1
Advisory task
Summarize news, extract events, classify regimes, or explain a setup without direct execution authority.
Lesson · Algorithmic and Automated Trading
AI-Assisted and Agentic Trading Workflows
Use AI for research, extraction, classification, and trade proposals while keeping market data, rules, risk, permissions, and execution controls deterministic and auditable.
Core concepts
What to understand
Keep the boundaries, state, and authority explicit.
2
Structured proposal
Return evidence, timestamps, uncertainty, rule references, invalidation, and a requested action in a schema.
3
Deterministic guardrail
Validate source freshness, allowed symbols, strategy rules, position size, risk, and approval before execution.
Interactive lab
AI Proposal and Guardrail Lab
Change source freshness, model confidence, evidence quality, hallucination risk, approval mode, and deterministic guardrails.
AI Proposal and Guardrail Lab
Deterministic synthetic educational data · no broker or live-market connection
SYSTEM MODEL
Process
Keep AI outside the final authority boundary
The model may propose; controlled services decide and execute.
Gather
Retrieve timestamped market, company, and event evidence.
Propose
Return a structured thesis with uncertainty and citations.
Validate
Apply deterministic strategy, risk, permission, and approval checks.
Knowledge check
Check your understanding
Select one answer for each question. Feedback appears immediately, and a wrong choice is answered on its own terms before the rule is restated.
1. Which output is safer from an AI component?
Structured proposals can be validated and audited before action.
2. High model confidence should:
Confidence is not an account-risk permission.
3. The execution service should accept:
A strict contract reduces ambiguity and unauthorized side effects.
4. Confidence 95%, newest source 12 minutes old against a 5-minute limit, guardrail on, authority mode automatic. What is the final action?
The proposal is created (95% ≥ 65%), then blocked: 12 min > 5 min. The 95% is never read again; that is what a deterministic guardrail means.
Practical rules
- Use AI for advisory work before execution authority.
- Require structured outputs with evidence and timestamps.
- Validate every proposal with deterministic rules and risk controls.
Common mistakes
- Allowing free-form model output to call the broker directly.
- Treating confidence as probability of profit.
- Using stale news or market context without validation.
References
Official reading
These sources cover algorithmic controls, market access, broker APIs, system operations, or security.
FINRA · Regulatory Notice 15-09
Official guidance on supervision, testing, controls, documentation, and monitoring for algorithmic trading strategies.
SEC · Rule 15c3-5 Market Access Controls
Official rule overview describing pre-trade financial and regulatory risk controls for broker-dealers with market access.