Could AI replace traders?

08/03/2021

The ‘march of the machines’ means that AI is reshaping the world as we know it.

Artificial intelligence is transforming virtually every business process in every industry. And capital markets are no exception.

AI will never replace the thinking and skills of a good portfolio manager. But it is enhancing it in an unprecedented way.

AI, to put it simply, is a set of technologies, enabled by adaptive predictive power and a degree of autonomous learning, that are empowering traders to:

  • Recognise patterns
  • Anticipate future events
  • Create good rules
  • Make good decisions
  • Communicate with other people

Trading and investing decisions are still overseen by the best traders who are savvy with numbers, systems and the market.

But now it is machines who are carrying out the data consumption, deep analysis and execution of those trades and investment ideas.

Traders can now take an oversight role – rather like aeroplane pilots – monitoring the autopilot and only intervening when something goes wrong, the route alters or the landing is more bumpy than usual.

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Will human traders become redundant?

Despite advances in AI and data analytics, the traders are still in charge.

The bottom line is that a human still has to program the ‘robots’ – or algos – and talk to real people.

And it is this that is driving the ever-increasing importance in the trading field of not just programmers – but also quantitative analysts and, increasingly, data scientists.

Looking ahead the trader will not become obsolete. But their roles will undoubtedly become more specialized as machine learning models get more advanced at making accurate predictions based on data.

But until AI reaches higher-intelligence and comprehends all human intricacies, market volatility drivers and socio-cultural trends, traders will continue to meet it half way.

Because the fabled end-to-end automated black-box consistently generating alpha does not yet exist…  

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