AI Trading

AI (Algorithmic) Trading Explained

7 min read

AI trading aka algorithmic trading software, does not have to be of the HFT (high frequency trading) variety to out pace you on the order book. Indeed, many are not. They just have to be faster than you. And most, if not all, are faster than the bulk of retail traders. Algorithmic trading software is used in conjunction with powerful day trading computers designed to beat you at your own game.

When we look at AI trading aka algorithmic trading software, it really hasn’t been around a long time, but it’s certainly changed the way markets are traded today. Markets have always been complex; with multiple participants all trading on different strategies, and all seeing different stories in the charts. So, what has changed since AI Trading (Artificial Intelligence Trading) has popped up on the scene?

Any trader who’s been around for awhile can tell you, there is a new breed of participant in the market that is especially dangerous: AI trading aka algorithmic intelligence traders. These traders use computer programs to scan the market for opportunities and swoop in at the right times, cashing in on retail trader losses in milliseconds, before they even know what hit them.

In this article, we’ll cover a few ways mathematical AI trading is used to beat the market, and a few ways you can get some edge back from them.

Rise of the Machines

Orrin Bach (Glenn Fleshler), Billions, Season 1: Pilot

AI traders are in and out of the position before your chart fully renders on your screen. To them, you’re just a source of liquidity, the real competition is the other machines outpacing their trades.

It was estimated that in 2014, over 75% of trading volume was driven by AI trading based algorithms. This number is likely closer to 90% today. 

With high speed data connections directly into trading exchanges, autonomous decision making made by extremely sophisticated algorithmic trading software, automated risk controls, the ability to do advanced calculus in milliseconds, instant order execution, and near instant profit taking, these algorithms have been engineered and back tested to outperform the average trader. 

AI (Algorithmic) Trading

Today I used FlowTrade to track what the algos were doing on $AAPL so I could find a divergent setup. I went long off AM lows and sold near highs capturing a several dollar move.

AI Trading Done Right

My advice to counter AI trading software may seem counter-intuitive, but I believe it is the best way to trade against the machines: don’t even try to beat them at being faster. Instead, beat them by slowing down.

Do this by looking at longer term time frames, and being more patient with your trades. Without a lot of experience and skill in intra-day trading, scalping, and other higher speed trading strategies that are high risk you will struggle and fail. It’s not your fault.

These algorithms are programmed to take advantage of human fear, greed and our natural impulses. Very simply they are programmed to target human emotions with math.

Instead, take your time to identify trends on multiple time frames before trading. The more cross-time frame trend line alignment you have on your trade, the higher the probability the trade will go in your favor.

And if you see strong resistance on your longer term charts, it might be a signal that you should hold off for a bit and wait for a better entry. 

Speeding Is the Road to Error

The faster you try to trade, the less room for error you have and you’re human, so you will make mistakes. Meanwhile, the AI trading software will do their thing no matter what – with precision and speed.

The intention of the AI is to lure you into making a quick decision, and thus a mistake. Without hot keys and a LOT of practice, this is a very challenging endeavor.

That is why you may choose to swing trade, or even longer term trade to avoid this situation entirely. In this strategy, it’s important to not get caught up in fast pace of one minute candlestick patterns.

When slowing down the chart and looking at longer term time frames, you increase your odds of success against the AI trading platforms by focusing on scenarios where the technical setups in many time frames align in the same direction. 

Practically speaking, next time you see a trend line you like on the 1 minute time frame and want to trade it right away, stop. Check the 5, 15, 60 minute charts. Check the daily chart.

Make sure that the majority of the longer term trends align with the direction of your trade. If they do, then return to your normal trade plan and give it some more time to play out.

Focus on longer term time frames when managing it. Algorithmic trading software will have a much harder time exploiting your plan this way.

AI Trading & the Tricks of the Trade

Many big institutions will use algorithmic trading software specifically to trick or shake weak hands out of the market.

There are numerous techniques used, including intentionally pushing a stock through an obvious support or resistance level to trigger stop losses, faking out the order book to move the price, pre or post market trading, and more.

None of this is illegal. Though it may be amoral. The bottom line is – don’t let them get away with their bluff!

Remember, thanks to AI trading there is more noise now than there was before, and that’s intentional. Think like a machine!

AI (Algorithmic) Trading

Check out the weekly and monthly resistance zones. Here we see the next levels of $PTN’s resistance.

Who’s on Your Side?

There is no doubt that AI Trading has changed the game. But there are many ways to still turn a profit in this type of atmosphere.

If there wasn’t, then what the heck is everyone still trading for! Well, the fact is, 90% of traders do fail.

So your training, experience and tools at your disposal are going to make a big difference in putting you in that highly desired 10% spot. You need to find your edge.

One way to fight the AI trading and gain your edge is to use some form of algorithmic trading software yourself.

AI (Algorithmic) Trading

Check out the after hours action of PTN, news broke and the trend spider platform immediately identified weekly resistance where price action would inevitably pause at. Buying and selling becomes a lot easier when you have the power of AI

TrendSpider is a user friendly automated chart analysis system that uses math and… algorithms! This unique platform will not only analyze charts for you, but it will watch them for you too and alert you when specific levels are being hit and send a text or email to your phone. 

Purchase TrendSpider Here!

Here is the Bullish Bears TrendSpider community discount:

BULLBEAR20 – 20% off TrendSpider plans. Discount applies to the first 12 months of service! 

Frequently Asked Questions

Can AI predict stocks? Artificial intelligence isn't foolproof because stock trading is done by real people with real emotions, however, it can take the guesswork out of manual trading. AI trading computers have a fairly high accuracy rate, but again nothing is foolproof.

Algorithmic trading is essentially artificial intelligence but in a computer designed to help you make trades. Each company has their own different coding specifications. They predict price action within the movement of a stock with better accuracy that human emotions.

Related Articles

What Is a Pullback

What Is a Pullback?

Have you ever wondered why some stocks temporarily drop in value after an upward trend? This is called a pullback, a temporary decline that can

Read More »
Order Imbalance

Order Imbalance

Have you ever been in a situation where you want to buy shares in a company, but none are available? Well, there’s a name for

Read More »
Floating Stock

Floating Stock Definition

Have you ever noticed companies with large bid-ask spreads? There is a significant difference between a stock’s buying and selling price. What is the reason

Read More »


If you’ve looked for trading education elsewhere then you’ll notice that it can be very costly.

We are opposed to charging ridiculous amounts to access experience and quality information. 

That being said, our website is a great resource for traders or investors of all levels to learn about day trading stocks, futures, and options. Swing trading too! 

On our site, you will find thousands of dollars worth of free online trading courses, tutorials, and reviews.

We put all of the tools available to traders to the test and give you first-hand experience in stock trading you won’t find elsewhere.

Our content is packed with the essential knowledge that’s needed to help you to become a successful trader.

It’s important to treat day trading stocks, options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career.

Invest the proper time into your Trading Education and don’t try to run before you learn to crawl. Trading stocks is not a get-rich-quick scheme. It’s not gambling either, though there are people who treat it this way. Don’t be that person! 


The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms. We provide our members with courses of all different trading levels and topics.

If you’re a beginner, intermediate level, or looking for expert trading knowledge…we’ve got you covered. 

We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. Free.

Just choose the course level that you’re most interested in and get started on the right path now. Become a leader, not a follower. When you’re ready you can join our chat rooms and access our Next Level training library. No rush. We’re here to help.

Click Here to take our free courses.