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BOOK YOUR FREE STRATEGY SESSION NOW >>Trading and Chat GPT: the match of a lifetime or a relationship doomed to fail?
There isn’t a single field in which Chat GPT has not been tested as an aid or to support activities.
Could we then refrain from testing it in systematic trading? Hmm, probably not.
The simple question we asked ourselves is: what support can Chat GPT offer a systematic trader?
The answer can be found in the report card we have compiled for you. A grade for each step of our trading activity:
1)Idea generation;
2)Coding of Ideas;
3)Trading system backtesting;
4)Trading system validation;
5)Portfolio creation;
6)Portfolio management;
7)Live trading on the market.
Is it time to start using Chat GPT for our trading?
Find it out right now!😉
Chat GPT: where man ends and the machine begins
ChatGPT in trading: Can it help a systematic trader? Well, I can talk about systematic trading because it's what I do, and I've been doing it for more than 20 years.
And I just want to take a look at the steps a systematic trader goes through and evaluate, with grades, what ChatGPT can do for this systematic trader.
We talk a lot about artificial intelligence and we talk a lot about ChatGPT, how the machine is beautiful and so on. We should never forget, anyway, that on top of the process or on the base, depending on how you see it, there is still a human being.
I mean, ChatGPT is there, but it was programmed, invented and built by a human being. And even when we'll arrive to ChatGPT version "N" programmed by its previous version, we'll still have to go back and imagine that at the very beginning, the very start, there was a human being.
This is very important, but especially in trading, the human being is extremely important to properly evaluate what we have in front.
But let's go into systematic trading and the steps which we can imagine going through when we approach this.
Idea generation
The step one is the generation of an idea. What should I do? Here ChatGPT is very useful. I mean, of course, we can have our ideas, but ChatGPT has an enormous database and the capacity to explore this database in zero time, you know. And to give us all the information that we need to generate ideas on how to build our systems.
And for this basic task, just to introduce us to the trading systems world, ChatGPT makes a great job. So I cannot give an A, but I will certainly give a B to this. I mean, A is top of the top and it's still not there. But B for sure is properly deserved for ChatGPT in this step 1.
Coding of Ideas
And then we go to step 2. We have the idea, we have to code it. And the coding exercise can be obviously asked to be delivered by ChatGPT. ChatGPT can deliver a code. You just say, "I want this idea programmed in Easy Language or Power Language," which is the language we use in MultiCharts, I personally use that.
Okay, you get the code and this output is not always the best you could imagine. You say, oh, the machine is not good? Well, in some cases it inserts unnecessary lines, but this is not a main problem, of course. But sometimes it makes mistakes, mistakes that can block your code. So you have a code that doesn't work just for a silly mistake.
So if you are a skilled programmer and you just used ChatGPT to ease your work, just to get something from scratch to work on, you can easily go through the code and correct all the small problems that you can find there, and then you can go on.
But if you're a newbie, somebody who has no experience, no programming experience, especially this one, you have something that you don't know why it doesn't work, because you are not able to understand it, so it's useless.
But even worse, there are even sometimes mistakes that are dangerous. I mean, mistakes in the code that lead the system to do things that it's not supposed to be, to do things that can be dangerous. And with dangerous, I mean things that can make you lose money.
Because they do the wrong thing and normally, when wrong things are done, it's more likely to lose money than to make extra money. At least this is pretty obvious.
So it can be dangerous in wrong, inexperienced hands. And this is something that obviously is a pity, because we have something that should give us an advantage, but it's not a 100% advantage.
I would not block it completely, but I cannot say it's good. So I will say we're about C for this second step.
Trading system backtesting
Third step. Third step is the back testing. We have now a system and want to backtest the system and eventually model it a little bit better, optimize it, tweak left or right to get a better output.
Well, here ChatGPT is weak because it can give us all the information we need on how to do it, but it doesn't do it itself, not the way we want it to be done or we desire it to be done.
So we are sit there, we get all the information of where to go to, what to do, but we have to do the dirty job. We have to understand what we get as a recommendation and then put it in place. And this is obviously a weakness point in the whole process.
So, in this case, I would stay on a D for this because I don't get a real help from ChatGPT.
