Last Updated: May 26, 2021.
Not too many years ago noted multinational investment bank and financial services provider Goldman Sachs did something quite unexpected; it fired 600 traders and replaced them with 200 computer engineers.
This somewhat radical departure from the norm occurred back in February 2017 and at the time Marty Chavez, the company’s deputy financial officer was quoted to have said, “Goldman Sachs has already begun to automate currency trading, and has found consistently that four traders can be replaced by one computer engineer.”
A.I.’s ubiquitous nature has seen it affecting numerous industries but its most prominent impact has been felt in the financial services sector.
Some have gone as far as saying that artificial intelligence provides an unfair edge within the realm of the financial markets.
Will A.I. replace Day Traders?
However, despite such notions, and despite A.I.’s capacity to evolve and improve, it remains limited. What is more likely is an integration; a helpful aid, but never an entire eradication of human traders.
Perhaps a more realistic prediction would be an algorithmic aid which will be part of the forex resources for individuals looking to improve their game.
The importance of human trading decisions
In recent years machine learning has advanced to the point that computers can now be taught how to trade.
However, despite this technological landmark, day traders continue to thrive and the vocation itself has increased in conjunction with the rise of online forex trading and its associated speculative trading options that at times include commodities and stocks.
Outside of exclusive niche trading subdivisions of corporations that employ automated high-frequency trading, the stock-standard practice of day trading by robots continues to reveal questionable outcomes.
Up until quite recently, a trading machine was only capable of learning historical trade and data patterns.
This trend has slowly begun to change with the utilization of big data which enables computers to employ human-like logic in their decision-making skills. The full realization of this technology however remains to be seen and the stock market’s erratic behavior is still best suited for the mind of a human.
Humans still make the key decisions
While all trades happening around the world are being facilitated by computers, their capacity terms of aid remain limited to implementing algorithms that analyze and predict market trends.
The main decisions still lie in the hands of the people who elect to buy or sell an asset. In some cases, it’s the trader hitting the buy/sell button while in other cases it’s the trader who commands the algorithm to initiate a buy when certain key parameters are in place.
According to Meir Barak, the founder of Tradenet and author of the highly influential book, The Market Whisperer: A New Approach to Stock Trading, human interaction in the market will always be necessary due to its aqueous and changing nature.
The savvy nature of things like news, social media, hype, and rumors make for unforeseen forces of impact upon the market and they cannot be processed by the algorithmic machinations of a computer.
It is in fact due to mankind’s inability to consistently behave rationally, that human trading will continue to trump A.I.-influenced trading.
To further illustrate the point, Barak speaks of a chess grandmaster who’s up against the best computer in the world – “Seconds before the game the arbiter tells both that the rules have changed, and the rook can also move in the diagonal.
The person would be confused but know how to respond. The computer would not have the time to adjust its software and would use old rules, and surely lose.”