Have you ever thought about How To Use AI For Trading?
In our busy schedule, we often need more time to research the best stocks from scratch. It seems overwhelming to search for the best stocks according to the present market scenario. However, with AI, this process can be much easier and less time-consuming.
Yes AI will not help you in decision-making and earning returns but it can help you in sorting and filtering stocks as per your instructions. Once you get the filtered list you can analyze each stock and make your trading and investment decisions.
Here we will learn How To Use AI For Trading.
AI tools like ChatGPT act as research assistants, that can help you gather insights from financial data, sector trends, and company fundamentals. To attain the best results from ChatGPT make sure you are giving precise and clear instructions. This will help the AI to give accurate information as per your instructions. Initially, for 1 or 2 days you can practice by giving different instructions to understand how the AI is behaving.
To understand How To Use AI For Trading you must learn what prompt to give to ChatGPT.
Broad questions like, “ Which stock should I buy?” are too broad and will not take you to the desired result. Instead, focus on detailed queries such as:
“List textile sector stocks with a low P/B ratio, high reserves, and expansion plans for 2024.”
Below is the result of this prompt.
Examples of Effective Prompts
Prompt - “Hi Chatgpt help me find the stocks of auto sectors with PB ratio less than 1”
Using any prompt that is specific and clear will help you get an accurate result. This prompt will give you the following results.
Results from ChatGPT
Sector-Specific Insights
“ Hi, ChatGPT I want you to act as an expert research analyst and Give me a list of companies in the pharma sector with strong fundamentals like high reserves and consistent sales growth in the Indian stock market listed on nse or base.
Results from ChatGPT
Remember that your work is not finished after ChatGPT has given you the names of the preferred stocks. Now comes the most crucial steps and time to use what you have learned in the live sessions and from your practice and experiences.
You must go through the fundamentals of the stock.
Once you’ve identified potential stocks, analyzing key financial metrics becomes crucial. Here’s a simple checklist to evaluate companies:
1. Income Statement : Make sure to check sales and profit trends over recent quarters.
You can also do it by giving further prompts to ChatGPT and then verifying the information.
Example Prompt : “Provide me the sales and profit trends for (stock name) over the last year.”
2. Balance Sheet : It is crucial to evaluate reserves and assets to assess the financial health of any company before investing.
3. Debt Levels : Remember to assess debt-to-equity ratios to ensure the financial stability of the company make sure the company you are planning to invein st is in a good position to pay back its debts.
You can also compare the debt levels of two competitors.
Example Prompt: “Compare the debt levels of Stock 1 and Stock 2”
4. Profit Margins : An investor must make sure that the company he is investing in is making profits consistently and is growing because, in the long run, only a fundamentally strong company sustains.
Example Prompt: “What are the gross and net profit margins of (stock 1) for the last quarter?”
Study its behavior in past years and when you are 100% convinced by its performance and you know it will give you the desired result in the given time period, you can invest in the stock.
Now that you know How To Use AI For Trading, let's summarise the points to be kept in mind while using AI.
Be Specific with Prompts
Clear prompts lead to precise results. Avoid vague questions and focus on specifics to enhance ChatGPT’s efficiency.
Stay Updated with Real-Time Data
Cross-check ChatGPT’s insights with real-time market data from trusted sources to ensure accuracy.
Verify Insights
Always double-check ChatGPT’s responses with other reliable sources, such as financial news, analyst reports, or stock screeners.
Streamline Your Strategy
Use ChatGPT to filter high-potential stocks and refine your trading approach with a mix of fundamental and technical analysis.
Keep Learning
The stock market is constantly evolving. Continuously learn and refine your trading skills to adapt to new opportunities and challenges.
By combining ChatGPT with a structured approach to stock market analysis, you can simplify your research and save time. Whether you’re evaluating financial metrics, seeking undervalued stocks, or exploring growth potential, ChatGPT serves as a powerful ally in your trading journey. With the right prompts and a disciplined strategy, you can maximize your returns in the stock market.
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