Written by Katie Gomez

In last week’s blog, I touched on the relatively recent introduction of ChatGPT and its impact on stock traders. However, ChatGPT represents just one aspect of the broader AI evolution that is only now beginning, contrary to the common assumption that artificial intelligence has reached advanced stages.

Although AI is not poised to take over immediately, it’s reshaping the trading landscape as a powerful force and a hot topic of the year.  Still, some traders are proceeding with caution, thinking AI might be close to running brokers and portfolio managers out of a job. In this article, I will review the main comparisons between humans and machines (AI) and outline whether AI is more of a friend or foe to traders. 

Popular culture, full of stories about robot domination (with thanks to Marvel Studios), often paints AI as a threatening force. AI is not the enemy, nor is automated trading. Instead of assuming its mission is to make human traders extinct, view it as a valuable asset for traders, especially now when it’s still relatively easy to use. 

Chat GPT is just one example of the innovations of the AI community, a highly efficient search engine used to help make lives easier by providing a broader scope of information at a rate unattainable to humans. Chat GPT has exemplified the potential of OpenAI and what it can offer in the future. However, the efficiency and progression of automated trading should be grabbing traders’ attention.

Does AI have a leg up on traders?

The main difference between the two has to do with emotion. AI’s lack of human emotion is considered a leg up in the trading world because our emotions often get the best of us and usually wind us up in trouble. As traders, when stocks decrease or increase, our emotions spark the impulse to sell or buy immediately. Imagine what kind of trades you would be free to make if your emotions were not in the driver’s seat. The trades AI makes might look different to you because the timetables are shifted, and the results will be influenced when emotions are not part of the decision-making process. 

Instinct vs. Analysis

The continued innovation of AI, Chat GPT specifically, has created another edge on human traders, as they can scan and interpret data at a monumentally faster rate than human traders are capable of, and time is invaluable to a trader. 

The information analysis provided by AI can prove invaluable, as it can indicate when to initiate a trade to when to close the position. AI can also benefit traders through the process of automated trading tools like stop-losses to help minimize their losses. After all, one of the major rules of trading is to make your mistakes as cheap as possible.  

Nevertheless, this information is not a guarantee for a successful trade. It simply uses the historical data it has to create an algorithm to provide traders with an idea of what could likely happen. AI is a machine at the end of the day and cannot make decisions based on anything besides the data in front of it. There is a gap between the information AI supplies and a successful trade result. That said, there is something humans have, and AI lacks, that could fill that gap from analysis to trade: gut instinct.

Gut instinct is an irreplaceable asset that every trader has. It’s an intangible skill transcending numbers and algorithms. While AI may surpass human intelligence in data analysis, trading is as much an emotional process as it is intellectual, and intuition becomes our secret weapon.

What sets traders apart is their instinctive ability to read the market, a unique sixth sense born out of human intuition. Although AI can execute cold calculations proficiently, they cannot mimic human thought processes or feelings.

While AI, such as ChatGPT, can generate human-like responses, it cannot emulate the complex range of human emotions, impulses, and cognitive thinking. It’s hard to compare the importance of gut instinct and data analysis, as they are both essential to the trading process. Consequently, AI, with its comprehensive analysis, should aid traders rather than replace them.

“No man is better than a machine, and no machine is better than a human with a machine.”

 – Paul Tudor Jones

In conclusion, neither AI nor humans outperform each other in trading; instead, their combination generates optimal results. The future is bright for traders who can learn to work with AI to make serious waves in the stock market, as AI can help traders improve their portfolios tenfold in 2023 (when used correctly).

The collaboration between artificial intelligence and human traders is one you can either fight or embrace. However, considering the undeniable momentum of AI, resisting it is akin to preventing the sun from rising. The future of trading, clearly signaled by the rise of AI, is inevitable.