robot working at desk
Image generated with Midjourney.

Best (and Worst) AI Trading Strategies

By:The tastylive Team

Expert options trader and tastylive founder Tom Sosnoff breaks down AI trading

  • AI technology is impressive, but can it really make trading decisions?
  • Pitfalls include a need for expertise, limited historical data and the risk of overfitting.
  • Despite the allure of AI, the human factor remains critical.

In the grand bazaar of trading, artificial intelligence (AI) has emerged as a new merchant, offering intriguing strategies such as algorithmic trading and machine learning-based predictions.

These innovative techniques promise to enhance efficiency and potentially bolster profits in the financial marketplace, creating a stirring narrative for traders. But traders should tread carefully.

Be careful with algorithms, machine learning

Unveiling the mysteries of algorithmic trading, we find one strategy that uses pre-programmed algorithms for executing trades based on predetermined rules. By scrutinizing historical price data, it unearths trends and crafts profitable trades. The idea is to leverage the speed and computational resources of computers, which, let's face it, think faster than you. The true beauty of algorithmic trading lies in uncovering pricing inefficiencies in the market. But many remain unconvinced of its true value.

Another approach, machine learning-based predictions, enables computers to write their own algorithms. This approach delves into both historical and real-time market data, searching for patterns and relationships that can predict future price movements. However, the precision and profitability of such AI bots in predicting market direction is still up for debate.

Tom Sosnoff breaks down AI trading on a special episode of Options Jive.

AI strategies, like double-edged swords, offer advantages such as automation and the ability to consume vast amounts of data, along with the capacity to evolve with fluctuating market conditions. But there are pitfalls—a need for expertise, limited historical data and the risk of overfitting—all lurking in the shadows.

The human factor is critical

Despite the allure of AI, the human factor remains critical in trading. AI strategies grapple with the challenge of consistently generating profits in the highly efficient financial markets. As someone with a quarter-century experience with machine learning platforms, I can vouch for the arduous journey to achieve success with AI strategies in trading.

Navigating the labyrinth of AI strategies in trading, we recognize its potential benefits but also encounter doubts about their effectiveness and profitability in efficient markets. The intricacies and challenges of AI in trading underscore the indispensable role of human decision-making. Sail on, brave traders, the bazaar has vast offerings and is full of promise.

For more on AI, check out the April issue of Luckbox magazine.

James Melton is managing editor of Luckbox magazine.

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.

Image generated with Midjourney.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.