How traders can identify patterns and discover trading events more quickly and objectively with the help of AI
Experienced traders know the advantages of trading chart patterns to maximize earning potential. Chart technicians, otherwise known as chartists, study charts of a security’s historical price to make a prediction of its future price target.
Traders and chartists draw charts to identify when a security has a breakout pattern in order to take timely action regarding when to buy or sell. That said, there are limitations to the speed and coverage that a human can handle which ultimately leads to missing out on profitable trades or making the wrong judgment calls.
Artificial intelligence (AI) and machine learning (ML) technologies can augment human’s limitations, and become every trader’s best friend. Let’s explore why you should incorporate it into your trading strategy.
How do traders and chartists find chart or candlestick patterns today?
There are many different types of chart and candlestick patterns. Chart patterns typically span over a course of weeks versus candlestick patterns, which span over a few days. If you’re a trader interested in learning more about the topic of charting you can consider joining the Chartered Market Technician (CMT) program. For more casual learners, there are many online resources detailing the different types of chart patterns and how to take action from them.
What are the challenges and limitations chartists face today?
After investing a lot of time and money in charting program fees, exams and certification, all chartists who operate without the assistance of AI and ML face these common challenges.
• A manual process. Chartists need to look at each individual graph and use different charting tools to draw patterns to confirm and identify patterns.
• Limited by coverage. Chartists are limited by their own bandwidth. For an individual, it isn’t humanly possible to cover and monitor all securities 24/7. A critical breakout pattern that happened in the past is a lost opportunity. Chartists need a way to find breakout patterns as they happen to maximize earning.
• Prone to biases and errors. Two chart technicians can view the same graph and draw two different conclusions as to what type of pattern it is. For better or worse, humans have subjective biases that can cloud judgment.
Augmenting human abilities with trained machines
Machines can be programmed and trained to process a vast amount of historical information faster and more objectively.
• Speed. Instead of manually searching, drawing, and tracing to find patterns, computers can do this automatically. Armed with AI pattern recognition technology, chartists can now spend more time making strategic trading decisions faster.
• Timeliness. Unlike humans, computers don’t sleep and never get tired. With enough compute power, machines can scan and monitor the entire market, 24/7.
• Objectivity. Computers are logical. They don’t have any subjective biases when it comes to pattern recognition. Furthermore, with machine learning, AI algorithms continuously improve and collectively gets better over time.
Pattern recognition technology in action
Kavout’s pattern recognition platform-as-a-service (PaaS) and Software-as-a-Service (SaaS) solution delivers unbiased and objective patterns using technical analysis theories and big data.
Our recognition service identifies patterns based on millions of historical data points in real time. Using multi-dimensional technical analysis with over 10,000 filters, our service provides objective information that can be used to find trading opportunities.
The pattern recognition service scans thousands of stocks and pricing information in multiple equity markets. It’s currently available for stocks, but can be developed for many asset types such as currency, commodity and others.
For technical traders who are interested in researching historical patterns and discovering real-time trading opportunities, hiring an AI-chartist can be a very cost-effective way to combine what you do best and what machine learning can offer to maximize your earnings.