3 Trends of the Neural Network Usage for Algorithmic Tradingby@mikhailkirilin
462 reads

3 Trends of the Neural Network Usage for Algorithmic Trading

tldt arrow
Read on Terminal Reader

Too Long; Didn't Read

A neural network is an artificial intelligence system that uses a variety of data points to analyze and make predictions. With the help of neural networks, investors can get a comprehensive view of their long-term goals. The data collected by neural networks have to be paired with human-generated predictions. Many people who use neural networks end up misappropriating the technology due to their lack of knowledge about how to use it properly. The rise of high-frequency trading has led to the emergence of computer-based trading systems.
featured image - 3 Trends of the Neural Network Usage for Algorithmic Trading
Mikhail Kirilin HackerNoon profile picture

@mikhailkirilin

Mikhail Kirilin

Learn More
LEARN MORE ABOUT @MIKHAILKIRILIN'S EXPERTISE AND PLACE ON THE INTERNET.

Credibility

react to story with heart

Developers of AI systems can create complex algorithms for a wide range of use cases, including in investing and trading. With the help of neural networks, investors can now make informed decisions by analyzing the data collected by these systems.


However, the data collected by these networks have to be paired with human-generated predictions. With the help of neural networks, investors can get a comprehensive view of their long-term goals.

The term

A neural network is an artificial intelligence system that uses a variety of data points to analyze and make predictions. It can also feed historical data to other systems.


Although neural networks are commonly referred to as traditional modeling techniques, they are more advanced and have a self-training component. This type of AI system learns and improves its results by analyzing the data collected by its system. The name of this type of AI is derived from the brain's neural networks.


Each artificial neuron has a specific weight and threshold that it uses to determine if it should be sent to the next layer. Increasing the amount of training data that it collects will help improve its accuracy. As more people use neural networks in trading, their performance will also be adjusted.

The trend of being misconceptualized

Unfortunately, many people who use neural networks end up misappropriating the technology due to their lack of knowledge about how to use it properly. This is because they rely on the software they use without having the proper training. One of the most important steps that a trader should take when using a neural network is to prepare it thoroughly.


The creator of a trading idea is the person who should be responsible for developing and formalizing the concept. This process can be done in various ways, such as testing and improving the idea, removing the plug, and eventually, getting rid of it. Before you start using neural networks in trading, it's important to understand that their goal is not to invent winning trading ideas.


A neural network is not intended for inventing winning trading ideas. It is intended for providing the most trustworthy and precise information possible on how effective your trading idea or concept is. – Dima Vonko @ Investopedia


Dima Vonko, a software entrepreneur and Investopedia writer, shared an in-depth explanation of creating a strategy for neural network usage in trading:


Before you start using neural networks in investing, it's important to understand that their goal is not to invent winning trading ideas. Instead, it's important that the creator has a clear idea of what he or she wants to achieve by using the strategy.


The next step in the network preparation process is to improve the quality of the model. This process can be done by modifying the data set used by the system and adjusting its parameters. Doing so will help improve the model's overall performance. Unfortunately, most neural-network models can't be used for an indefinite amount of time.


One of the most common mistakes that people make when it comes to using a neural network is to rely on a simplistic approach to forecasting the price. This method doesn't take into account the various long-term interdependencies and fails to capture the significant gains that can be made.

The trend for creating communities

The rise of high-frequency trading has led to the emergence of computer-based trading systems. In 2018, about 80% of the stock transactions in the US were carried out by machines. Because of this, investors and traders cannot trade with small spreads and are forced to use robot developers.


Some develop strategies and algorithms, while others write them according to the set of instructions. The creation of trading robots has created a new source of income for both the end-users and the creators of indicators and bots. This is because the developers of these systems tend to work together to create communities of interest. One of the largest platforms for this type of trading is MQL5.com.


Trading-related discussion topics on a community forum – taken from MQL5.com

Trading-related discussion topics on a community forum – taken from MQL5.com


Such communities are composed of individuals who are ready to create trading solutions using an algorithm trading bot. For individuals who are interested in learning more about AI, this is a place to start. Besides being able to develop their skills in programming, many communities also help individuals improve their knowledge of various subjects, such as business management.


Some communities are more like a community where you can interact with other individuals who are experts in the field of ML. These are also more likely to provide you with the necessary support to solve your own problems.

The trend to be in a need of a human

AI trading is expected to become more accurate and successful over time. Similar to how humans have developed programs to win at chess and poker, this technology will eventually become more successful.


Since AI is expected to become more prevalent in the financial sector, it’s important that companies establish training programs for their employees on how to use it. A survey revealed that over 70% of workers in the US are positive about the use of AI in their workplace.


To become more productive, employees should receive training that will help them use AI in their daily operations. This doesn’t mean they should learn how to program algorithms, but rather, they should learn about the various capabilities of data science. This includes learning about the multiple aspects of data science, such as clustering, classification, and regression analysis.


A study conducted by The Conversation revealed that certain AI-powered funds were underperforming human-led trading companies. Based on this finding, they concluded that managers and analysts are more likely to perform well when using AI.


Despite the various shortcomings of AI, empirical evidence shows that humans are ahead of machines when it comes to making decisions under uncertainty. This is because how humans have the necessary mental shortcuts to make quick decisions.


In the future, we should combine the capabilities of AI and humans instead of treating them as separate entities. This would allow them to make better decisions and improve the efficiency of their operations.

Conclusion

Despite the increasing popularity of neural networks, they are not as widely used as other types of trading. This is because they are still in their early stages of development. However, we believe that they will eventually become more popular. One of the most important factors that traders should remember when it comes to using neural networks is to stop looking for the best one and, instead, be reliant on the trading strategy itself.

RELATED STORIES

L O A D I N G
. . . comments & more!
Hackernoon hq - po box 2206, edwards, colorado 81632, usa