What happens when AI starts trading stocks?

Thread Starter

strantor

Joined Oct 3, 2010
6,798
Well, it already is doing that to an extent, but I mean once the training wheels are off. Right now it is used as a tool to analyze trends in stock price and make recommendations to humans on which actions to take. I mean once it becomes an actual stock broker. What I am envisioning is an AI which looks at more than just stock ticker data and does more than just make recommendations. Here this guy made an AI bot to which he has delegated the authority to buy and sell stock on his behalf:


But it still is pretty limited, in that it only analyzes trends in stock price. What if the AI was monitoring social media, news outlets, press releases, reading quarterly reports, staying up-to-date to within seconds of current events, and making actual informed decisions(*) based on the dossier that it builds for a given company? Ten seconds ago an Apple employee on Reddit leaked something about an upcoming release of iPhone37 xs ++ Pro Mega, buy Apple stock. The president just tweeted about opening a new oil pipeline, buy stock in Kinder Morgan. Bud Light just announced a transgender spokesperson sure to offend rednecks, sell Budweiser stock.

(*) I already know it will be said that AI is incapable of making actual informed decisions, so if you're going to go there, please elaborate; why can't it do that? What are the barriers needing to be overcome before it can do that? How far away are we?

What are your thoughts and predictions?

I don't know enough about AI or the stock market to have a valid opinion on this from any angle, but I won't let that stop me. Here's my uninformed opinion presented before the AAC brain trust for target practice, so shoot holes in it; tell me why I'm wrong:

I think this will happen sooner or later and it will fundamentally change how our economy works. I predict that once the first firm implements an AI to do this and is wildly successful, there will be a race to the bottom as no human will be able to compete. The other firms will all find themselves "behind the curve" and having their actions be dictated as reactions to whatever the other firm's AI is doing. So they will implement their own AIs, some fully featured ("proactive") like I described, but mostly the "easy" kind like the one in the video ("reactionary"). The reactionary ones will still be "behind the curve" like humans, but only by a few seconds, and will exacerbate the issue. They will turn every minor up-tick or down-tick into a dramatic spike or plummet. Stocks will have already tanked or exploded before any human even understands why. It could be in response to a badly received Facebook post, maybe even one made by a hacker, and by the time it's sorted out it will be far past too late. People will go to bed destitute and wake up millionaires, and vise versa. There will be less development of needed industry and more development of wanted industry. They will be active in all markets in all countries in all time zones, the effect will be global.

Ok, there it is, fire away.
 

Papabravo

Joined Feb 24, 2006
21,225
It is less than clear what the goal of AI trading would be. The primary aim of regulators is that markets be fair and orderly. A fair market is one where everybody has access to the same information at the same time. An AI would have an advantage in terms of reaction and decision-making time. Orderly markets have roughly equal numbers of buyers and sellers. Collusion among AI entities would be decidedly negative for orderly markets. I guess I would want to know more about what regulations are in place to ensure that markets remain fair and orderly.

ETA: How would you compel an AI to make good on a margin call? Could you prosecute one for fraud?
 

MrChips

Joined Oct 2, 2009
30,817
Automatic trading systems are already in place around the globe. Since such trading decisions are essentially based on the same information, trading orders tend to follow the same behaviour. Hence it makes the stock market more volatile.

If you are already "behind the curve" then surely the best trading strategy would be to do the opposite of what they are doing. That seems rather contrary, doesn't it? Remember, the big houses are trading in billions of dollars. What should the little guy do except swim against the shoal.
 

nsaspook

Joined Aug 27, 2009
13,291
Well, it already is doing that to an extent, but I mean once the training wheels are off. Right now it is used as a tool to analyze trends in stock price and make recommendations to humans on which actions to take. I mean once it becomes an actual stock broker. What I am envisioning is an AI which looks at more than just stock ticker data and does more than just make recommendations. Here this guy made an AI bot to which he has delegated the authority to buy and sell stock on his behalf:


But it still is pretty limited, in that it only analyzes trends in stock price. What if the AI was monitoring social media, news outlets, press releases, reading quarterly reports, staying up-to-date to within seconds of current events, and making actual informed decisions(*) based on the dossier that it builds for a given company? Ten seconds ago an Apple employee on Reddit leaked something about an upcoming release of iPhone37 xs ++ Pro Mega, buy Apple stock. The president just tweeted about opening a new oil pipeline, buy stock in Kinder Morgan. Bud Light just announced a transgender spokesperson sure to offend rednecks, sell Budweiser stock.

(*) I already know it will be said that AI is incapable of making actual informed decisions, so if you're going to go there, please elaborate; why can't it do that? What are the barriers needing to be overcome before it can do that? How far away are we?

What are your thoughts and predictions?

