When do you think AI will dominate trading field?

[wildchild]

my point is, there will be time when big companies,hedge funds, will have so much computer power and so strong AI/algoritms that they will simply crash all the "small" (retail/individual) traders and the latter won't be able to survive in trading at all

but the question is when is this going to happen?

Never. I don't trade using an algo but know quite a bit about the types of a models that are used by the algo traders. I know a guy who is senior in an algo hedge fund and asked him how complicated the algos they use are. Of course we wouldn't tell what they were doing, but he said the algos they use are not really that complicated.

I figured that was the case because as the models are always subject to biases and all kinds of other problems. The more complicated the model, the more likely you are going to inject biases or overfitting.

If you want to check out some cool data science/AI problems with solutions check out a website called Kaggle. The have all sorts of challenges and some of them apply to trading and they offer cash rewards for the winner. They often have interviews with the winners and the winners explain what they did. You can learn quite a bit.

Just remember, all models are false, but some models have value.

 

[volpri]

Then one counters..."But Zandy....for every loser there's a winner.... trades are two sided. Somebody's making that money". I'm sure that's true. But its not going to be anyone that ever reads these words that I am writing right now.

who is making the money?

 

[Sig]

who is making the money?

The house, or in this case the market makers, brokers, and exchanges along with all the infrastructure that goes with it.

 

[vanzandt]

The house, or in this case the market makers, brokers, and exchanges along with all the infrastructure that goes with it.

I think a lot of goes up in heat loss.

 

[wrbtrader]

If the world starts to get funky and all currencies weaken because some Mad Max thing is coming, gold won't go down, it will go up. This is not something that can be programmed into a box.

So you let your algobox short the thing, while I, with my human brain, long the thing. Human minds and discretion is going to win in the end. Not "algo". Remember: All things automatic are programmed by...You guessed it...Humans!

I don't use algo's...never have. Yet, I do like talking about them as they continue to grow among retail traders.

 

[cybrbrdr]

"I don't trade using an algo but know quite a bit about the types of a models that are used by the algo traders. I know a guy who is senior in an algo hedge fund and asked him how complicated the algos they use are. Of course we wouldn't tell what they were doing, but he said the algos they use are not really that complicated"


I'm sort of a neophyte, but always wondered about this; I see lots of negatives about automated trading on this board such as "human discretion is always best, machines cannot be programmed to understand market movements, etc. etc." But it seems major trading firms rely heavily on automated systems. Computer trading seems to dominate the markets.

Question: why can only the big boys create these systems? Why cannot the little retail trader create something as effective? There seems to be lots of traders on this board who have understanding of the movement of the markets, and many seem to understand programming.

So, what do the major players do that we cannot? Does the answer lie in continuous day to day revision of the software, which would require lots of highly qualified staff?

 

[Sig]

"I don't trade using an algo but know quite a bit about the types of a models that are used by the algo traders. I know a guy who is senior in an algo hedge fund and asked him how complicated the algos they use are. Of course we wouldn't tell what they were doing, but he said the algos they use are not really that complicated"


I'm sort of a neophyte, but always wondered about this; I see lots of negatives about automated trading on this board such as "human discretion is always best, machines cannot be programmed to understand market movements, etc. etc." But it seems major trading firms rely heavily on automated systems. Computer trading seems to dominate the markets.

Question: why can only the big boys create these systems? Why cannot the little retail trader create something as effective? There seems to be lots of traders on this board who have understanding of the movement of the markets, and many seem to understand programming.

So, what do the major players do that we cannot? Does the answer lie in continuous day to day revision of the software, which would require lots of highly qualified staff?

The term algorithmic trading can mean 10 things to 10 different people. High frequency algorithmic trading is out of reach of most retail because they don't have the skills to program at that low of latency or the money to pay for the high speed links and the requisite hardware. An HFT shop will have specialists in several programming areas and it's just not many of us who are great at all the fields needed to put together something that works, plus have the assets available to implement it.
Coding an algorithm is very doable, you can go write an algorithm on Quantopian today and hook it up to your brokerage account at a couple of brokerages to do live trading for you. Your only investment will be learning Python. There are a large number of us doing that or something similar with custom platforms.
At the risk of starting a firestorm, I'd maintain that you don't see much automation of TA type trading because the vast majority of TA traders are experiencing apophenia, and when forced to actually put the theory into the rigor of rules based trading in an algorithm it's shortcomings are revealed, leading to reversion to the "human discretion is best" meme.

 

[ajensen]

At the risk of starting a firestorm, I'd maintain that you don't see much automation of TA type trading because the vast majority of TA traders are experiencing apophenia, and when forced to actually put the theory into the rigor of rules based trading in an algorithm it's shortcomings are revealed, leading to reversion to the "human discretion is best" meme.

"Apophenia is the spontaneous perception of connections and meaningfulness of unrelated phenomena."

Cool, I learned a new word.

 

[Humpy]

I see an AI system has beaten 5 experts playing No Limit Texas Holdem over a 2 week period.
I am waiting for the ideal robotic woman. No answer backs, no winging, no spending sprees with my money etc. etc. AND looks like Marilyn.

 

[trade5656]

I see an AI system has beaten 5 experts playing No Limit Texas Holdem over a 2 week period.

But people still deny that AI is growing really fast and soon will beat humans in almost any activity.

Computers are beating humans in chess, beating in that GO game, now beating best of the best in poker, trading is next but people for some reason try to deny it very hard.