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A.I. Oscar—The Benefits of AI in Your Trading Journey

A.I. Oscar—The Benefits of AI in Your Trading Journey

  • 01 January 2025
  • By OCBC Securities
  • 10 mins read

In your trading journey, the use of Artificial Intelligence (AI) could involve employing tools that apply advanced computational techniques and algorithms to consolidate financial data, predict possible market trends and streamline market insights. AI supplements traditional trading analysis methods by leveraging machine learning, natural language processing and other subfields.

AI excels at processing a vast amount of complex data, both structured and unstructured, to uncover potential trends and consolidate information. In financial markets, this includes analysing financial metrics, economic indicators and alternative data sources such as social media sentiments and news headlines. With this, AI can help summarise and streamline investment information, enabling investors to make more informed trading decisions.

Potential advantages and disadvantages of Using AI

Advantages

Efficiency and cost reduction
AI streamlines market information by swiftly scanning through a vast amount of data from thousands of stocks across major markets. Automation of tasks such as data collection and the meaningful presentation of data to users reduces costs and saves time.

For instance, the US market is highly volatile, requiring thorough research before investing. AI can assist with this process by gathering information on stocks in parallel and quickly generating insights based on certain pre-defined parameters. This efficiency surpasses what a human can realistically achieve in a day, providing more timely and comprehensive information to users which can serve as a resource to support more informed trading decisions.

Data-driven
The sheer amount of information available, especially in volatile and uncertain markets, can be overwhelming. This can make it challenging for investors to cut through the noise and identify the most relevant insights. AI can serve as a tool to help with this by streamlining and distilling vast amounts of information, providing investors with a clearer view of the market.

Enhanced personalisation
In an information-heavy world, AI can filter irrelevant information and curate insights relevant to each investor. For example, some AI tools may provide relevant market insights and news or stock ideas that are tailored to you based on pre-defined parameters such as your trading history, demographic information, and so on. 
Disadvantages

Poor data quality
While innovative, using AI presents its own risks. A key concern is its reliance on data quality. Flawed, incomplete or biased data can lead to poor quality outputs. Furthermore, AI models trained on historical data may struggle to adapt to unexpected market events that deviate from past trends*.

Potential systemic risks
The widespread use of AI in financial markets can also pose systemic risks. Reliance on similar AI-driven information may amplify herd behaviour, exacerbating market volatility during crises. Cybersecurity is another significant issue, as integrating AI into trading platforms increases exposure to hacks and data breaches.

Ethical and regulatory concerns
Ethical and regulatory concerns further complicate matters. Ensuring fairness, accountability and compliance with evolving regulations remains a challenge. Additionally, developing and maintaining AI solutions can be cost-prohibitive for smaller firms, with benefits not always guaranteed.

Over-reliance on AI
Over-reliance on automation can lead to complacency and neglect human oversight. While AI excels at data processing, it misses qualitative factors or nuances best assessed by humans. Excessive automation could also result in unintended consequences, such as algorithmic clashes destabilising markets.

To mitigate these risks, a balanced approach is essential.

Examples of AI applications in the financial sector

AI is being increasingly leveraged in the financial sector as an advanced tool to support activities such as real-time monitoring, analytics and stress testing. 

Here are some examples of use cases for AI in the financial sector:

 
Real-time risk monitoring
Predictive risk analysis
Stress testing and scenario analysis
Fraud detection and cybersecurity
Portfolio risk diversification
Examples
AI systems can continuously monitor market movements, portfolio performance and external factors like geopolitical events or news. By doing so, they can provide real-time alerts for potential risks, enabling more swift action to mitigate possible losses. For example, some AI algorithms can be used to track stock volatility or credit exposures and flag unusual patterns. However, AI systems can fail to provide timely alerts if they are hindered by network latency or delayed data feeds, which can compromise their ability to detect risks in real-time.
Using machine learning models, some AI models analyse historical and real-time data to forecast potential market trends and economic downturns. This predictive capability could highlight possible market movements for investors to anticipate and prepare for risks such as stock market corrections or sector-specific downturns, but investors must note that such predictions are based on the past and may not always be accurate*. 
AI models can be used to simulate a variety of market conditions and stress scenarios to assess a portfolio's resilience. These simulations can help investors understand how their investments may perform under adverse circumstances, such as sudden interest rate hikes, recessions or natural disasters. For this, however, investors should recognise that AI systems can only be as good as the data they are trained on; limited and incomplete data can impede AI’s ability to simulate scenarios.
AI systems can excel at identifying anomalies in transaction patterns, which could help detect fraud or unauthorised access in real-time. Moreover, in an era where cyber risks are a growing concern, AI’s ability to secure sensitive financial data is invaluable. With that said, AI systems may not always have a complete understanding of the context of a transaction which can lead to false positives or false negatives.
AI-driven tools can be used to analyse asset correlations and potential diversification opportunities to reduce concentrated risks in a given portfolio. These models may optimise asset allocation by balancing potential returns against associated risks. However, such models are vulnerable to volatile markets where they can fall short in identifying market changes instantly.

