The Problem With Algo Trading

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Includes: DDM, DIA, DOG, DXD, EEH, EPS, EQL, FEX, FWDD, HUSV, IVV, IWL, IWM, JHML, JKD, OTPIX, PSQ, QID, QLD, QQEW, QQQ, QQQE, QQXT, RSP, RWM, RYARX, RYRSX, SCHX, SDOW, SDS, SFLA, SH, SMLL, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SQQQ, SRTY, SSO, SYE, TNA, TQQQ, TWM, TZA, UDOW, UDPIX, UPRO, URTY, UWM, VFINX, VOO, VTWO, VV
by: Macro Ops
Summary

With the rise of quant trading, AI, algos, and everything else, is there even room for us human traders?

The question becomes what will happen to the nature of markets if they’re full of machines battling each other as opposed to people.

If these machines still have human biases, then we’ll likely still have trends with booms and busts and all the rest of that good stuff.

Everywhere you look there are robots taking over. Even in markets! With the rise of quant trading, AI, algos, and everything else, is there even room for us human traders? AK talks to Tyler of Macro Ops about all of this and more. Make sure you watch the video above for the full conversation!

The question becomes what will happen to the nature of markets if they’re full of machines battling each other as opposed to people. Will there be a fundamental change to how markets function? Will the human emotion that kept markets the same for thousands of years finally be removed? Could the emotional aspect of market booms and busts subside?

Probably not.

First off, all technology requires human input. It can’t be avoided regardless of how hard the techies try. Even with just the AI duking it out in the markets, there will still be human biases embedded in them. And that’s because humans originally made them. Studies are already finding that biases accidentally input by programmers when creating a machine learning program actually become amplified as the learning process progresses. Instead of the bias clearing itself out through multiple iterations, it becomes far more pronounced in comparison to any human.

If these machines still have human biases, then we’ll likely still have trends with booms and busts and all the rest of that good stuff. And this is not to mention the fact that the money AI strategies trade with comes from none other than people themselves. These are the same people with the same emotions they’ve always had. Hope, fear, greed — they’re all still there.

To learn more, make sure you watch the video above!

And as always, stay Fallible out there investors!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.