St Germain en Laye, December 19th 2024.
There are several potential dangers associated with using artificial intelligence (AI) in stock trading. First, over-optimization of AI models can make them overly adjusted to historical data, which could lead to disappointing performance in real-world market conditions. Furthermore, the lack of transparency of complex algorithms, such as neural networks, makes them “black boxes,” making it difficult to understand the decisions made by AI.
AI-based strategies can also react quickly to market fluctuations, which can increase volatility and cause large price movements. Overreliance on AI risks diminishing traders’ ability to rely on their experience and judgment. Regarding cybersecurity, trading algorithms remain vulnerable to cyberattacks, which can lead to significant financial losses. Errors or bugs in AI coding can also lead to erroneous trading decisions, with negative financial consequences.
Finally, this reliance on AI can lead to overconfidence among traders, who may overlook the need for ongoing monitoring and critical evaluation. It is therefore essential for traders to be aware of these risks and put in place appropriate measures to mitigate them, including human monitoring and rigorous model testing.
See full article on BlueberryMarkets.com: Benefits And Risks of Using AI in Trading
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