As AI evolves, the breadth of its use cases will continue to expand. Improvements in natural language processing (NLP) will enable deeper insights from unstructured data, such as earnings call transcripts or regulatory filings.

With that said, while AI offers significant benefits, it is crucial to still ensure human oversight to account for factors such as ethical considerations, unforeseen complexities, and other qualitative factors.

Meet A.I. Oscar, your AI-powered virtual trading assistant on iOCBC

A.I. Oscar, jointly developed by OCBC Securities and OCBC AI Lab, is an AI virtual trading assistant meticulously trained using a complex deep-learning network. A.I. Oscar can support your trading experience with advanced machine learning and deep learning algorithms that can help streamline information for you.

A.I. Oscar dynamically learns from a vast amount of market data, identifying potential patterns and trends while continuously improving its predictive capabilities. By analysing historical price movements*, technical and fundamental indicators, A.I. Oscar generates personalised stock ideas tailored for each investor based on their trading history with us and basic demographic data. 

When investors consolidate their shares on the iOCBC trading platform, A.I. Oscar analyses their entire portfolios, delivering deeper insights and more targeted stock ideas based on their holdings and trading history with us. As such, A.I. Oscar empowers investors in their trading journeys by providing timely information, a crucial advantage in making more informed trading decisions.

How A.I. Oscar can help you

Feature
Market coverage
AI watchlist
Data-driven insights
Explanation
Provides stock ideas for Singapore, Hong Kong and US markets.
Offers 15 personalised stock ideas based on your trading history with us and basic demographic data, refreshed weekly for up-to-date insights.
The AI algorithm takes into account the past prices of stocks over a 12-month period*, along with technical and fundamental indicators, and news.

Source: OCBC AI lab and Refinitiv

You're the boss – A.I. Oscar is your personal virtual assistant

It is important to note that A.I. Oscar is a resource tool and not a decision-making or financial advisory service. A.I. Oscar only considers your general demographic data and trading history with us. It does not consider your full profile, trading style, risk appetite or financial circumstances. It helps you stay informed with news and gives you fresh ideas but does not constitute or replace personalised financial advice. You should independently evaluate A.I. Oscar's outputs and consider your own investment objectives, financial circumstances and particular needs.

Important notes

*Past performance is not necessarily indicative of future performance.

Trading in capital markets products and borrowing to finance transactions (including, but not limited to leveraged trading or gearing) can be very risky, and you may lose all or more than the amount invested or deposited. Where necessary, please seek advice from an independent financial adviser regarding the suitability of any trade or capital markets product, taking into account your investment objectives, financial situation, or particular needs before making a commitment to trade or purchase the capital markets product. In the event that you choose not to seek advice from a financial adviser, you should consider whether the capital markets product is suitable for you. You should carefully consider and exercise caution in making any trading decision whether or not you have received advice from any financial adviser.

The information provided herein does not take into consideration your investment objectives, financial situation, and particular needs. Any reference to a company, financial product or asset class is used for illustrative purposes only. Where any graph, chart, formula or device is included, there may be limitations and difficulties in respect of its use. Where any historical information is included, past performance is not necessarily indicative of future performance. OCBC Securities Private Limited (“OCBC Securities”) makes no representations or warranties (including as to the accuracy, timeliness or adequacy) in respect of any information provided herein, or in your personalised AI watchlist (generated based on demographic data and your trading history with OCBC Securities), and it should not be relied upon as such. Such information should not be construed as personal trading recommendations or financial advisory in any manner from OCBC Securities. OCBC Securities does not undertake any obligation to update the information or to correct any inaccuracy that may become apparent at a later time. OCBC Securities shall not be responsible for any loss or damage howsoever arising, directly or indirectly, as a result of any person acting on any information provided herein.

The information provided herein is intended for general circulation and/or discussion purposes only and may not be published or circulated in whole or in part without our prior consent.