What is AI trading?
“AI trading” covers three quite different things:
| Type | What it does | Who uses it |
|---|---|---|
| AI-assisted research | Screens stocks, summarises results and announcements, flags unusual volume, explains charts. You still decide and place the trade. | Retail investors and remisiers |
| Algorithmic or quant trading | Rules-based or machine-learning models place orders automatically through a broker’s systems, often with strict risk limits. | Funds, prop desks, brokers’ own strategies |
| “AI trading bot” investment schemes | You send money to a company or app that claims its AI will trade for you and pay a fixed daily or monthly return. | Frequently used by scammers |
Is AI trading legal in Malaysia?
Using AI to help you analyse stocks, then trading in your own name through a licensed broker, is legal. Your shares sit in your own CDS account at Bursa Depository, and every trade goes through a Bursa Participating Organisation.
What is not legal is anyone managing or pooling your money for investment without a licence from the SC. A company that takes your deposit and says “our AI robot will trade it for you” is carrying on fund management. If it is not licensed, it is breaking the law, whatever technology it claims to use.
AI trading bot scams: red flags
The SC has warned the public about unlicensed “robot” trading schemes, and in July 2024 about deepfake videos of well-known personalities promoting fake investments. Watch for these signs:
- Guaranteed or fixed returns, such as “1% a day” or “RM9,000 profit in 6 hours from RM300”. Real trading has no guaranteed returns.
- You must send money to a person or company account, not to your own trading account with a licensed broker.
- Celebrity or “Datuk” endorsements in Facebook or TikTok videos. These are often AI deepfakes.
- Pressure to recruit friends or to “top up” to unlock withdrawals.
- Apps downloaded from a link instead of the official App Store or Google Play.
- Withdrawal problems, extra “tax” or “release” fees before you can take money out.
How to check before you invest
- Search the company on the SC Investor Alert List.
- Use the SC Investment Checker and the SC’s list of licensed persons.
- Check that your money goes into a trading account in your own name with a Bursa Participating Organisation.
- If you have already been scammed, contact your bank immediately and call the National Scam Response Centre on 997.
How Malaysian retail investors can use AI safely
1. AI stock screeners
Filter Bursa, US or Hong Kong stocks by valuation, growth, dividend yield, momentum or Shariah status in seconds, instead of building spreadsheets.
2. Results and announcement summaries
Use AI to summarise a quarterly report or a Bursa announcement. Then check the key numbers yourself in the original filing, because AI can make mistakes.
3. Alerts
Set price, volume or news alerts so you don’t have to watch the screen all day.
4. Backtesting ideas
Before risking money, test a simple rule (for example “buy when X happens”) on past data. Remember that past performance does not guarantee future results.
5. Keep a human in the loop
AI is good at speed and breadth but weak at context, such as a rights issue, a takeover, or a one-off gain in a quarter. A licensed remisier can explain what the numbers miss.
I use AI-assisted screening and analysis for clients. You can try some of these tools at ai.dexterchia.com.
Limits and risks of AI trading
- Overfitting: a model that looks perfect on past data can fail on new data.
- Hallucinations: chatbots can invent numbers, dates or announcements. Always verify.
- Crowding: when many traders use similar signals, the edge disappears.
- Black swans: events such as halts, takeovers and policy changes are hard for models to predict.
- Costs: frequent trading adds up. On Bursa, the RM8 minimum brokerage plus clearing fees and stamp duty can eat small gains. See the M+ Global fee examples.
Frequently asked questions
Is AI trading legal in Malaysia?
Yes, if you use AI tools to analyse markets and trade your own account through a licensed broker. Giving money to an unlicensed party that promises AI-driven returns is not legal for them, and is a common scam.
Are AI trading bots profitable?
Some professional quant strategies make money over time, but no bot can guarantee profit. Any bot that promises fixed returns should be treated as a red flag.
How do I check if an AI trading company is a scam?
Check the SC Investor Alert List and the SC’s licensed persons register, and make sure your money only goes into a trading account in your own name with a Bursa broker.
Can I use ChatGPT or other AI tools to pick stocks?
You can use them for research and summaries, but verify every number against the company’s official filings, and make the final decision yourself or with a licensed adviser.
What is the best AI trading platform in Malaysia?
There is no single best one. Look for a licensed broker whose app gives you screeners, alerts and research, then add AI tools for analysis. Avoid any platform that is not licensed by the SC.
Key takeaways
- Using AI for research and trading your own account through a licensed broker is legal and useful.
- “AI robot” schemes that hold your money and promise fixed returns are a common scam; check the SC Investor Alert List.
- Use AI for speed (screening, summaries, alerts) and keep human judgement for the final decision.
Want AI-assisted research with a licensed human behind it? Open M+ Global with invitation code UBZQ and I’ll share screeners and alerts with you.
Disclosure: Dexter Chia is a licensed dealer’s representative (DR code R336) at Malacca Securities Sdn Bhd. This article is for education only and is not investment advice. Sources: Securities Commission Malaysia media release on deepfake investment scams (22 July 2024), SC Investor Alert List, and reporting on SC warnings about “Robot AI Trading” schemes (2022–2023).
