Realistic Uses for AI in Trading
By Dave Mabe
In yesterday's post, I shared why it's so important for traders to create their own systems.
If you outsource the hard work of creating a system, you essentially put a cap on how much confidence you can have in it.
This includes following someone else's picks in a trading room, but also asking AI to do too much of the work of creating a profitable strategy.
It might work for you in the short term, but when the strategy draws down, you need some reason to be confident it hasn't stopped working.
If you find yourself switching from strategy to strategy because they "stop working", you should step back and think about your entire process.
What would convince you during a drawdown that you should continue trading a strategy even though, in the short term, it's losing money?
"Someone told you the idea works" is not a good enough answer.
And that includes if Claude or ChatGPT said something was optimal.
This is the same as a CEO outsourcing the running of a company to an intern.
But that doesn't mean AI has no value to your trading business. Far from it!
In fact, if you've got a solid process for creating strategies, it's never been easier to offload some of the grunt work and even help with idea generation.
Here are some things I've had Claude do recently that have saved me time in my trading business:
Using an existing backtest as a reference, create another one that does $X
Compare two strategies and tell me what the effective differences are
Run explorations in Amibroker to determine why stock XYZ didn't appear in strategy A on a certain date
Run backtests in Amibroker, removing a single rule at a time, to determine which rule is doing the most work
Examine all strategies in my GitHub repo and tell me where I might be missing coverage
Create Python scripts to reconcile live trades with the backtest
Notice that none of these uses makes my strategies more like a black box.
In fact, they only contribute to my deeper understanding of a strategy and why it does or does not work.
What are the ways you've used AI to deepen your understanding of your trading?
Hit reply and let me know.
-Dave
P.S. Do you wish you had a column library that would tell YOU how to make your strategy profitable? My column library is now included with MabeKit