The recent developments of artificial intelligence (AI) tools have taken the world by storm, primarily the launch of the language bot ChatGPT in November 2022. Following the incredibly fast growth of Open AI’s bot ChatGPT, a number of other AI-based tools have been introduced in the market, catering to a wide range of industries. Such finance-focused platforms as ATPBot or BloombergGPT, for example, have raised interesting discussions on the future of trading. Will AI-powered tools be able to create successful trading strategies? Let’s explore the different takes on the topic.
A powerful tool
Experts in the industry will collectively agree that what we’ve seen so far in the development of artificial intelligence has been highly impressive. AI-based tools offer a huge variety of benefits in trading, one of the most important being the speed at which they are capable of analysing vast amounts of data in real-time, around the clock.
These platforms are run on sophisticated algorithms that analyse, compare and identify the best trading opportunities in the time and efficiency humans simply cannot match. In addition to that, when provided with the latest data or, ideally, connected to the internet, AI tools can access and analyse unique sets of data too, such as social media sentiment, new events and various other economic indicators. The speed at which the data is being dealt with is certainly key in the trading industry, which makes AI an incredibly useful and productive tool.
Beginner traders can particularly benefit from the educational aspects of artificial intelligence chatbots. They are able to provide answers and explanations to common questions beginner traders tend to have, such as what are the differences between options and futures, for instance. With AI platforms able to analyse decades-worth of financial data, it is likely to provide the most common answer to this question, while summarising it in a simplistic way, if needed. This perk can save a lot of time which would otherwise be spent reading through dozens of articles trying to understand the concept in question.
Furthermore, another significant benefit of using AI in trading is the elimination of human bias. Humans are inherently emotional beings and our decisions are often influenced by our personal biases. This, unfortunately, can often lead to poor decision-making or missed opportunities in trading. In contrast, artificial intelligence is not influenced by emotions or biases, meaning it makes decisions purely based on data presented to it. It can, therefore, help the trader make better-informed and, possibly, more profitable decisions.
The concerns of using AI
As powerful as AI is, it has also recently flagged many concerns amongst the experts in the trading industry. Perhaps the key worry of using AI to create personal trading strategies is privacy and data safety. An industry giant, JP Morgan, for example, has taken the steps to restrict the use of ChatGPT amongst their employees, as they are growing increasingly nervous over sensitive data being exposed due to potential failures of the platform. These concerns are within reason too, given that it is currently unclear how information is shared within this platform or whether third-party individuals have access to answers generated by it.
In addition to this, the users of AI-powered tools cannot guarantee that the answers provided by the machine will be 100% accurate and factually correct. While ChatGPT does not, as of yet, have access to the internet (its data base covers up to 2021), there are other platforms that cater specifically towards trading. However, even these bots will need to be thoroughly fact-checked by humans in order to avoid significant financial losses. Trading, in general, involves a variety of risks – relying on AI bots for it will potentially add further additional risks one must be aware of.
Overall, there will always be a concern surrounding the trustworthiness and transparency of AI-powered trading tools. The algorithms used in these platforms are highly complex and so understanding how it makes the decisions it does is particularly difficult. Trusting that it creates the best investment strategies based on the data set provided will be up to the trader. However, who will be accountable in the event of system failures, bugs or leaked data? Especially in the scenario of using ChatGPT, which does not specialise in trading, nor offers any promises when used for trading purposes.
The future of trading
In conclusion, despite their drawbacks, artificial intelligence tools offer a wide range of benefits and powerful possibilities in the trading industry. Some forms of AI have been used in trading for quite some time now and it is unlikely to change with the introduction of even better AI trading bots. However, as of this moment, AI-powered tools do not substitute human based judgement and overreliance on them could potentially lead to various risks. The traders still need to have a deep understanding of the market in order to interpret the data, predictions and strategies suggested by AI. Although, it is safe to say that they will be able to do so much more productively while leveraging the benefits of this powerful tool.
