal or just a marketing gimmick?

An AI trading system is said to be free from the influence of human emotions, often a major source of incorrect decisions.

AI systems can also better manage risks and watch the markets 24/7, the promoters of the technology say.

Some local brokerages have jumped on the bandwagon to tap the growing trend of computer-aided investing.

CASH Financial Services Group Ltd. (00510.HK), for instance, has introduced such a service to help clients trade Hong Kong-listed shares.

Its programs use data such as stock prices and transaction volume to decide if a certain stock is in an ascending trend, a CFSG executive told the Hong Kong Economic Journal Monthly.

To keep things simple, the system will send out only one buy suggestion each day.

Not only does the system back-test its trading algorithm using four years of past data, new variables are being added constantly to take into account the impact of potentially important factors such as the movements of the Japanese yen and Chinese renminbi.

While a system that spits out reliable money-making tips every day sounds like a dream, one must ask the question: if everybody uses the same system, would these trading ideas be quickly rendered useless, because, as the stock moves, the recommended entry and exit prices would no longer be available to the investor?

AI can indeed be helpful, but its effectiveness may be somewhat overstated.

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FL

EJ Insight writer

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