In many ways, trading is an art form. The work that goes into building a successful trading strategy – or traders’ Mona Lisa’s – is monumental. It takes most people many years to build a multitude of skills, emotional intelligence and the risk appetite to become a successful trader. This is why the likes of ChatGPT won’t replace the human trader.
But just like in the world of art, artificial intelligence (AI) is a growing force of disruption in trading. With ChatGPT able to digest and analyse vast amounts of information and put forward conclusions, traders are swooning at its potential. Critically, ChatGPT can now even analyse visual data, unlocking the ability to read trading charts and graphs to spot data that might not be spotted by the naked eye.
These abilities raise questions as to where the human fits into the equation. How far should traders rely on this exciting new technology? ChatGPT is undoubtedly a very useful tool but has to remain just that: a tool. It can’t completely take over, and it has its limitations compared to a human trader.
Contextual understanding is integral
Firstly, ChatGPT is a matter-of-fact mechanism. Like art, trading is often dependent on a wider view and context of social or economic trends, but AI is limited in this way. Whilst it can process large amounts of data quickly, it doesn’t have a deep understanding of the broader economic, social, and political context that can impact market movements.
The technology is not able to incorporate subjective factors such as personal experience, intuition, and emotions into its decision-making process. While it is important not to let emotions influence your trading too much, contextual understanding and subjective factors are often critical for making informed trading decisions – which evoke gut feeling. If you take this human understanding away, you’re placing all your faith in technology that could fail and might have missed something. It can – and does – get things spectacularly wrong on occasion.
Intuition, on the other hand, is based on an individual's personal experience, knowledge, and emotional intelligence. Although people may be less good at processing data, intuition can be highly effective in certain situations.
Navigating the unknown
Another limitation is that ChatGPT can only process things based on data that it has been trained on, which means it can only look at what has happened in the past and therefore may not be able to adapt to unexpected events or changes in market conditions.
We live in an age of change where the technological revolution and the pace of disruption makes markets increasingly unpredictable. In trading, everyone knows to expect the unexpected. But AI may rely a little too much on what it knows, without thinking about what it doesn’t. With a pandemic, a war in Europe and now the sudden collapse of banks, the last few years have reinforced why technology must remain only a helping hand.
In a similar vein, ChatGPT struggles with unstructured data. While it can analyse structured data such as financial reports and stock prices, it is less proficient at interpretating data and insights in less friendly formats, such as in news articles or social media posts, as accurately as human traders. These are critical sources for trader and present a notable gap in AI’s usefulness, especially in volatile or rapidly changing markets.
A helping hand, nothing more
There’s no doubt that ChatGPT can be highly effective in analysing large amounts of data quickly and identifying patterns that may not be apparent to humans. However, it’s important to consider the potential limitations and risks before making decisions based solely on AI-generated insights.
Traders must remain the artists of their strategies. Much like how graphics tools and software enable artists to experiment and improve, traders must use ChatGPT to elevate their abilities, as opposed to completely automating them.
The level of trust one places in ChatGPT versus intuition ultimately depends on several factors, including the specific task at hand, the quality of the data being analysed, and the level of experience of the individual trader. The best approach is to combine the strengths of both ChatGPT and human intuition by using ChatGPT initially, and then taking its conclusion forward with a healthy dose of scrutiny.
In addition to the website disclaimer below, the material on this page prepared by Vantage FX Pty Ltd does not contain a record of our prices or solicitation to trade. All opinions, news, research, tools, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently, any person acting on it does so entirely at their own risk. The expert writers express their personal opinions and will not assume any responsibility whatsoever for the forex trading account of the reader. We always aim for maximum accuracy and timeliness, and Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.sary.
Editors’ Picks
EUR/USD stays defensive below 1.1750 as USD finds its feet
EUR/USD kicks off the new week on a softer note, holding below 1.1750 in European trading on Monday. The pair faces challenges due to a pause in the US Dollar downtrend, with traders shifting their focus to the delayed US Nonfarm Payrolls and CPI data for fresh directives. The ECB policy decision is also eagerly awaited.
GBP/USD holds steady above 1.3350 as traders await key data and BoE
GBP/USD remains on the back foot above 1.3350 in the European session on Monday, though it lacks bearish conviction and holds above the key 200-day SMA support. The US Dollar holds its recovery mode ahead of key data releases, while the Pound Sterling faces headwinds from the expected BoE rate cut this week.
Japanese Yen adds to strong gains and drags USD/JPY to 155.00 amid hawkish BoJ bets
The Japanese Yen extends its steady intraday ascent through the Asian session on Monday, dragging the USD/JPY pair to the 155.00 psychological mark in the last hour. Against the backdrop of the recent shift in rhetoric from Bank of Japan Governor Kazuo Ueda, an improvement in business confidence reaffirms market bets for an imminent rate hike this week.
Editors’ Picks
EUR/USD stays defensive below 1.1750 as USD finds its feet
EUR/USD kicks off the new week on a softer note, holding below 1.1750 in European trading on Monday. The pair faces challenges due to a pause in the US Dollar downtrend, with traders shifting their focus to the delayed US Nonfarm Payrolls and CPI data for fresh directives. The ECB policy decision is also eagerly awaited.
GBP/USD holds steady above 1.3350 as traders await key data and BoE
GBP/USD remains on the back foot above 1.3350 in the European session on Monday, though it lacks bearish conviction and holds above the key 200-day SMA support. The US Dollar holds its recovery mode ahead of key data releases, while the Pound Sterling faces headwinds from the expected BoE rate cut this week.
Gold climbs to seven-week highs on Fed rate cut bets, safe-haven demand
Gold price rises to seven-week highs to near $4,350 during the early European trading hours on Monday. The precious metal extends its upside amid the prospect of interest rate cuts by the US Fed next year. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
Solana consolidates as spot ETF inflows near $1 billion signal institutional dip-buying
Solana price hovers above $131 at the time of writing on Monday, nearing the upper boundary of a falling wedge pattern, awaiting a decisive breakout. On the institutional side, demand for spot Solana Exchange-Traded Funds remained firm, pushing total assets under management to nearly $1 billion since launch.
Big week ends with big doubts
The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.