Can AI Replace Trading? Explained

Automated trading systems have seen a recent rise in popularity, leading to a drastic change in the way so many people trade and invest. Although some have chalked this revolutionary change to trading as artificial intelligence just evolving naturally, there are still some who have doubts on the matter.

What we mean by this is that some doubt that AI can truly replace trading. After all, not everyone is willing and able to trust others, especially non-humans, with gathering information crucial to their investments.

Because of this, we’re here with various advantages and disadvantages an average person will notice if they replaced traditional trading with AI trading. Through this, we’ll be able to help decide for yourself whether AI can replace trading.

Benefits of AI Trading Over Traditional Trading

As mentioned above, the first thing we want to do is go through the benefits of AI trading, or factors that traditional human trading might lack in when compared to the AI-powered counterpart.

No Emotional Biases


The first and most important thing we have to talk about when mentioning AI replacing humans is the lack of emotional biases when it comes to artificial intelligence. Talking about the trading world specifically, emotional biases have been plaguing human traders since trading itself has existed.

We humans get tired, we get hungry, and we might even get greedy every now and then which makes us more likely to make decisions based on the emotion we’re feeling. This affects our trading consistency and makes us humans more likely to make mistakes.

However, machines don’t get greedy, hateful, tired, or jealous. Because of this, they can consistently execute trades based on the already established rules and criteria and without any impartiality. This has the potential to not only decrease risks but also to increase profits in some cases.

More Speed and Efficiency

As is common knowledge, AI has the capability to process information much more efficiently and with more quickness than a human’s brain. This lightning-fast processing can be extremely beneficial for quickly identifying and capitalizing on market opportunities that may arise.

They can also look through potential information gold mines that humans might overlook, such as certain news articles and other unstructured pieces of market-related data that signify events that have the potential to affect the price of assets. What’s more, they can do this quicker than the time it might take for an average human trader to even realize the event has happened.

Of course, all this speed is useless with proper efficiency, but fortunately, efficiency is something AI has in spades. It can also go through the available information on different markets and assets which might, at first, seem to be unrelated to your assets. However, upon further inspection, there might be some correlation that a human trader would be likely to miss.

This will lead to the AI-created trading portfolio being more complete and diverse, which might potentially lead to more profits.

High Adaptability


Perhaps the most appealing benefit of AI trading for most traders will be how adaptable an AI can be. For starters, AI systems can learn and adapt from past trades, regardless of whether they were profitable or not. 

They continuously refine and polish their strategies over time to increase profitability, and if there are any potential risks or opportunities detected by them, the systems flag them to ensure we notice them and are able to either avoid or capitalize on them accordingly.

Finally, AI powered trading can also be scaled up or down depending on several factors. These factors can range from how volatile the market is, how the trading conditions are, and which asset class the asset being traded belongs to. This allows traders of all skill levels to trade efficiently using AI.

Saves You Time and Effort

If you’ve already gone through our 9 brutally honest disadvantages of trading, then you’ll know that many of these traditional trading disadvantages have to do with the trader not having enough time or rest.

Well, with AI systems doing much of the heavy lifting for you, you’ll have some more freedom to do what you want with your extra time. Of course, this doesn’t mean that you won’t have to do anything, but hey, some extra time is better than none at all, right?

You also won’t have to keep an eye out for each and every market-related trend, as the AI system will do that for you as well. However, it’ll still be up to you to ensure the data is up-to-date, reliable, and usable.

Disadvantages of AI Trading Compared to Traditional Trading


With that being said, there are certain things you should keep in mind before converting to a fully AI-controlled trading system.

Lack of Transparency

Because AI systems use complicated mechanics to run, a lot of traders might find it hard to completely trust them. After all, how can you trust something when you don’t completely understand how it works, right?

As a matter of fact, there are a bunch of traders that are still pondering over the legality of using AI in stock trading. Without proper transparency, it’s impossible to build complete trust.

Risk of Digital Issues


When it comes to AI, the most common threat is that of the AI getting hacked, malfunctioning, or having a glitch that messes with the system and the data of the user. Unfortunately, when it comes to something like trading, even the smallest error can lead to a devastating financial loss.

This isn’t even mentioning some of the more wide scale issues, such as the fact that if too many traders start using AI to come to the same strategies and conclusions regarding their trading, that might negatively affect the market fragility.

No Human Factor

This one might be an obvious one, but the more you think about it the more it’ll make sense. The fact of the matter is that the biggest reason so many traditional traders refuse to switch to AI completely is the lack of human factors.

Factors such as experience, personal or professional intuition, and the ability to make quick judgments on the fly are all human-exclusive behaviors that are extremely valued in the trading world. However, no AI, at least currently, is able to mimic or recreate these behaviors.


So, can AI replace trading? Yes, but not currently. We do believe that eventually, AI will have evolved enough to be able to completely replace traditional trading and traders, but it’s currently impossible. 

Although there are certainly various advantages to AI trading, there are also certain disadvantages that just can’t be overlooked from a trading perspective.

With that being said, AI trading systems are a valuable tool that traders can definitely take advantage of to potentially increase their trading profitability and make things easier for themselves.

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Malik Hamza
Articles: 20
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