Best Brokers For Machine Learning
Machine learning brokers provide sophisticated programs to enhance trading strategies. The best solutions analyze vast amounts of market data to identify potential opportunities, helping investors make informed trading decisions. And whilst historically machine learning services were used by large banks and hedge funds, an increasing number of solutions are now available to retail traders. This guide explains how machine learning works, tips for getting started, plus the top supporting brokers in 2024.
Best Brokers For Machine Learning for United States
Machine Learning Explained
Machine learning is essentially a computer program that is trained to recognize information and make increasingly accurate predictions or classifications. Powerful algorithms are essentially fed large amounts of data which is then analyzed before a resulting estimation is provided based on the program’s objectives. This estimation is then compared to an accurate model and if an error is found, it is corrected. Importantly, machine learning programs will continuously run and correct errors until the algorithm is deemed sufficiently accurate.
Let’s look at an example…
You ask a computer to identify dogs from 10 photos of cats and 10 photos of dogs. On the first attempt, 50% of the computer’s classifications are correct with 5 of the 10 dogs identified. The algorithm then adapts, runs again, and next time it is correct 70% of the time, with 7 dogs identified. This optimization process is repeated until the accuracy reaches an acceptable level, for example, 90%, with 9 of the 10 dogs identified each time.
Machine learning is fairly common nowadays with applications in various industries, from financial technology to social media, gaming and manufacturing. Programs have been used to beat world chess champions, filter spam from email inboxes, detect fraudulent bank transactions, or run virtual assistants like Alexa, Siri and Google Now.
How Brokers Use Machine Learning
Success in trading often requires collecting and analyzing large amounts of market information, from price data to figures on volume and volatility. As machine learning algorithms are designed to process masses of data in a short space of time, they are useful for many traders.
Online brokers offer machine learning services across two main categories:
Alerts, Indicators & Signals
Alerts, indicators and signals help identify potential trends and highlight entry and exit points. Machine learning can be used to interpret historical data and real-time market activity to make increasingly accurate predictions. Programs can scour news feeds and social media platforms to judge market sentiment. Equally, algorithms can compare a currency’s value and purchase price parity to identify potential triggers.
Importantly, the best brokers for machine learning offer a library of community-created alerts, indicators and signals. Some of these will be free while others may come with a one-off charge or a monthly subscription fee. TradingView, for example, has close to 300 trading ideas, alongside more than two-dozen scripts. In addition, Capital.com introduced its own AI-powered solution in eQ, which analyzes trader activity and provides personalized tips. The broker found that clients regularly reading and acting on their messages were 11% less likely to receive a margin call while newcomers to the firm have been 6.5% more profitable.
Tech-savvy traders can also develop their own custom algorithms. These could be used to analyze earnings reports or identify spikes in trading volumes. Just make sure to backtest any custom applications against historical data to improve their accuracy. Also look for platforms that provide tutorials and tools to help you code your own solutions.
Automated Trading
The best brokers for machine learning offer sophisticated trading algorithms and Expert Advisors (EAs). These are essentially automated trading bots that execute trades following a specific strategy and criteria. An algorithm, for example, could analyze volume and volatility metrics across major forex pairs and take out a short position when it believes the value of the USD is going to fall.
Importantly, robots offer hands-free trading because after setting up and refining your algorithm, you can leave it to enter and exit positions with minimal input. And by incorporating machine learning into a bot, its success rate should increase as the algorithm becomes better at recognizing particular patterns. They also bring the added benefit of not letting emotional factors and decision-making interfere with your strategy.
Interestingly, eToro now offers its own machine learning-powered CopyPortfolios, where data scientists bundle high-performing and low-risk traders together so that clients can mirror their positions. This is another good example of brokers incorporating machine learning principles and technologies to provide clients with better trading tools.
Benefits of Trading with Machine Learning
- Faster Analysis: Less time is spent analyzing markets because algorithms can process many months of historical data in a fraction of the time a human could. It also means you can analyze many markets, sectors and industries simultaneously.
- Quicker Trades: Trading bots and machine learning-powered algorithms can execute positions as soon as criteria are met. This can help you capitalize on slight market changes where there is only a short window of opportunity. It can also help reduce slippage and manual delays.
- Avoid Emotion: Trading is a highly emotional activity due to the capital at risk. This can easily cloud judgment and lead to inadequately planned or unfavorable trades. Fortunately, machine learning is less influenced by emotional bias and instead simply follows the numbers.
Drawbacks of Trading with Machine Learning
- Large Initial Investment: Developing your own machine learning algorithm takes an investment of both time and capital. This is particularly true where you need to spend time testing and refining programs. Equally, if you buy and download a third-party piece of software or AI, you may have to spend several hundred dollars or even many thousands.
