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Future of trading still lucrative?
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Future of trading still lucrative?

  #1 (permalink)
Trading Apprentice
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Future of trading still lucrative?

Hello,

Fulltime lurker here.
Been studying technical analysis and sim-trading for 3 years, doing so-so.

I have to confess a fear of mine, which I hope you guys can lay to rest:

With the wake of A.I. will independent traders have a chance in the future on the markets? =D


Sorry if this question has a thread already.


Kind regards.

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  #2 (permalink)
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  #3 (permalink)
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Well, you phrased the question as if the "future of trading" was expected to be profitable without AI, i.e. that in the past most traders found success. That's simply not true for most traders.

As far as AI, independent traders are not excluded from using AI and machine learning. The main difference in the current AI revolution from previous advances is that is the technology is being rapidly democratized and that it has more general purpose application. Change tends to bring opportunity for those who take advantage of it. I imagine most traders who are successful aren't doing things the way everyone is and/or have very special, unique capabilities.

Automation and technology is typically bottom up. The way this translates for the technical trader is that the trader of tomorrow will be using more advanced and proprietary technical indicators to make decisions. I'd hope you were already exploring that.

Even if AI becomes very advanced then there will still be value that a discretionary trader can add. Honestly, I think it is a greater risk to system traders and quants actually. The value comes in at a higher level though. For example, you might tell the system what direction you want to trade but it makes the decision on how and where to enter. I explore such ideas at my graybox blog.

There are a few caveats:

* If AI is inherently somehow more capable of trading the markets then humans then they might develop an exclusive, dominant advantage.
* If a general purpose intelligence is produced that exceeds or matches human intelligence. Not likely in the immediate future. Consequences unknown. But the impacts would go far beyond the markets. One argument I have against self-driving cars being better than humans is they have radar capabilities and other advanced sensors. We don't know whether or not a completely automated system would be superior to an advanced hybrid system. Even if it were superior, we don't know if that's because most people treat routine driving as a low motivation chore versus a high performance activity. So, it wouldn't apply to trading where the motivation is high. On the other hand, computers are a lot faster and most people do treat driving as a chore, so it's probably only a matter of time before they are better.
* If you have a lower level job in trading that is rather routine then it might be a risk. Most traders don't have jobs. So no problem. =)


Last edited by tpredictor; February 2nd, 2017 at 08:43 PM.
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Maybe by way of analogy, let's say you were a farmer 100 years ago and asked if it was still going to be profitable to be a farmer in another 20 years. Well, yes, if you went out to go get a tractor and some automation. If you couldn't afford the new technology, then probably not, if you could, then great! You'll make lots of money.

Fast forward to 2017. Is it still going to be profitable to be a farmer in another 20 years? Well...maybe. Assuming you have said tractor already (old tech), but now you also have the latest in drone technology to monitor crops, fertilizer, and genetically enhanced seeds. If so, great, you'll be profitable. If not...it will be a struggle.

So...can you scratch out a living in 2017 manually farming with a plow? Maybe for a few beans here and there...but you better have enough capital to afford the latest tech. If you can, you'll be fine.

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  #5 (permalink)
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@MacroNinja

That last line puts the threshold even higher for me. What are some examples of software that need to be purchased?
Which ones are you using, for the sake of example?

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  #6 (permalink)
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MADayTrader View Post
@MacroNinja

That last line puts the threshold even higher for me. What are some examples of software that need to be purchased?
Which ones are you using, for the sake of example?

We use a lot of custom built items, but still build maybe 50-60% to leverage off the shelf platform stuff.

Assuming your budget for tech is under $5k, I'd say the best stuff out there right now is 1) Sierra Charts for charting. (their stock indicators has really come a long way to earn this endorsement) 2) Peter Davies' Jigsaw, best commercially avaliable dom pro or non-pro out there. 3) TT ADL for order execution.

Lots of interesting AI modules to take the leading edge on. There's a few good threads about Tensor Flow out there.

Just remember, the best stuff out there either costs a lot of money, or isn't even for sale. If a vendor legitimately has the best pick axe for mining gold out there, they either decided it was easier to make money selling pick axes, or used it themselves to mine gold and chose not to sell it to anyone.

Good luck out there and stay safe.

PS You can either have the best tech, or just really cheap labor to do a lot of grunt work for you. Continuing the farming analogy, I asked a friend who sells fertilizer in SE Asia if his farmers had started to use drones yet. He replied that it was still cheaper to hire someone to literally walk around the fields to get the geographic data at $200USD per month rather than buy the drones. i.e. don't overlook the value of something powerful like Excel with a lot of data monkeys to run it to run your analytics. You can spend a of money on fancy software, but if a company like Apple or Berkshire is trading below fair book value...it doesn't take a lot of quantitative muscle to figure it out and invest.

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I'd add, if you can find a trading partner then that would be really helpful whether your partner runs research or you just share your trading ideas. Also, learning how to do some basic backtesting and testing of your ideas using Tradestation and Easylanguage or C# and Ninjatrader would be a good step. Taking some basic statistics courses would also help give you some background if you wanted to pursue more advanced topics like machine learning. As for programming languages, Easylanguage is one the easiest to get started with and fast for prototyping. C# is good for general purpose programming and can do pretty much everything and it is what Ninja is based on. There's a lot of debate but I'd recommend Python for machine learning. Matlab, Excel, and R are commonly used, as well.

The other route you could go would be to try to step your game by giving yourself a short and focused "TST type challenge" on a free simulator. Really training or working on specific aspects and seeing what you can do.


Last edited by tpredictor; February 3rd, 2017 at 10:50 PM.
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  #8 (permalink)
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MADayTrader View Post
Hello,

Fulltime lurker here.
Been studying technical analysis and sim-trading for 3 years, doing so-so.

I have to confess a fear of mine, which I hope you guys can lay to rest:

With the wake of A.I. will independent traders have a chance in the future on the markets? =D


Sorry if this question has a thread already.


Kind regards.

I am trying to understand the logic of your question. AI tries to imitate humans: voice, thought, brain process and even consciousness. So you asking if an imitation of you is better than you? "machine mimics "cognitive" functions"

Your competition are people who trade, have skin in the game, do research and have an amazing work ethic. My 2 cents and opinion.

Matt Z
Optimus Futures

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PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #9 (permalink)
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The market is just an imperfect information game and though the evidence is undeniable that AI is better at perfect info games e.g. chess, checkers, and now go, it's now overcoming the best in the world at a imperfect info games beating four of the top heads up poker players https://www.wired.com/2017/02/libratus/

It's obviously only a matter of time....

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  #10 (permalink)
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Here's a more in-depth write up:

https://www.cmu.edu/news/stories/archives/2017/january/AI-beats-poker-pros.html

Right, to play devil's advocate, computers have a lot more "energy" or "work capacity" than people. Energy and intelligence produce power. Humans have a lot more intelligence. If computers get just even a little bit of intelligence then they could quickly and easily surpass humans.

By way of analogy, if we imagine that "trading" involves listening to a radio program for a "signal". A person will understand much more of that "radio program" and thus be able to profit from more scenarios provided that trading cost are low enough. However, there is no real cost for the computer to be patient to wait, as long as it can "confidence rank" its finding then it can wait until it is 99% certain it heard the "signal" and then trade on it. Even though, it is far less "efficient" than the human in understanding capacity, the work capacity can make up for it.

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