FNG Exclusive Interview… One of the most searched terms lately on the Internet is ChatGPT, with everyone from writers to bankers to educators and also just good old regular folks trying to figure out what the advent of artificial intelligence means for them.

And traders are no different.

We’re pleased to speak today with Marc Despallieres, Chief Strategy and Trading Officer at Vantage about ChatGPT and AI in general, and what it means for the trading world at large. Here is what he had to say.

FNG: Hi Marc, and thanks for joining us today and helping us understand a lot more about this very talked-about subject. How are ChatGPT and AI currently used in trading?

Marc: ChatGPT and AI are being increasingly used in trading to automate and improve various aspects of the trading process.

ChatGPT, or conversational AI, is being used to develop virtual trading assistants that can interact with traders and help them make informed decisions. These assistants use natural language processing to understand traders’ questions and provide them with relevant information and insights. They can also analyze large amounts of data and provide personalized recommendations based on a trader’s individual trading history and preferences.

AI is also being used to develop sophisticated trading algorithms that can analyze market data and make trades based on complex algorithms and mathematical models. These algorithms can analyze vast amounts of data and identify patterns and trends that are not readily apparent to human traders. They can also make trades faster and more accurately than human traders, which can result in higher profits and reduced risk.

In addition to virtual assistants and trading algorithms, AI is also being used to develop risk management tools that can help traders identify potential risks and take steps to mitigate them. These tools can analyze a trader’s portfolio and provide insights into potential risks and opportunities.

Overall, ChatGPT and AI are being used to improve trading efficiency, reduce risk, and increase profits. As these technologies continue to evolve and improve, we can expect to see even more advanced applications in the world of trading.

FNG: What makes ChatGPT a better tool for traders than other AI trading tools?

Marc: ChatGPT, or conversational AI, can be a better tool for traders than other AI trading tools in certain contexts. One advantage of ChatGPT is that it can provide a more natural and intuitive interface for traders to interact with AI-based trading systems. Traders can ask questions and receive answers in plain language, without needing to learn how to use complex trading algorithms or interfaces. This can help reduce the learning curve for new traders and make it easier for experienced traders to get the information they need quickly and easily.

Another advantage of ChatGPT is its ability to learn and adapt to individual traders’ needs and preferences over time. As traders interact with the system, ChatGPT can learn from their feedback and improve its responses and recommendations accordingly. This can help provide more personalized and relevant insights to traders, which can lead to better trading decisions and improved performance.

Additionally, ChatGPT can provide traders with insights and recommendations that are not limited to trading data alone. For example, it can incorporate news and social media data, which can be important drivers of market sentiment and volatility. This can help traders get a more complete picture of market conditions and make more informed decisions.

However, it’s important to note that different AI trading tools may be better suited for different tasks and contexts, depending on their specific features and capabilities. Therefore, traders should carefully evaluate their options and choose the tools that best meet their individual needs and preferences.

FNG: What are the pros of AI in trading?

Marc: There are several potential benefits of using AI in trading, including:

Increased efficiency: AI can process large amounts of data much faster than humans, which can help traders make decisions more quickly and efficiently. AI can also automate many routine tasks, such as data analysis and risk assessment, freeing up traders’ time to focus on more complex tasks.

Improved accuracy: AI algorithms can analyze vast amounts of data and identify patterns and trends that may not be apparent to human traders. This can help traders make more accurate predictions about market movements and make better-informed trading decisions.

Reduced risk: AI can help traders identify potential risks and take steps to mitigate them. For example, AI-powered risk management tools can analyze a trader’s portfolio and provide insights into potential risks and opportunities, helping traders make more informed decisions and reduce their overall risk exposure.

Personalization: AI can learn from traders’ behavior and preferences over time, allowing it to provide more personalized insights and recommendations. This can help traders make more informed decisions that are tailored to their individual needs and preferences.

Continuous improvement: AI can learn and adapt over time, improving its accuracy and effectiveness as it processes more data and receives feedback from traders. This can help traders stay ahead of market trends and make more informed decisions as market conditions change.

Overall, AI has the potential to provide traders with a range of benefits, including increased efficiency, improved accuracy, reduced risk, personalization, and continuous improvement. However, it’s important to note that these benefits depend on the quality of the AI algorithms being used and the specific tasks and contexts in which they are being applied.

FNG: What are the cons of using it?

Marc: While AI has several potential benefits for traders, there are also some potential drawbacks to using it in trading:

Dependence on technology: Relying too heavily on AI systems can make traders vulnerable to technology failures or errors. If an AI system fails or produces inaccurate results, it can result in significant financial losses.

