Humans vs computers, chess vs trading

Quote from Cutten:

After all, trading is incredibly simple - there are only a handful of variables (price, time, volume, open interest), and you can only be long, flat, or short.

Also, the vast majority of system trading seems to be done by humans, Why can't a trading program, once written, scan the markets itself and then trade profitably?
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A computer can be programmed to play chess because the elements of the chess-system are readily identifiable, and their possible dynamic relationships can be modelled (comprehended) by the computer's programmer.

A stock, commodity, or index, on the other hand, is a pseudo-system by way of being an epiphenomenal sub-system of the global economy and is, therefore, subject to myriad extra-systemic influences.

These external influences are not quantifiable; a program cannot be written to model the true system - the entire world.

 
Quote from chasinfla:

i suppose there's lots of technical jargon out there that can make my remarks look pretty simplistic, but the bottom line is that the machine has no soul. That's the dimension that a machine will never have.

It may dazzle with brilliance and/or baffle with bs, but it <i>ain't never gonna have no soul.</i>

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Computers dont have the degree of discretion human traders have.

:cool:

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Agree trading is real simple;
that is 7 year trading where we chewed the bubble gum and traded
Sandy Koufax baseball cards.
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Quote from Cutten:

I was looking at the Kasparov vs Fritz chess game, which was a draw. After reading some background, it seems pretty clear that in a few years the best computer programs will be able to regularly beat the human world chess champion. I then wondered why, when computers are so good at chess, how come they are no way near as good at trading? After all, trading is incredibly simple - there are only a handful of variables (price, time, volume, open interest), and you can only be long, flat, or short.

Now I am not very knowledgeable about computers, but the only computer programs that seem to be able to make profits similar to humans are arb programs. Profitable directional programs seem not to exist. Also, the vast majority of system trading seems to be done by humans, using the computers only as aids to system-design, rather than writing a program which then *creates* systems of its own accords. A chess program, once written, can play world class chess. Why can't a trading program, once written, scan the markets itself and then trade profitably?

I assume that investment banks and other market players have spent literally billions of dollars trying to write a computer program that can devise profitable trading systems. Given the massively higher resources ploughed into trading computers vs chess computers, why haven't they achieved anywhere near the same success?
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Chess is pure logic and strategy. Trading is speculating on an unknowable future. In chess, all of the variables are definable. In trading, neither their number nor their respective weight is accurately known in advance. The "if-then" logic is much looser and more fleeting/dynamic in trading. Apples and oranges.
 
Chess is a one vs one game.

The markets are a n-player game.

I don't know if there have been studies on this, but my intuition is that n-player games are quite different in nature. I know economic game theory likes to analyze n-player games as merely an extension of 2 player games, although as you go deeper, you do find that economics acknowledges that n-player games have their own special adaptive characteristics.

A more simple analogy is this : if you play Counterstrike or any of the popular first person shooters on the PC, you'll know that playing against a technically superior computer bot is different from playing against a human opponent, which is in turn vastly different from playing over the internet against 20 opponents.

There is an increasingly adaptive aspect as you play against human players :)
 
Quote from Cutten:

I was looking at the Kasparov vs Fritz chess game, which was a draw. After reading some background, it seems pretty clear that in a few years the best computer programs will be able to regularly beat the human world chess champion. I then wondered why, when computers are so good at chess, how come they are no way near as good at trading? After all, trading is incredibly simple - there are only a handful of variables (price, time, volume, open interest), and you can only be long, flat, or short.

Now I am not very knowledgeable about computers, but the only computer programs that seem to be able to make profits similar to humans are arb programs. Profitable directional programs seem not to exist. Also, the vast majority of system trading seems to be done by humans, using the computers only as aids to system-design, rather than writing a program which then *creates* systems of its own accords. A chess program, once written, can play world class chess. Why can't a trading program, once written, scan the markets itself and then trade profitably?

I assume that investment banks and other market players have spent literally billions of dollars trying to write a computer program that can devise profitable trading systems. Given the massively higher resources ploughed into trading computers vs chess computers, why haven't they achieved anywhere near the same success?
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Because the markets are dynamic and every trade the computer program would make would change the markets.
 
Quote from axehawk:




Because the markets are dynamic and every trade the computer program would make would change the markets.
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Good thinking. Imagine the insanity if everybody used the same paradigm.
 
Market's boring today. I come to distract here haha !

Already answered here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=332280&highlight=chess#post332280

"a large percentage of trading volume on the Nyse comes solely from automated trading. It only concerns firms but probably more and more traders will join automatic trading. Even if you are not for competition will force you.

Antropomorphic vision is always blinding so remember that a dumb machine has beaten Kasparov at Chess:

http://www.gamesdomain.com/gdreview/depart/may97/craig.html
Exerpt:

"The chess-playing community is also shell-shocked. Some are convinced that Kasparov took a payoff to lose the game on purpose to generate more interest in Deep Blue. Others say that Kasparov's style played right into Deep Blue's hands and that Karpov would not fall into that trap. Or that if he'd simply tried harder he'd have won. Yet the fact is there that he lost, and lost for the first time in his life. Kasparov could not psych out his emotionless opponent; opposite him sat one of the IBM team. Deep Blue hummed away in another room, distanced from the action. Nor could Kasparov attack the weaknesses in his opponent's style of play, for Deep Blue has no style, and if anything represents a hybrid of many observed styles. Kasparov is rumoured to have practised against a number of computer opponents to try to get a feel for the style he'd face, but if anything that probably did more harm than good. Inevitably the odds were stacked against the unfortunate human sacrifice, and Deep Blue accepted the offering in cold blood.

The bottom line is that the number crunching ability of the 32-node IBM "supercomputer" has finally outweighed the natural ability of the best human player."
 
Funny how many different views exist in a market.

I think the market is kicking ass today :)
Several very juicy plays today.


peace

axeman
 
Quote from axeman:

Funny how many different views exist in a market.

I think the market is kicking ass today :)
Several very juicy plays today.


peace

axeman
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There are "juicy plays" everyday, why should today be any different?


edit: This is my best "dbphoenix" impersonation :)
 
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