I don't know enough about AI or the stock market to have a valid opinion on this from any angle, but I won't let that stop me. Here's my uninformed opinion presented before the AAC brain trust for target practice, so shoot holes in it; tell me why I'm wrong:

I think this will happen sooner or later and it will fundamentally change how our economy works. I predict that once the first firm implements an AI to do this and is wildly successful, there will be a race to the bottom as no human will be able to compete. The other firms will all find themselves "behind the curve" and having their actions be dictated as reactions to whatever the other firm's AI is doing. So they will implement their own AIs, some fully featured ("proactive") like I described, but mostly the "easy" kind like the one in the video ("reactionary"). The reactionary ones will still be "behind the curve" like humans, but only by a few seconds, and will exacerbate the issue. They will turn every minor up-tick or down-tick into a dramatic spike or plummet. Stocks will have already tanked or exploded before any human even understands why. It could be in response to a badly received Facebook post, maybe even one made by a hacker, and by the time it's sorted out it will be far past too late. People will go to bed destitute and wake up millionaires, and vise versa. There will be less development of needed industry and more development of wanted industry. They will be active in all markets in all countries in all time zones, the effect will be global.

Ok, there it is, fire away.
Some of the best mathematical minds 'Quants' have been in the stock 'forecasting' business for decades. The machines will lose vast sums of money just like people (in theory making actual informed decisions) do.
"It is difficult to make predictions, especially about the future."
Philosopher Yogi Berra

A more scientific approach.
“Prediction is very difficult, especially if it’s about the future!”
Nobel laureate in Physics Niels Bohr

1704995487404.png
 
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joeyd999

Joined Jun 6, 2011
5,283
The best analysts are rarely able to keep up with indexed funds over the long term.

They get lucky a few times, and boast that, but they never boast their losses.

I don't know how AI -- informed or otherwise -- could be any different.
 

LowQCab

Joined Nov 6, 2012
4,075
Alan Greenspan was a Super-Genius Computer-Programmer from back in the '60's,
who set up the first Automatic / Manual Market-manipulation Programs.

ALL Markets / Prices are fully manipulated by vastly superior Programs right up to this minute.
The biggest difference, currently, is that the manipulation has been
taken-over by US Military-Intelligence.
This is why certain Market-Indicators can indicate that inevitable, and certain, doom
is unavoidably eminent, seemingly for years on end,
but no "doom" event ever actually materializes.

Fake "Fiat-Currencies", like the Dollar, are being slowly, and carefully, phased-out of existence.
All future "Real-MONEY(s)" will be Commodities-backed,
and tracked in real-time, by "Blockchain" technologies via dedicated US-Space-Force-Satellites.

Many new "Money-Systems" are already in-place, and fully tested and functional,
and are simply waiting to be announced / implemented.

In the meantime, EVERYTHING, currently Financially-related, is FAKE and Actively-MANIPULATED.
This includes the "Dollar-Price" of all Crypto-Currencies.

Any "wealth" that is not in your personal-possession will be completely lost at some point.
Paper "Contracts" for various forms of "Currencies" will become worthless.

Unfortunately, the "Gamblers", ( Banksters ), always have to
make things more difficult for all the hard-working-honest-People.
.
.
.
 

Ian0

Joined Aug 7, 2020
9,822
If AI learns from other AI, then all AI will end up being the same. Then the financial markets will be like two perfectly matched football teams playing against each other - a nil-nil draw.
 

Lo_volt

Joined Apr 3, 2014
317
AI is only as good as the training data. Take a look at the stock market historical data. MAYBE, just MAYBE if it can see trends there, AI MIGHT make profitable stock picks. IMHO, stock prices have a huge human element to them that I don't see being included in the AI training data. Think Boeing after the fallout from the door blowout. Think Tesla or Twitter with Elon's interference. How about insider trading, i.e. the stuff we know happens but few are ever caught. How does one include Elon into AI training data? How does one include great innovations like cell phones, semi-trucks taking over transportation from railroads, the internet, etc?
 

nsaspook

Joined Aug 27, 2009
13,291
If AI learns from other AI, then all AI will end up being the same. Then the financial markets will be like two perfectly matched football teams playing against each other - a nil-nil draw.
It's even worst than that. When an AI 'learns' from another AI the result is homogenous garbage.

https://www.techtarget.com/whatis/f...plained-How-synthetic-training-data-breaks-AI
Model collapse explained: How synthetic training data breaks AI
In this scenario, models start to forget the true underlying data distribution, even if the distribution does not change. This means that the models begin to lose information about the less common -- but still important -- aspects of the data. As generations of AI models progress, models start producing increasingly similar and less diverse outputs.

Generative AI models need to train on human-produced data to function. When trained on model-generated content, new models exhibit irreversible defects. Their outputs become increasingly "wrong" and homogenous. Researchers found that even in the best learning conditions, model collapse was inevitable.
1705002385873.png
 
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joeyd999

Joined Jun 6, 2011
5,283
If the AI learns that, say price increases when there is high demand, it might just buy lots of stock to raise the price.

Or it'll start running unattended pump and dump schemes.

What fun.
 

GetDeviceInfo

Joined Jun 7, 2009
2,196
Personal AI assistant that would schedule your days, mapping out your most fruitful journey in life, continuously remapped in response to your actions. Connected to the world, interacting with everyone else. Get your babies chipped folks.
 
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