10/14/2025

10 min read

Artificial Intelligence: Automated Trading

In modern trading, artificial intelligence (AI) and automated systems open up completely new possibilities for analysing vast amounts of data in real time. In our guide, you'll first learn what AI trading is and how automated trading and AI-based systems work. In addition to the advantages and risks of trading with AI, we'll also explain how companies and traders can use AI trading bots and strategies in general to gain a competitive edge.

Explanation: Automated trading uses algorithms to execute trades based on predefined criteria without human intervention – this can ease the burden on traders in day-to-day business.
Function: AI trading uses machine learning and advanced algorithms to optimise trading strategies and make more efficient decisions.
Opportunities: Advantages of AI trading include fast execution of trades, emotional neutrality and continuous market monitoring.
Disadvantages: Risks of AI trading include algorithmic errors, technology-related distortions and the unpredictability of market conditions, which can lead to unexpected losses.

What is AI trading?

AI trading leverages artificial intelligence to make and execute trading decisions by analysing vast amounts of data in real time and adapting dynamically to market movements.

Using machine learning (ML) and advanced algorithms, these systems detect patterns and trends that human traders might miss, continuously learn from new data, and refine their strategies for greater precision and efficiency. By processing large data sets instantly, AI enables faster and often more profitable decisions.

It is important to note, however, that AI trading is a subfield of algorithmic trading: every AI trading bot operates automatically, but not every automated bot uses artificial intelligence, some follow only predefined rules.

Did you know? Automated trading, also known as algorithmic trading, uses computer programmes to automatically execute trading orders based on predefined criteria. The programmes analyse the market in real time and make trading decisions without human intervention.

Automated trading offers key advantages such as faster trade execution and reduced emotional bias in decision-making. These systems continuously track market movements and react instantly to signals. Traders can use backtesting to validate strategies with historical data before applying them in live markets. Automated trading also supports diversification, enabling multiple markets and strategies to be managed simultaneously and spreading risk more effectively.

The technology of artificial intelligence can therefore make trading easier for traders. Despite its advantages, it's important to understand the underlying algorithms and markets well and to regularly monitor and adjust the systems to achieve optimal results.

How does trading with AI work?

AI trading begins with the collection of vast amounts of market data, from historical prices and trading volumes to news and social media sentiment. This data is analysed to identify patterns and trends that may signal future price movements.

Using machine learning, the algorithms learn from this information, refine their predictions and adjust strategies based on past performance, which leads to more accurate risk assessments.

In real time, AI systems then monitor markets and react within fractions of a second, allowing traders to capture opportunities as they arise. Because decisions are based strictly on data and predefined rules, AI trading helps eliminate emotional and cognitive biases.

What are the possibilities with AI trading?

AI trading opens up a wide range of possibilities that go far beyond traditional trading systems. The technology offers innovative approaches to market analysis, pattern analysis, automated decision-making and strategy optimisation. From leveraging advanced algorithms to implementing machine learning and artificial intelligence, AI trading has the potential to transform the way trading functions in markets.

Analysis with language models

Language models, which are used in Natural Language Processing, play an important role in AI-driven trading. They analyse large volumes of textual data such as news articles, financial reports and social media posts to capture sentiment and potential market movements.

These models can interpret trends, patterns and events in real time. This enables traders to make informed decisions based on current information. With the ability to detect subtle clues in texts, language models provide an additional dimension of market analysis that goes beyond traditional numerical data. This in turn helps to adjust strategies more quickly.

AI trading on the stock market

Trading on the stock market with AI also opens up possibilities such as the automation of complex trading strategies and portfolio optimisation. Systems using artificial intelligence analyse historical and current market data to identify profitable trading opportunities. They can respond to market changes in fractions of a second, which is especially beneficial in volatile markets. Furthermore, AI algorithms help minimise risks and maximise profits in trading by continuously monitoring performance and making adjustments. Efficiency and precision are just as valuable to institutional investors as they are to individual traders.

Crypto trading with AI

In the field of cryptocurrency trading, artificial intelligence offers a particular strength. The high volatility and 24/7 open market require fast and precise decisions, which AI systems can deliver exceptionally well.

They analyse blockchain data, market trends and trading volumes to determine the best times to buy and sell. AI trading bots can trade automatically and thus minimise human errors. They also use machine learning to adapt to new market conditions and constantly improve their strategies. Therefore, AI trading in the crypto market can be an important tool for traders. At the same time, the risk in crypto trading remains high – so set clear risk limits.

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Advantages and disadvantages of AI trading

For traders, the technology behind AI trading can offer real advantages, such as faster decisions, 24/7 market oversight and scalable trading. But every technology has its limits and carries risks, such as unpredictable market crashes. Here you'll find an overview of the key advantages and disadvantages.

