from Hacker News

Do humans stand a chance against AI robots in the stock market?

by bernardlunn on 11/5/23, 8:28 AM with 8 comments

Betteridges Law of headlines says no, but this human says yes.

Maybe that is a naive human’s hope.

70% to 80% of stock market trades ate done by automated bots - including HFT & Algos - and AI robots will win those games. Disclaimer: I am not a lawyer, but HFT - High Frequency Trading - feels like legalized front running. If you hold for a long time, I assume HFT will not matter ie it is a rounding error for someone like Warren Buffett.

Although I may be naive about AI vs humans, I am not naive about Warren Buffett. He is only another human, not an AI robot with at least 100x my brain power. I know I know, he is vastly wealthy but without the leverage from Buffett’s insurance float, his returns look pretty ordinary. I assume his vast wealth/clout means he can at least bypass the HFT cost.

My guess is that AI will lead to some fake news that will be used by automated bots to buy or sell stock. Some humans can spot fake news easily and so can make money from the resulting mispricing, if that human acts quickly.

Maybe 99.9% of the time the AI robot gets it right but 0.1% of the time gets it massively wrong. Occasionally dumb robot crowds lead to wild mispricing opportunities. Time will be critical as robots learn fast.

At least this human hopes that is true.

  • by thiago_fm on 11/5/23, 1:39 PM

    Trading is a losing game in any situation, even HFT companies lose money.

    I don't even understand why people consider that to be an option for themselves, it's a waste of time.

    Warren Buffet is an investor / business owner, not a trader. He buys businesses, sometimes invest on them, change the management or just watch it.

    I suggest you study more about that subject (get a few investment book in Warren Buffet's list), as your point looks like a beginner that is having difficulties to comprehend how things work in Wall Street or the stock market.

    Trading matters very little in real life.

  • by bell-cot on 11/5/23, 9:59 AM

    Back in the '80's, I recall some pretty well-informed arguments which blamed the Black Monday crash ( https://en.wikipedia.org/wiki/Black_Monday_(1987) ) on computerized stock trading. Basically, the algorithms were written and optimized for a certain narrow set of circumstances, were for-sure money-makers in those circumstances, and also created both "smart investment firms gotta use these algorithms" and "stock prices just keep rising" feedback loops.

    But as usual, feedback in the real world is far more complex than a mic, an amplifier, and a speaker - and the algorithms proved both blind to that possibility and worse than worthless in the new and different circumstances.

    I see no reason to think that AI stock trading would be much different. We're not talking about wise and benevolent robots out of some old Isaac Asimov SF story. The people building, employing, and tuning these robots will be obsessed with making as much money as possible, as fast as possible.

    But many of the rich will get richer. For a while.

  • by almatabata on 11/5/23, 6:08 PM

    > My guess is that AI will lead to some fake news that will be used by automated bots to buy or sell stock.

    This already happened in the past where one fake tweet led to a stock crash:

    * https://business.time.com/2013/04/24/how-does-one-fake-tweet...

    I think these HFT algorithms only follow specific white listed accounts. They will not read random accounts. Still it leaves the door open to hacks and if an official account retweets some fake news.

  • by sircastor on 11/5/23, 2:47 PM

    There’s nothing about the stock market that AI models are going to be able to expose that is not already known. An AI in this context is just an overly complex bot. It’s only trying to take advantage of the margin, as you say, but the market is not predictable enough to gain more than that. So to me, AI doesn’t really have use case in trading.

    Manipulation of the market is already illegal. Whether that’s effectively enforced is a different question.

  • by b20000 on 11/5/23, 5:57 PM

    i am always amused how people have a negative view of HFT but have no problem with their private information being auctioned off daily online and their mental health destroyed by social media companies.

  • by piaoyu2011 on 11/5/23, 8:36 AM

    No