Trading system validation
Step number four: we want to validate the system. Again, same story, ChatGPT doesn't validate the system. It just gives us the information about the validation we have to go through, we could go through.
But in this case, the information that we receive from ChatGPT is, in my opinion, of higher value than in the previous case, because we are in a more difficult area and whatever we get as tips or information from the machine, it's more helpful because we are really in the darkness before we get this information.
So in this case, these small suggestions, or the list of to do things helps more than in previous case. So in this case, I will for sure stay with C even though it's the very same situation as in the step three. But in this case I will stay with C because I think it's more valuable.
Portfolio creation
So step five, we go through the previous four steps over and over, because we want to create a portfolio of strategies. So we have just built one strategy with all the process before. Now we have to go through that again and again to get more strategies to diversify.
But it's not the same level of easiness, because here we have also to explain to the machine that we have to diversify, we have to find new markets, new approaches, new ideas.
So again, every time we start from scratch, making sure that we don't repeat something that we have already done. So the situation here is a bit choppy let's say. We get the help we aim to, but we have some weaknesses.
So in this case, the whole process was a little bit decent... We had a B in the first step, let's say C, but it's a little bit... a sort of a present I'm giving to ChatGPT with a C on step five.
Portfolio management
Step six, we have to manage the portfolio. Now we have a portfolio and we have to manage it. And here ChatGPT is not really useful. I mean, we have to understand what strategies to put at work, how many contracts to use per strategy. We have to understand if we have to kill some strategies, we have to stop some, to pose them.
We don't know all this information, ChatGPT has difficulties in leading us through this path. So it's really weak in this area. It doesn't give valuable information for this, so I would say D.
Live trading on the market
Seventh, last step: we have everything ready, we have to go live. Now, we have to go live here and here, I must admit I don't see really anything of good use from ChatGPT because going live means, okay, it gives us information on how to build our infrastructure, but it doesn't really help on the day-by-day stuff.
It doesn't give us the information of what to do, how to monitor, it tells us how, but it doesn't monitor. So we have to do all the job and we just get some generic information from ChatGPT. This is really weak.
And here I must be evil, the evil professor - F. I'm sorry Chat, but you deserve no more than an F for this.
Final thoughts
Okay, so do we really get a help in systematic trading from ChatGPT? I don't know. I mean, you have seen the grades were somewhere good, somewhere so and so, somewhere bad. We could imagine to say in average on a C.
So something which is just decent maybe, I don't know. I can tell you I don't use ChatGPT today for trading or for building my infrastructure.
I can't tell that in ten years we will all be using ChatGPT. Maybe it grows to a level where we get a real help in all the steps that I've gone through. As of today, the situation is completely different and even more dangerous.
If you think to use ChatGPT as a total beginner just because you think you are accompanied by something very clever, you are in danger. Because some solutions that may be proposed by ChatGPT may sound very simple, very easy, and with easiness you go into the market and you get hurt.
Because it's not that easy. It's like if I gave you information on how to drive a big powerful motorcycle and just make you think that it's easy to drive it. But when you jump on a motorcycle and you've never driven a motorcycle before and you go, it might be dangerous, you understand this, of course.
So the same here, going and putting your money in the market thinking it's simple or using tools that may be wrong or may contain mistakes or whatever. I mean, this is really dangerous.
And make you feel confident that you are properly assisted by the machine might lead to some serious problems. So I think that we still need experience, the human experience in the markets, because ChatGPT doesn't have that experience, that experience that you gain only when you sit there and you trade the market.
And I am still making mistakes today because in some cases, I don't judge properly some situations, how dangerous they could be, and only afterwards I recognize that they were dangerous and they made me lose money. And only afterwards, I can put in place some new features, some new tools to avoid in the future this situation.
But this is the experience and ChatGPT doesn't have it. But you need somebody with experience, you will build the experience yourself. Normally the experience you build is expensive because normally we make experience from mistakes. And mistakes in trading are equal to losses, losing money, which is not very pleasant, of course.
In the future maybe we'll get all this features into ChatGPT. Today we don't. So my suggestion is stay with the humans and use ChatGPT for other kinds of tasks, but not for systematic trading today. Ciao from Andrea Unger.
We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.
BOOK YOUR FREE STRATEGY SESSION NOW >>Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.
