Can ChatGPT’s Smart AI Trading help me achieve financial success?

The emergence of this new breed of “generative” AI tools is making waves as technologists promote it as a new tool that will revolutionise how people work.

People love it, they trust it, and they want to use it for everything – legal work, medical advice, student papers, and so on. However, one question remains – if it is so smart, can it be used for making money? Will ChatGPT help me get rich? In particular, how can it help with investments and trading?

My short answer would be “yes”, ChatGPT, or conversational AI, can be, and is, used in trading.

The longer answer, however, would be more nuanced, as AI still has several crucial limitations.

With the introduction of its next generation, GPT-4, OpenAI's system can solve even more difficult problems with greater accuracy, thanks to its broader general knowledge and problem solving abilities.

For example, GPT-4 is better at organising the large amount of data and performing a comprehensive search of relevant content.

Generally there are several main applications for AI in trading.

First, AI is being employed to develop virtual trading assistants that interact with traders and help them make informed decisions.

These assistants use natural language processing to understand traders’ questions, and in response, analyse large amounts of data to provide personalised recommendations.

Second, AI is also being used to develop sophisticated trading algorithms that can analyse vast amounts of market data and make trades based on complex algorithms and mathematical models.

They can also make trades faster and more accurately than human traders, which can result in higher profits and reduced risk.

And third, in addition to virtual assistants and trading algorithms, AI is also being used to develop risk management tools that can help traders identify potential risks and take steps to mitigate them.

These tools can analyse a trader’s portfolio and provide insights into potential risks and opportunities.

Like other AI tools, ChatGPT can help traders save time and increase the speed and efficiency of their trading process, from automating tasks, identifying patterns and trends, reducing risk, giving personalised insights and recommendations, to the ability of learning and adapting over time to increase profits.

It also has the advantage of providing a more natural, plain language, and intuitive interface for traders.

Another benefit of using ChatGPT is its ability to learn and adapt to individual traders’ needs and preferences over time. As traders interact with the system, ChatGPT can learn from their feedback and improve its responses and recommendations accordingly.

Additionally, ChatGPT can provide traders with insights and recommendations that are not limited to trading data alone. For example, it can incorporate news and social media data, which can be important drivers of market sentiment and volatility.

This can help traders get a more complete picture of market conditions and make more informed decisions.

At the same time, there are some obvious cons – while AI has several potential benefits for traders, there are also some potential drawbacks of using it in trading.

Relying too heavily on AI systems can make traders vulnerable to technology failures or errors.

If an AI system fails or produces inaccurate results, it can lead to significant financial losses.

AI also has other risks associated with it, including limited ability to adapt to unexpected events, overfitting, ethical concerns, and high implementation costs. And this is an important thing to remember – although ChatGPT and other AI systems can provide traders with a range of benefits, these systems cannot replace human traders owing to several crucial limitations.

For instance, although ChatGPT can process large amounts of data quickly, it may not have a deep understanding of the broader economic, social, and political context that can impact market movements.

This contextual understanding is often critical for making informed trading decisions.

Obviously, ChatGPT is only as good as the data it is trained on, and it may not be able to adapt to unexpected events or changes in market conditions that were not present in the training data. If the data is biased, incomplete, or inaccurate, it can lead to incorrect predictions and decisions.

This can limit its usefulness in volatile or rapidly changing markets. And while ChatGPT can analyse structured data such as financial reports and stock prices, it may not be able to interpret unstructured data such as news articles or social media posts as accurately as human traders.

Furthermore, although ChatGPT can analyse data and identify patterns that may not be apparent to people, it is unable to incorporate subjective factors, such as personal experience, intuition, and emotions.

These subjective factors can play an important role in human traders’ decision-making processes.

We all know that great trading comes from a combination of accurate data analysis and intuition.

What AI lack is intuition, which comes from an individual’s personal experience, knowledge, and emotional intelligence. While human mind may not be as effective at processing large amounts of data, its capacity of intuition can be highly effective in certain situations where subjective factors or personal experience play a critical role.

This is why the best approach may be to combine the strengths of both AI/ChatGPT and human intuition.

By using AI/ChatGPT to process and analyse large amounts of data and human intuition to incorporate subjective factors and personal experience, traders can make better informed decisions that take into account a wide range of factors. AI tools and features are helping to make trading more efficient, accurate, and cost-effective.

By automating certain tasks and providing valuable insights and recommendations, these tools can help traders make more informed decisions and manage their portfolios more effectively.

In conclusion, ChatGPT is a powerful tool that can be used to help with trading process by analysing data and generating code – but nothing is perfect, it is only as good as the instructions you give it.

With that being said, however, it seems likely that ChatGPT and other AI tools will continue to play an increasingly important role in the trading space over the next five years and beyond.

As these AI tools become more widely adopted and their capabilities continue to evolve, traders can expect to benefit from more accurate and effective analysis, more informed trading decisions, and greater efficiency and automation in managing their portfolios.
 

By Marc Despallieres, Chief Strategy and Trading Officer at Vantage Written for The Nation