Investors guided by AI trading algorithm
Attracted by the market volatility that has marked 2020, the number of retail online investors in Australia has surpassed 1 million for the first time.
Between December 2019 and June 2020, the number of active online investors grew by 41 per cent from 750,000 to 1.06 million, according to financial services industry research company Investment Trends in its 2020 1H Online Investing Report.
Recep Peker, research director at Investment Trends, says the record flow of first-time investors reflects a trend to online trading that was already under way before being magnified by the COVID-19 pandemic as investors moved in to exploit market volatility
“First-time investors typically consist of young Australians in the Zoomer or Millennial age group, but the pandemic-induced lockdown has accelerated these trends,” Peker says.
“This year, the vast majority of first-time investors are under the age of 40 (70 per cent), which represents a significant shift from last year (51 per cent).”
Having successfully attracted this new legion of online traders, Peker says there is a heightened responsibility for online brokers to “help investors navigate this uncertain investing climate”.
Anubhuti Shrivastava, a writer specialising in software design and development, says building an ideal online trading platform “in the current dynamic marketplace” is not without challenges.
However, she notes five trends in online trading platform development that mark the leaders among the pack: advanced charting tools, user customisation, high-speed transactions, cloudbased and mobile functionality, and research tools that use big data.
“Investors and traders need excellent research tools that can help them in identifying trends and spotting opportunities that are suitable to fulfil their investment objectives and make better trading decisions,” she writes in LearnBonds, an online investment publication specialising in news and information for millennial investors.
Today’s online traders understand the power that technology brings to their decision-making, particularly when it comes to built-in artificial intelligence (AI) and machine learning (ML) capabilities.
This was reflected in JP Morgan’s E-Trading Survey 2020 which found that 66 per cent of traders believe that AI and ML optimise trade execution and 58 per cent believe that AI and ML represents an opportunity to hone their trading decisions.
There’s no doubt that thanks to accessible and affordable online trading, and vast streams of readily available investment data, it has never been easier to invest in shares.
But making it easier to play the sharemarket doesn’t necessarily make it easier to make money, as Sydney technology entrepreneur Tui Eruera discovered two years ago.
“I had always been a passive investor and when I sought to become more involved I learned that I, frankly, wasn’t very good at it,” recalls Eruera, who is founder and CEO of fintech start-up Jaaims Technologies.
“So I went looking for a technology solution and couldn’t find anything. Using my technology background, I locked myself away and developed an artificial intelligence-based trading algorithm that simplifies stock selection and trade execution.”
That algorithm became the basis for an automated mobile stock-trading application that uses AI to analyse investment data in real time and automatically make trading decisions.
As Jaaims is not a broker, the app is connected to the user’s broker account and the trading algorithm sends buy and sell orders to the user’s share trading platform.
With COVID-19 providing the ideal volatility for novice online traders to chance their arm, the times suit the Jaaims app.
“Many investors are inexperienced traders and three-in-four new online traders lose their entire investment capital when they begin trading,” Eruera says.
“Using an automated trading platform removes the emotion from trading by automating trade execution and calculating the position size best suited to each user’s trading portfolio.”
Noting the proliferation of complex technology products aimed at making trading easier, Eruera says Jaaims makes a virtue of simplicity.
“Jaaims cuts through that complexity with a simplified product offering. We offer full transparency in our results, detailing our return rate for each equity to date within the application.”
While online traders have access to unprecedented amounts of information, this can be both a help and a hindrance for inexperienced traders. Jaaims can access, analyse and automatically act on this data.
Jaaims’ AI engine analyses 250-plus news, financial data and social media sources in real time and updates its stock recommendations every 15 minutes. The app collects and analyses financial data from the Australian, New York, London, Frankfurt and NASDAQ stock exchanges, market news from sites such as Bloomberg, Reuters and The New York Times, as well as social media sites.
Jaaims comes in three formats: Starter, Standard and Professional. While the app was originally conceived to benefit inexperienced traders, Eruera says sophisticated investors use Jaaims as one component of a diversified investment strategy.
Between June and October, Jaaims beat the market by 13.9 per cent compared to the MSCI World Index.
Jaaims Technologies has an Australian financial services licence. The company expects to launch its app in the UK in 2021 and in the US in 2022.