From Algorithms to Alpha: Exploring the Role of Machine Learning in Financial Markets

This paper explores how machine learning is transforming the financial markets, specifically in relation to trading strategies and profit-maximizing investment choices. We examine machine learning’s influence on algorithmic trading, revealing how it shapes trading algorithms and guides investment strategies to maximize returns, commonly called "alpha." From there, we explore a wide range of financial applications of machine learning, such as fraud detection, portfolio optimization, and risk management. While highlighting the positive impacts of machine learning, we also acknowledge and address the challenges it presents in finance. Overall, this article shows how machine learning (ML) is changing the financial landscape and emphasizes the need for ethical use to maximize its advantages while minimizing its risks.