Looks like Knight Capital's AI, their HAL, rebelled. Perhaps they worked it too hard and didn't give it a Sunday rest?
AI is a bit of a loaded term. Let’s focus on ML (Machine Learning) instead as I think there is less mysticism around it. The key thing to keep in mind about ML is that at the end of the day, it is a set of tools to extract information from data. Typically, this is in the form of fitting a function such as y=f(x) based on the data. This is actually much harder in practice than it sounds. But let’s say that it’s easy; even in that case, ML doesn’t tell you what relationships (functions) to estimate or how to trade (profit from) those relationships. I think there are a lot of misconceptions about AI in general and around using ML in trading in particular. Something like ChapGPT is probably going to be pretty useless when it comes to trading, even though it is capable of some very impressive feats. Specifically, ChatGPT doesn’t “know” any data and thus doesn’t “know” any relationships that can be exploited in trading. ChatGPT could potentially help you develop some models in the sense that it could provide code that could be run to train (estimate) such models; but it would essentially be performing the role of a nice coding assistant (copilot) in that case, you’d still have to be the main pilot. ChatGPT isn’t going to “learn” any of these relationships on its own even if you ask it to do so. Given the points I made above, I really don’t see a trader who is not intimately involved with every detail of the strategy as having any possibility of success beyond sheer dumb luck. Using tools such as ML is not a substitute for having detailed knowledge of the strategy. ML, as stated above, can help with the estimation of relationships, whether they be pricing, clustering, covariance, or other relationships. But, ML is not going to tell you what relationships to investigate or estimate, why, or what to do with them. I may be proven wrong in the near future, but I really don’t see AGI happening anytime soon. And even if it were to happen, I still don’t see how it would lead to trading profits. Assuming AGI were to be made available, every trading team in the world would have “the AGI” created trading system by the end of the first weekend; hardly a scenario for windfall profits
Professional traders do not use AI. No one uses AI in trading if it involves time series analysis. AI can be useful for text analysis (e.g., Twitter, Reddit) and the initial stage of crowd sentiment extraction. But these are not "professional traders" (discretionary trading), but rather algo-traders and hedge funds. In any case, AI and trading are on opposite poles. There is too much noise in prices, and AI struggles to understand the big context (the bigger picture)
Do you have any tips on how to stay prepared for market changes while using AI? I see some uses this AI for the signals to buy or sell.
Thanks for the detailed explanation! Do you think there's a significant difference in how AI is utilized between individual traders and those working for big firms? I am pleased that you answered me with details.
lol, luv your example Lot's of truth in this post. The quality of the answer depend upon the quality of the question. IOW, answers are locked by the ability to ask the appropriate question. The truth of the above statements is true when interacting with LLM's through the lens of the emerging discipline of prompt engineering. Much like deriving insights from search engines; using specific keywords, chaining prompts, filtering and using logical conditions, emerging insights come from edges. -- Great essay on edges: The illegible Margin: Profiting From The Gap Between The Map And The Territory "It is better to be roughly right than precisely wrong" ~John Maynard Keynes https://taylorpearson.me/illegible/
Surely automated assistant can take a lot of ones shoulders, but you should always stay updated and look out for possible major changes in the trend caused by sudden events or news at least, the only way an EA won't fail you(assuming your strategy is profitable) is to stay on it yourself. Only thing that can solve that is to have some sort of a quantum brain in that AI, which is yet to happen.