Limited ability to adapt to unexpected events: AI systems are only as good as the data they are trained on, and they may not be able to adapt to unexpected events or changes in market conditions that were not present in the training data. This can limit their usefulness in volatile or rapidly changing markets.

Overfitting: AI systems can be vulnerable to overfitting, which occurs when the system is trained on a limited set of data and performs well on that data, but performs poorly when applied to new data. Overfitting can lead to inaccurate predictions and poor trading decisions.

Ethical concerns: There are concerns about the ethical implications of using AI in trading. For example, some AI systems may be designed to take advantage of market inefficiencies, which can have negative effects on other market participants. Additionally, there are concerns about the potential for AI systems to amplify biases or reinforce existing power imbalances in the financial industry.

Cost: AI systems can be expensive to develop and maintain, which can be a barrier to entry for smaller traders or firms.

Overall, while AI has the potential to provide traders with significant benefits, it’s important to be aware of the potential drawbacks and to use AI systems in a responsible and ethical way. Traders should carefully evaluate the costs and benefits of using AI in their specific context and consider the potential risks and limitations of these systems before making a decision.

FNG: What limitations does ChatGPT have over a human trader?

Marc: While ChatGPT and other AI systems can provide traders with a range of benefits, they also have several limitations compared to human traders:

• Limited contextual understanding: While ChatGPT can process large amounts of data quickly, it may not have a deep understanding of the broader economic, social, and political context that can impact market movements. This contextual understanding is often critical for making informed trading decisions.
• Inability to incorporate subjective factors: While ChatGPT can analyze data and identify patterns, it may not be able to incorporate subjective factors such as personal experience, intuition, and emotions into its decision-making process. These subjective factors can play an important role in human traders’ decision-making processes.
• Vulnerability to unexpected events: ChatGPT is only as good as the data it is trained on, and it may not be able to adapt to unexpected events or changes in market conditions that were not present in the training data. This can limit its usefulness in volatile or rapidly changing markets.
• Limited ability to interpret unstructured data: While ChatGPT can analyze structured data such as financial reports and stock prices, it may not be able to interpret unstructured data such as news articles or social media posts as accurately as human traders.
• Dependence on the quality of the data: The quality of the data used to train ChatGPT can significantly impact its effectiveness. If the data is biased, incomplete, or inaccurate, it can lead to incorrect predictions and decisions.

Overall, while ChatGPT and other AI systems can provide traders with many benefits, they also have several limitations compared to human traders. Therefore, it’s important to use these systems in a responsible and ethical way, and to consider the potential limitations and risks before making decisions based solely on AI-generated insights.

FNG: How far can you trust AI/ChatGPT over you own intuition?

Marc: The level of trust one places in AI/ChatGPT versus their own intuition ultimately depends on several factors, including the specific task at hand, the quality and accuracy of the data being analyzed, and the level of experience and expertise of the individual trader.

In general, AI/ChatGPT can be highly effective in analyzing large amounts of data quickly and identifying patterns and trends that may not be apparent to humans. However, it’s important to remember that AI/ChatGPT can only process data that it has been trained on and may not have the same level of contextual understanding or subjective factors as a human trader.

Intuition, on the other hand, is based on an individual’s personal experience, knowledge, and emotional intelligence. While it may not be as effective at processing large amounts of data, intuition can be highly effective in certain situations where subjective factors or personal experience play a critical role.

Ultimately, the best approach may be to combine the strengths of both AI/ChatGPT and human intuition. By using AI/ChatGPT to process and analyze large amounts of data and human intuition to incorporate subjective factors and personal experience, traders can make more informed decisions that take into account a wide range of factors. It’s important to use both approaches in a responsible and ethical way, and to always consider the potential limitations and risks associated with each approach.

FNG: Aside from ChatGPT, what other AI tools/features are helping make trading easier?

Marc: There are several other AI tools and features that are helping to make trading easier and more efficient:

Robo-advisors: Robo-advisors are AI-powered investment platforms that use algorithms to analyze data and provide personalized investment recommendations based on an individual’s risk tolerance, investment goals, and other factors. They can help investors manage their portfolios more efficiently and cost-effectively than traditional human advisors.

Sentiment analysis: Sentiment analysis is the process of using natural language processing (NLP) and machine learning algorithms to analyze public opinion and sentiment towards specific stocks or companies. This can provide traders with valuable insights into market trends and help them make more informed investment decisions.