Advantages and opportunities of AI trading:

AI processes extreme volumes of data in real time, identifies patterns faster than humans and thus supports more precise decisions in trading.
AI bots speed up backtesting and scenario analyses to efficiently optimise strategies and help better assess risk in each market phase.
Systems with AI automate portfolio analysis and risk management.
AI supports emotion-free trading, reducing the impact of biases like greed or fear and enabling more consistent decisions.
AI trading saves time on repetitive tasks (e.g. backtesting, monitoring, journaling) and scales processes through technology.
AI aids in learning and developing strategies (e.g. through language models/sentiment analysis and knowledge preparation).

Disadvantages and risks of AI trading:

An AI bot requires continuous updates to adapt to ever-changing markets; otherwise, model drift may occur and the AI will make poorer predictions.
The performance of AI depends on the quality of the training data, poor or incorrect algorithms can distort the outcome.
AI lacks intuition to make reliable decisions in complex political situations.
AI bots are trained on past data, which limits flexibility, and if conditions change, this can negatively impact AI-based trading.
Traders are dependent on the technology and provider, and a shutdown or change would have a direct impact on trading.
There is often limited transparency, while AI handles sensitive data.
Some providers and platforms make exaggerated claims and impose high costs on traders.

Caution: Despite its advantages, it's important to be cautious when trading with artificial intelligence and not blindly trust the grand promises of providers and platforms. Some providers overestimate the capabilities of their AI trading systems and suggest guaranteed profits or risk-free trading. In reality, there are no guarantees of profit, and even the best AI systems on platforms cannot always predict market movements precisely.

Traders should always maintain a critical mindset and conduct thorough research before investing in AI trading bots or systems. Using AI for trading is always associated with risks. Therefore, traders should always consider the risks as well as the limitations of the technology.

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Conclusion: AI opens up new opportunities for traders

AI trading not only offers the potential to optimise trading strategies and trade more efficiently, but could also contribute to the development of entirely new trading approaches. With the increasing availability of data and the ongoing improvement of algorithms, systems with artificial intelligence are becoming more powerful and more accurate. This could lead to financial trading becoming more transparent, faster and more accessible overall.

Traders who familiarise themselves with these technologies early on could benefit from a significant competitive advantage and better adapt to dynamic market conditions. The future of trading may therefore be shaped by the integration and continued development of artificial intelligence.

Frequently asked questions about AI trading

Here you'll find answers and explanations to the most frequently asked questions about AI trading.

How can I trade with AI?

To trade with artificial intelligence (AI), you first need to choose a suitable trading platform that supports AI trading. After selecting a platform, you can configure an AI trading bot or software based on your personal trading strategies. These bots then continuously analyse vast amounts of market data and automatically execute trades based on the predefined criteria.

However, you should regularly review the strategies to ensure the algorithms are functioning optimally. Additionally, analysing trading results should help minimise the disposition effect (holding onto falling stocks too long and selling rising stocks too quickly) by reducing emotional and cognitive biases. You can use AI trading not only for stock trading but also for more complex financial instruments like CFDs and derivatives.

What is an AI trading bot?

An AI trading bot is a software programme that uses artificial intelligence to make and execute automated trading decisions. Such bots analyse market data in real time and dynamically adjust their strategies. Thanks to today’s advanced technology, bots with artificial intelligence are becoming increasingly attractive to investors.

AI trading bots use algorithms and machine learning to identify trading patterns and trends. They can process vast amounts of data and respond to market changes with new strategies in seconds. These bots can eliminate emotional and cognitive biases, leading to more rational and consistent trading decisions. Through automation, they enable traders to trade around the clock across various platforms without constantly monitoring the market. This applies to stock trading as well as other financial instruments.

Is trading with AI dangerous?

AI trading involves risks because algorithms can be faulty and market conditions can change unpredictably. Dependency on technology can lead to losses if systems fail or are not properly adjusted.

Although trading with artificial intelligence offers many benefits, it is not without risks. Cognitive biases may be reduced, but technological and algorithmic biases can still occur. Therefore, you should regularly monitor and adjust AI systems and have a good understanding of the underlying algorithms.

Is it worth letting AI do the trading?

Letting artificial intelligence do the trading can be worthwhile because it can act efficiently and without emotion while analysing large amounts of data. However, you should consider the costs and risks and continuously monitor the systems.

Using artificial intelligence in trading offers many advantages, such as fast information processing and filtering out emotional influences, which is particularly beneficial in stock trading. This can lead to better trading decisions and potentially higher profits. However, the implementation and maintenance of such systems are often expensive, and there's always a risk of algorithmic errors and market volatility. Traders should therefore carefully weigh whether the benefits outweigh the costs and risks, and ensure they understand and can monitor the technology properly. Overall, it can be said that while the use of AI on various platforms offers advantages, it should be approached with care.

Can you invest passively with AI trading bots?

Yes, passive investing is possible with AI trading bots, as these bots make automated trading decisions without requiring constant intervention. The bots use algorithms to analyse market data and respond to market movements in real time. This makes it possible to pursue a passive investment strategy while the bot continuously monitors the market and executes trades. Despite automation, traders should regularly monitor the bot’s performance and ensure the underlying algorithms are functioning optimally.