- Posted by cglah1
- On June 26, 2014
- 5 Comments
If traders and investors are bad at decision-making, can AI replace humans? Well, the term Artificial Intelligence itself is a misnomer. It is artificial, but it’s not really intelligent. “Machine learning” is a more appropriate term.
Compared to humans, machines are better at processing large volumes of data. You can apply machine-learning algorithms to data sets with historical asset prices. Or you can try to find different correlations between asset prices and some other data sources. You can also use machine learning to remove biases from human-generated data, such as Twitter feeds or your own forecasts. The catch is that you need really big data.
Neural networks, which is what most people mean when they talk about AI, require even bigger data sets. These models “learn” by identifying complex, non-linear relationships between different elements. Typically, even their creators don’t fully understand how exactly they work. One connection is very clear: the more data you have, the more accurate a neural network can become.