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Asking HN: What will happen when “regular traders” are running AIs? I’m imagining a kind of “inbreeding” where AIs are doing fast trades based on signals other

Asking HN: What will happen when “regular traders” are running AIs? I’m imagining a kind of “inbreeding” where AIs are doing fast trades based on signals other AIs are giving, but it’s not my expertice.

AnthonyMouse 3y ago
The AIs "regular traders" will have will be the same ones as one other, so they'll make similar recommendations, so they'll be priced in. But they'll make similar recommendations to many people, so those stocks will go up, and people will think it's working. Then some new AI will be released that makes different recommendations and the stocks artificially inflated by the obsolete AI will crash. People will say that you need the latest AI or you'll be left behind. This is not a new thing. It's how every commodified stock-picking mechanism works. By the time retail investors have it, you're already inside a bubble.
astrange 3y ago
Nothing, because the AIs will tell you to invest in low cost passive index funds. Mainly because it's correct but also because the AIs will be certified financial advisors and will tell you what any of them would. "Regular traders" are gamblers whose job is to give market-makers their money in trade fees.
- sharts 3y ago
  The gambling allows price discovery to occur. Without it buying index funds is to buy no matter the cost.
  - astrange 3y ago
    You're providing price information anytime you buy a fund that's choosier than VTSAX. Conversely, if your opinion is the tech sector will go up and so you buy NVDA instead of a tech sector index fund, you've bet more than you intended to.
  - chii 3y ago
    > Without it buying index funds is to buy no matter the cost. for the retail people who are bad at actually discovering prices, their buying of index funds instead actually makes the market more efficient.
mhh__ 3y ago
Good question. Depends if regular means institutional non-algorithmic traders or retail. Most traders even in hedge funds are not trading using a machine as per se. I think at the moment a lot of old-er financial people are quite sceptical of complicated black-box models. AI could be a huge win in the sense that you could say "When has this bond future been in [conditions] like now and what happened". The potential for organising information is fantastic.

AnthonyMouse 3y ago

The AIs "regular traders" will have will be the same ones as one other, so they'll make similar recommendations, so they'll be priced in. But they'll make similar recommendations to many people, so those stocks will go up, and people will think it's working. Then some new AI will be released that makes different recommendations and the stocks artificially inflated by the obsolete AI will crash. People will say that you need the latest AI or you'll be left behind. This is not a new thing. It's how every commodified stock-picking mechanism works. By the time retail investors have it, you're already inside a bubble.

astrange 3y ago

Nothing, because the AIs will tell you to invest in low cost passive index funds. Mainly because it's correct but also because the AIs will be certified financial advisors and will tell you what any of them would. "Regular traders" are gamblers whose job is to give market-makers their money in trade fees.

sharts 3y ago
The gambling allows price discovery to occur. Without it buying index funds is to buy no matter the cost.
- astrange 3y ago
  You're providing price information anytime you buy a fund that's choosier than VTSAX. Conversely, if your opinion is the tech sector will go up and so you buy NVDA instead of a tech sector index fund, you've bet more than you intended to.
- chii 3y ago
  > Without it buying index funds is to buy no matter the cost. for the retail people who are bad at actually discovering prices, their buying of index funds instead actually makes the market more efficient.

mhh__ 3y ago

Good question. Depends if regular means institutional non-algorithmic traders or retail. Most traders even in hedge funds are not trading using a machine as per se. I think at the moment a lot of old-er financial people are quite sceptical of complicated black-box models. AI could be a huge win in the sense that you could say "When has this bond future been in [conditions] like now and what happened". The potential for organising information is fantastic.