Literally every trader is using AI wrong.

Kevin Gong

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Aug 15 (edited) • 💬Chat

Literally every trader is using AI wrong.

Its not going to make regular traders, good.

Its going to make algotraders, great.

Unprofitable traders think they can ChatGPT:

"make me a 99% win rate strategy"

and create a money printer...they're using it completely wrong.

The way that AI works is:

Garbage in, garbage out.

Think about it if 99% of traders blow up with in 90 days, what are the chances that there are profitable strategies ready to plug and play available publicly on the internet?

Jim Simons (the $100B fund manager) died with his secrets.

And all quant funds with actual edge are extremely secretive.

Which means in an AI future where knowledge, code, and implementation will be democratized and widely available, the competitive edge will come from how quickly a trader can:

1. Observe a new market anomaly (knowing its an anomaly requires years of market exp)

2. Clearly define and communicate it to AI (will require critical thinking which is drying up fast)

3. Backtest and code it into an algorithm

4. Fund it with capital

Beginner traders will get left behind due to lack of edge, execution, and capital.

Veteran traders who have edge and capital, but lack the execution speed and precision of algorithmic trading. Being slow to adapt, they will also be left behind.

The future of trading will be this:

90% of the markets will be lions. Large sophisticated quant funds fighting for position on the nanosecond timeframe. Their battles will be brutal between each other, but they often leave meat on the bone (Big money moves markets, so there will always be inefficiencies).

9% of the markets will be deer. Regular people still trading by hand. Due to their inexperience, they will create massive inefficiencies (like panic selling) that the quant funds prey on.

1% of the markets will be vultures (us!). Algotraders with just enough capital to make fantastic living, yet small enough that the lions can't be bothered to hunt us.

(why try to catch a pesky bird when there's newborn fawn to hunt?)

What no-one realizes though, is retail algotraders will quickly gain the sophistication of quant funds due to AI.

AI is the great equalizer, giving access to the coding prowess and intelligence of a team of Harvard PHDs.

The only real moat for quant funds will be the physical location to the exchange.

Vultures don't need to be quick. They simply clean up what's left once the lions are full. They may not have the speed required to kill a deer, but this is the lions job. Vulture's descend down lazily, when the lions have eaten all they can, and there's still half a deer to harvest.

And while half a deer may only be enough to keep a lion full for a day. The same bounty can keep a vulture satisfied for much longer.

But here's the beautiful part:

When lions kill each other in battle, vultures feast as well. Vultures never go hungry since they don't aren't picky with their prey. They are opportunists.

TLDR: Algotraders who adopt AI correctly will have an window of opportunity to make enough wealth to change their entire bloodline and build generational wealth.

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