Summary of a 45-minute discussion about AI, market psychology, how to make more money, and how to stay sane doing it
AI Investing
October 10, 2024
AI stock trading is rapidly evolving, empowering everyday traders to compete with large financial institutions. In a recent episode of the PayPod Podcast, Andrew Einhorn, CEO of LevelFields, explains how AI-driven tools are revolutionizing the way traders analyze and respond to market events. With AI, traders now have access to high-level insights that were once exclusive to professionals, leveling the playing field for all.
As Einhorn explains, "With AI, we can monitor thousands of stocks and identify material events affecting share prices." AI enables traders to track events such as leadership changes, product launches, and government actions that consistently impact stock prices. This data-driven approach eliminates the need for guesswork, allowing traders to make more informed and strategic decisions.
According to Einhorn, event-driven stock trading is particularly powerful. By analyzing how specific events have historically influenced stock prices, AI provides insights into whether a price drop or spike is likely to be temporary or long-term. "If the CEO of a major corporation leaves, like Amazon, it’s bad news. But is it bad news long term, or is it just temporary bad news?" Einhorn explains about the predictive power of AI.
One of the most significant advantages of AI stock trading is its ability to remove emotional bias from decision-making. Human traders often fall into the trap of over-buying during market highs and panic selling during downturns. Einhorn describes this as part of human nature: "Humans don’t change much over history. We keep making the same mistakes."
By relying on data-driven decisions, AI helps traders avoid these common mistakes. "People are manipulated left and right by different pump-and-dump schemes," says Einhorn. "But AI doesn’t get emotional." Instead, it evaluates market events and stock data objectively, allowing traders to make rational decisions based on historical patterns rather than reacting impulsively to market swings.
The U.S. stock market contains thousands of stocks. It's impossible for individual traders to monitor them all manually. Einhorn explains how AI tools provide a level of scalability that was previously only available to large institutions. "AI can monitor thousands of stocks simultaneously, identifying critical events and trends that would take a human an immense amount of time to spot."
This scalability enables traders to keep up with the vast array of opportunities available in the market. Instead of focusing on a handful of stocks, traders can use AI to monitor the global market, uncover hidden opportunities, and act quickly on market-moving events. "It’s like having 200 analysts working for you full time," says Einhorn.
The concept of Event-driven Stock Trading is central to the LevelFields platform. By analyzing how past events have affected stock prices, AI can predict how future events will influence the market. "There’s always a catalyst for a stock to move," explains Einhorn. "It’s about knowing what’s happening and being there at the right time."
For example, if a company announces a major leadership change, AI can analyze similar events in the past and predict whether the stock price is likely to rebound or continue to decline. This allows traders to make more strategic decisions, maximizing their potential for profit while minimizing risk.
One of the most compelling aspects of AI stock trading is how it enables traders to maximize their returns with minimal effort. Event-based stock picks—where traders capitalize on critical events affecting stock prices—can yield substantial returns without requiring constant monitoring of the market.
"You might take 5-10% of your portfolio and trade on key events, achieving much higher returns than if you left everything in an index fund," Einhorn explains. By using AI to track event-based opportunities, traders can achieve significant returns without needing to spend hours researching and analyzing data manually.
Human behavior is one of the driving forces behind stock market fluctuations, and AI stock trading tools like LevelFields AI can help traders better understand and predict these movements. "The stock market is just a collection of people reacting," says Einhorn. Whether it’s a product launch, a CEO resignation, or a disaster, human reactions drive stock prices.
By analyzing market psychology, AI can anticipate how traders are likely to react to specific events. For instance, when a CEO steps down, stocks typically fall. But AI can help determine whether this is a short-term drop or a sign of a deeper issue, allowing traders to make more informed decisions based on real-world data.
While AI stock trading is powerful, Andrew Einhorn emphasizes the importance of maintaining mental health in the process. "It’s hard. I don’t claim to have all the answers, but I will say that I’m okay when things get out of balance," he notes. By automating much of the analysis and decision-making process, AI allows traders to reduce the stress of constantly monitoring the market.
Einhorn points out that traders often put too much pressure on themselves to be constantly active in the market. They overtrade. They question and second guess themselves. And this can be harmful to mental health as well as chip away at profits.
With AI, traders can set alerts for critical events, follow the data, and allow the system to do the heavy lifting. This gives them more time to focus on other aspects of life, striking a better balance between work and personal well-being.
Einhorn, who holds a B.A. in Neuropsychology from Emory University, believes that by using AI for stock investing and stock research, we can all give ourselves back the time that investing has taken from us to date. And that we can use that time wiser, diving deeper into strategy or just for focusing on other things in life. "Ultimately, the stock market is composed of people," said Einhorn, "and people get nervous, people forget, people make mistakes, people get greedy, people get too optimistic. The stock market is just a mirror into human behavior."
The rise of AI stock trading has opened up new opportunities for traders at all levels. Whether you’re a beginner or a seasoned professional, AI offers tools that can enhance your trading strategy, maximize returns, and reduce emotional bias. As Einhorn puts it, "There’s always a company profiting somewhere. The key is knowing where—and AI helps you find it."
By embracing event-driven stock trading, traders can act with the same level of confidence and precision as large financial institutions. And with AI taking care of the heavy lifting, traders can focus more on strategy and less on constant market monitoring. The future of stock trading is here, and AI is leading the way.
Join LevelFields now to be the first to know about events that affect stock prices and uncover unique investment opportunities. Choose from events, view price reactions, and set event alerts with our AI-powered platform. Don't miss out on daily opportunities from 6,300 companies monitored 24/7. Act on facts, not opinions, and let LevelFields help you become a better trader.