What if.. humans are replaced in the trading business by AI's?
Hi everyone,
I am back again with my first real story as promised! The first what if..
Ever tried to google how we can predict stock prices or exchange rates? Immediately there are a million results with all kinds of methods to predict the rate of anything on the market today. Including crypto-currency.
It all started with the basic time series and regression methods. What has happened in the past and can we predict the continuing trend. However, when the market crashed, we all knew something was up. We all made the wrong assumptions about a good economy. Only few analysts predicted the crash of the market, but most of them paid the price by losing their jobs.
Now with the advancements in technology, there are many ways to go. The first, actually in use at many companies, is algorithmic trading. Find good algorithms that buy and sell at critical moments. As they are machines, they can react immediately on a change, whereas the human mind needs a little processing time. There are different types of algorithms. Some are basic analytical algorithms that just respond fast and are considered rush traders. Other are machine learning techniques deciding when the best time is to buy and sell. And there are many many more..
But by far the most interesting technique is the artificial intelligence (AI) way. There are many who have researched it but none seem to get the perfect result. The ultimate machine that can predict the rate so accurately it even seems scary. What if the only thing that is missing is one piece of information. Which is abundantly available everywhere nowadays. What if the machine gets so good at it that it can crash and build markets as it pleases. What if the dealing rooms will no longer be filled with humans, but only need one machine. And what if this can spark the beginning of the battle of machines. All companies trading with AI's trying to outrun each others AI by having faster connection, faster algorithms, faster everything.
Or what if.. trading with only AI's finally finds the market equilibrium (if it actually exists). Where there is no point in selling and buying anymore? What if.. there is only one AI, somewhere.. This AI can rule over the market and nobody would know..
Hope you enjoyed the read! And hope you will stick around to read my next post! :)
Very interesting. Who would have thought that we are going to have blockchain now 10 years ago. Everything is possible as more and more people are engaging into IT and Stocks. Blockchain too. Resteemed and Upvoted.
It's already happening. Used to be a trader at a corporate and we used to call the trading desks at the banks for quotes / chit chat.
Anyway, at a lot of the banks we used to deal with, the traders got let go and the sales guys tell us they use 'algo' now, whatever that is.
Wrote my master thesis about machine learning and algorithmic trading - didn't find anything working though ;)
That's too bad.. Would have been a nice money making business otherwise! I wonder if there are airtight algorithms though. I really don't think so.. But efforts are most certainly made! Plus the high frequency trading generates output anyway for the companies that use it!
Some reading if you are interested! :) http://cs229.stanford.edu/proj2014/David%20Montague,%20Algorithmic%20Trading%20of%20Futures%20via%20Machine%20Learning.pdf
Because blockchain has open analysis I think non mixed coins would show patterns to good data miners looking for trends. Once an abnormally successful trend appears more simplistic bots could be made to try to follow these trends again taking human limited response out of the equation.
Thanks for reading! Yes, that sounds very reasonable! For now at least. However, think further.. What if we could somehow automate the creation of these simplistic bots. Not even needing a good data miner anymore?
Great post keep it going! <3
Well thank you very much :D
I resteemed your story post! It was very well thought out, interesting and I could really tell you focused on the grammar. Keep this up and you will surely gain followers. Keep up the good work!
i think they already are.... :-)