Let's imagine that ChatGBT, the next version or the ones that will come one day will be able to predict market/stocks direction. Please consider I am saying `imagine`, so i am not asking you if will happen or not, so let's "imagine" this has true as hypothesis. My question is : What will happen in a market where everybody has an Edge?
That's the thing about AI in trading. Eventually it will be AI versus AI and us humans will have always opportunity amid the turbulence. It's not a scenario where it's AI doing away with inefficiencies such as doctors, lawyers, tax preparers, etc.
good point, like two chess engine that play, they are going to "optimize" a move, so in theory i may not be wrong saying that market may become much more efficient, leaving human traders lot of meat from the bones. EDIT: an Antifragile system to say as the option guy Taleb
Hypothetically, if everybody had the edge of knowing what will happen with stock prices, then we will all be multi-millionaires. But this would be unsustainable. Hypothetically.
FALSE! It is totally sustainable if everyone on this forum became multi-millionaires, because Kashkari admitted it!
A market where everyone has an edge literally means that no one has an edge. I don't want to get too philosophical with all this because it can be a little overwhelming for some people. But you must understand the concept of duality, or the nature of opposites. So in order for someone to have an edge, it implies that someone else does NOT have that edge. What we call an "edge" simply means "a level of insight that you possess which someone else does not have, which ultimately creates a higher win rate for yourself". But if all the players in the game have the same so-called "edge", the game results in a tie, or "average returns" in investment terminology because nobody truly has an advantage over the next person, which just means that nobody in the game had an edge to begin with. The only edge they may have in the grand scheme of things is when you compare their results to those individuals who never played the game to begin with, or in other words, those who didn't invest at all over time but instead kept their money in cash. An example of this would be those who invested their extra money in the S&P 500 for 20 years instead of just keeping those funds in a savings account.
In my crude way of thinking, that also implies that everyone has the same entries and exits. So make your stop/target just a bit better than the next folk, you have an edge.