Pattern recognition: AI-powered pattern recognition tools can analyze large amounts of historical market data to identify patterns and trends that may not be apparent to human traders. This can help traders make more informed decisions about when to buy or sell stocks.

Fraud detection: AI-powered fraud detection tools can analyze large amounts of financial data to identify suspicious activity or potential fraud. This can help traders and financial institutions detect and prevent fraudulent activity more quickly and efficiently.

Algorithmic trading: Algorithmic trading involves using computer algorithms to execute trades automatically based on predefined rules and conditions. This can help traders execute trades more quickly and efficiently, while also minimizing the potential for human error.

Overall, AI tools and features are helping to make trading more efficient, accurate, and cost-effective. By automating certain tasks and providing valuable insights and recommendations, these tools can help traders make more informed decisions and manage their portfolios more effectively.

FNG: Do you expect ChatGPT to make a move into helping institutional traders or is it just a retail trend?

Marc: ChatGPT and other AI tools have already made significant inroads in the institutional trading space, and there is every reason to believe that they will continue to do so in the future. Institutional traders, like retail traders, face a variety of challenges and complexities when it comes to analyzing market data and making informed trading decisions. AI tools like ChatGPT can help address these challenges by analyzing large amounts of data quickly and accurately, identifying patterns and trends, and providing valuable insights into market conditions.

In fact, many institutional traders are already using AI tools like ChatGPT to help manage their portfolios more efficiently and effectively. These tools can help traders make more informed decisions about which assets to buy or sell, when to execute trades, and how to manage risk. By automating certain tasks and providing valuable insights, AI tools can help institutional traders operate more efficiently and effectively in an increasingly complex and competitive market.

Overall, while AI tools like ChatGPT may have initially gained popularity in the retail trading space, they are increasingly being adopted by institutional traders as well. As the benefits of these tools become more widely recognized, we can expect to see continued growth and adoption of AI tools in both the retail and institutional trading spaces.

FNG: In a trading sense, where do you expect ChatGPT and AI to be in 5 years?

Marc: It’s difficult to predict with certainty where ChatGPT and AI will be in the trading space in 5 years, but there are some trends and developments that suggest the technology will continue to play an increasingly important role.

One trend that is likely to continue is the increasing adoption of AI tools in the trading space, as more and more traders recognize the benefits of these tools for analyzing data, identifying patterns and trends, and making informed trading decisions. As AI algorithms become more sophisticated and data analysis techniques continue to evolve, we can expect these tools to become even more accurate and effective.

Another trend is the growing importance of ethical considerations in the use of AI in trading. As these tools become more widely adopted, there is increasing scrutiny and concern about the potential risks and limitations of the technology. To address these concerns, we can expect to see greater emphasis on ethical considerations, transparency, and accountability in the use of AI in the trading space.

Overall, it seems likely that ChatGPT and AI will continue to play an increasingly important role in the trading space over the next 5 years and beyond. As these tools become more widely adopted and their capabilities continue to evolve, traders can expect to benefit from more accurate and effective analysis, more informed trading decisions, and greater efficiency and automation in managing their portfolios.

FNG: Apart from AI, what other technologies/tools are helping retail investors on their trading journey?

Marc: There are several other technologies and tools that are helping retail investors on their trading journey:

Mobile trading apps: Mobile trading apps allow investors to trade on the go, monitor their portfolios, and access real-time market data and news. Many brokers now offer mobile trading apps that are optimized for smartphones and tablets, making it easy for investors to stay connected to the markets wherever they are.

Social trading platforms: Social trading platforms allow investors to connect with other traders, share ideas and insights, and follow the trading strategies of successful traders. This can help newer investors learn from more experienced traders and make more informed trading decisions.

Online education resources: There are a wealth of online education resources available to retail investors, including webinars, tutorials, and courses. These resources can help investors develop their trading skills and stay up to date on the latest market trends and strategies.

Robo-advisors: As mentioned earlier, robo-advisors are AI-powered investment platforms that use algorithms to analyze data and provide personalized investment recommendations. While primarily designed for passive investing, some robo-advisors now offer more active trading options for investors.

Trading bots: Trading bots are computer programs that can execute trades automatically based on predefined rules and conditions. While not without their risks, trading bots can help investors execute trades more quickly and efficiently, and minimize the potential for human error.

Overall, there are a variety of technologies and tools available to retail investors that can help them on their trading journey. By leveraging these tools, investors can make more informed decisions, stay connected to the markets, and manage their portfolios more effectively.