- Profits Are Not Guaranteed: Just because you are using a machine learning algorithm does not mean that every trade will result in a profit. All trading is risky and the past performance of an asset is not always an accurate indicator of future market activity.
Comparing Machine Learning Brokers
The best brokers for machine learning offer various tools and trading services at different price points. Consider the key elements below when choosing a provider:
Programs
The principal factor to take into account is the quality of the machine learning tools available. So when doing your research, try to find out as much information as possible. For example, can you read the algorithm script to gain a better understanding of how the program functions and how it will learn? You can often find scripts online on websites like GitHub. Equally, if you plan on using an automated trading bot, try and find out how you can adapt the program to carry out your strategy.
One tip is to head to discussion forums and threads on Reddit or Telegram. Here you may be able to find reviews and ratings from other users. The best brokers for machine learning also publish performance statistics on their websites.
Cost
Another important factor is the cost of using a broker’s machine learning services. This could be in the form of a one-time subscription, increased spreads or a commission on every trade. Keep in mind that you will need to make sufficient trading profit to offset these charges. We would also caution against using free tools as the quality and reliability may be reduced versus paid-for solutions. Entry-level algorithms are available from just $10 while advanced programs with an impressive track record can cost several thousand.
Importantly, many of the best brokers with machine learning tools offer a trial period or demo trading account with simulated funds so you can test out their services.
Other Factors
Additional considerations include:
- Markets: Ensure that the broker you plan on using offers access to the markets you wish to speculate on. For example, if you want to use machine learning for high-frequency forex trading, find a broker that supports this. Equally, if you want to trade cryptos, stocks or commodities, open an account with a brokerage that offers wide market access.
- Trading Platform: The platform available will have a significant impact on your trading experience. Solutions such as MetaTrader 4 and MetaTrader 5 are some of the best in the industry with plenty of customizable charts, alerts and indicators. However, it is important to check how machine learning tools will integrate with your terminal. Does the broker offer free APIs, for example?
- Customer Support: A reliable customer support team will help you solve issues promptly. Look for brokers who offer 24/7 support either via a phone hotline, live chat or popular social media channels. Also bear in mind that most customer service representatives will have limited technical knowledge and expertise. With this in mind, you may want to consider brokers that have an active investor community and forums where you can talk through tooling issues with other developers and traders.
- Regulation: The best brokers for machine learning trading hold licenses with respected financial regulators, such as the Cyprus Securities & Exchange Commission (CySEC), the UK Financial Conduct Authority (FCA), and the US Securities & Exchange Commission (SEC). Regulatory oversight means that a broker must follow strict rules on how they treat and protect clients, from negative balance protection to segregated customer accounts.
Bottom Line on Brokers for Machine Learning
The top brokers with machine learning tools can add a new dimension to your trading. Leading AI and software can help reduce the time spent manually analyzing the markets, increase the speed and quality of order executions, and allow you to implement multiple strategies on various assets simultaneously. As machine learning becomes more ubiquitous across fintech firms, the quality of trading programs should also improve. See our list of the best machine learning brokers to start trading today.
FAQ
Is It Legal To Use Machine Learning For Trading?
Yes, it is legal to incorporate machine learning into your retail trading activities. Many big financial corporations, brokers and banks already use machine learning to improve their own services. With that said, some platforms do restrict the use of powerful trading tools and programs so check for any restrictions before depositing funds.
Does Machine Learning Make Trading Safe?
Machine learning does not remove the risk of losses when trading on the financial markets. Whilst machine learning programs can help you execute trades, you will still need to employ various risk management alerts and tools, for example, stop-loss orders. Fortunately, the best programs incorporate risk management techniques into their solutions.
Can Anyone Use Machine Learning For Trading?
Machine learning is accessible to everyone, regardless of their skill or experience level. This is because the top brokers provide a library of free and paid-for indicators, alerts and bots. With that said, having an understanding of the language that scripts are written in is helpful.
What Are The Best AI Trading Programs?
There is no exhaustive list of the best automated trading programs for retail investors. This is because what makes one program better than another will depend on your budget, risk appetite and trading objectives. With that said, some of the most popular AI programs include TrendSpider and EquBot. GitHub also has details of many more solutions.
What Fees Does A Machine Learning Broker Charge?
Online trading brokers make money through several channels. The most common is through spreads and trading commissions where they essentially take a cut from each trade. Another is through subscription costs where clients have to pay weekly, monthly or yearly to access their services. Finally, brokers may impose charges on transfers whereby customers pay a fee when they make a deposit or withdrawal between their bank and brokerage accounts.