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The High Failure Rate in Day Trading
Recent studies paint a stark picture: 40% of day traders quit within the first month, and only 13% persist beyond three years. Even more telling, a mere 1% achieve lasting success over five years. Another daunting figure: Statistics reveal that about 10-15% of online poker players consistently profit, a success percentage much higher than that in the trading world.
The Role of Behavioral Biases
One major culprit behind these losses in day trading is behavioral biases and the tendency to overtrade. An MIT study highlights that overtrading can diminish a portfolio’s value by over 30%, comparing the highest turnover bucket to the lowest in the study. This is often exacerbated by the illusion of control, where traders overestimate their ability to predict market moves, fueled by overconfidence and confirmation biases.
Prospect Theory
Behavioral economics provides further insights through prospect theory, explaining that traders tend to prematurely sell assets with small gains while holding onto losers, hoping for a turnaround. This tendency not only amplifies losses but also reduces overall profitability.
The Advantages of AI-Driven Trading
Recent studies indicate that trading and investment strategies powered by machine learning often outperform traditional methods. These AI models leverage non-linear techniques to predict stock returns more effectively than conventional linear regression approaches. By directly scanning financial data, such as prices and volumes, these models autonomously extract features, reducing the biases introduced by human selection and traditional technical indicators.
QUINETICS: A Platform for AI Trading Bots
QUINETICS emerges as a pivotal solution to these challenges. This platform empowers traders to build and deploy AI-driven trading strategies for stocks, ETFs, and cryptocurrencies in seconds and without requiring coding knowledge. By automating signal generation and trading decisions, QUINETICS helps mitigate the impact of human emotional biases, leading to more disciplined and rational trading.
A Case Study: Allianz SE Using QUINETICS
Strategy Setup
We select Allianz SE as the asset in the strategy configuration together with technical indicators and then click on “Load strategy” to launch our first AI strategy.
The Results
A predictive AI strategy on past returns of the Allianz stock would have returned nearly 33% over the past year at a Sharpe Ratio of 2.5. This compares to 17% of the stock itself. Of course, backtested performance is not an indicator of future performance.
Conclusion
In conclusion, the automation of trading through AI-driven strategies like those offered by QUINETICS provides a compelling advantage. It not only enhances the efficiency and effectiveness of trading strategies but also helps traders navigate the complex and volatile world of financial markets with less emotional interference — all while leveraging the power of AI.
FAQs
What are the benefits of AI-driven trading strategies?
AI-driven trading strategies can provide higher returns, improved accuracy, and reduced emotional bias. By automating signal generation and trading decisions, traders can make more informed decisions and navigate markets more effectively.
Is AI-driven trading accessible to everyone?
Yes, platforms like QUINETICS offer an accessible way to build and deploy AI-driven trading strategies without requiring extensive coding knowledge.
How can traders get started with AI-driven trading?
Traders can get started with AI-driven trading by signing up for free on QUINETICS and following their beginner-friendly guides to building and deploying AI trading bots.
