Trading Tips from ChatGPT: Are They Awful?


Do you know how long it took big tech and social media companies to reach 1 million users?

  • Netflix: 3.5 years
  • Airbnb: 2.5 years
  • Twitter: 2 years
  • Facebook: 10 months
  • Spotify: 5 months
  • Instagram: 2.5 months

But do you know how long it took OpenAI’s ChatGPT app to get its first 1 millon users?

5 days!

Artificial Intelligence is on everyone’s minds. People are using AI for things like high school assignments, college papers, virtual receptionists, and customer service.

Buzzfeed is even replacing journalists with AI.

As traders, we must ask ourselves can we trade with ChatGPT?

So we asked ChatGPT a query about trading::

“Give me 7 tips for stock trading that I can't find in mainstream books, articles, or videos. Tell me what the best pros do and be very specific.”

Now let’s rate ChatGPT’s answers!

ChatGPT Trading Tip #1: 

Develop a solid risk management strategy. This includes setting stop-losses, diversifying your portfolio, and having a plan for both short-term and long-term investments.

My Score: 6/10 

Solid risk management is one of the most important elements of trading. 

ChatGPT Trading Tip #2: 

Utilize fundamental analysis in addition to technical analysis. While technical analysis looks at charts and past price movements to predict future trends, fundamental analysis examines a company's financial and economic fundamentals to assess its true value.

My Score: 1/10

The best way to go out of business as a day trader is to worry about fundamentals and technicals.

This is one of the worst tips I’ve ever gotten from a robot. 

As a day trader, I am looking at technical signals and price action to determine my buy and sell decisions.

A stock may be attractive on fundamentals but ugly on technicals. 

So if I listen to my fundamental bias, I might lose my shrt. 

ChatGPT Trading Tip #3: 

Keep an eye on global events and their potential impact on the markets. This could include political elections, natural disasters, or economic policy changes.

My Score: 6/10: Tape bombs hit the market almost every day. It is very important to understand  the potential effect.

What ChatGPT misses is that a good trader understands the relationship between different possible events and macroeconomic indicators, and how those can possibly affect the equity markets.

ChatGPT Trading Tip #4: 

Take advantage of options trading. Options trading can provide a way to hedge against potential losses in your portfolio, as well as offer additional income through selling options.

My Score: 6/10

A really fast way to lose a lot of money is to be a beginner trader. 

An even faster way to lose a lot of money is to be a beginner options trader.

Options trading can be a very helpful vehicle in terms of hedging trades and portfolios, and the selling of options or options right can be a profitable source of income.

It is also something that requires education, skill, and proper risk management. 

So I'll give it a six out of ten.

ChatGPT Trading Tip #5: 

Consider the use of algorithmic trading. Algorithmic trading uses computer programs to make trades based on a set of rules and conditions, which can help remove emotional biases from the trading process.

My Score: 2/10

Oh boy. I feel a rant coming.

I've worked with a lot of algorithmic traders. Do you know who loses most to algorithmic traders?

It’s other algorithmic traders.

So if you think you're gonna write an algo and go toe-to-toe with Citadel, I have a bridge in Brooklyn to sell you. 

Algorithmic trading can be very helpful if you have the resources, the bandwidth, and the computing power to do it properly.

Then there’s whole idea of removing emotional biases from trading.

To some extent, you should remove biases from trading.

This idea that traders can just write a program that will trade their idea without their emotions is nonsense.

You're always going to be emotional. You're always going to have emotions. 

You have to get over that.

You have to embrace the fact that you are an emotional being.

ChatGPT Trading Tip #6: 

Don't be afraid to ask for help. Many successful traders have mentors or belong to trading groups where they can share ideas and insights.

My Score: 10/10

“I can succeed at trading without any help,” said no successful trader ever.

The idea that you can be a lone wolf and never get any help is is preposterous. It's about as easy as launching yourself to the moon.

It's just not going to happen.

This is ChatGPT’s best tip by far. 

You need help. You need mentorship. You need an accountability partner. You need someone to help you figure out a strategy that works. You must understand risk management, technical analysis, and the craft of trading.

It takes a team.

I almost said “it takes a village” but I stopped just short of that!

ChatGPT Trading Tip #7: 

Continuously educate yourself. The market and economy are constantly changing, so it's important to stay up-to-date on new developments and strategies in the trading world.

My Score: 8/10

This is a good one. It’s funny. There's an interesting duality here.

The fundamentals of markets never change.

They were the same 100 years ago when the fathers of technical analysis were writing their books.

But every day you wake up and the market has a different personality 

The dynamics of the market are constantly changing. 

Price action is constantly changing.

So, it is one of those paradoxes where the fundamentals of technical analysis never change and you never see anything new.

On the other hand, everything constantly changes, as far as how they move.

The most important thing I would tell a beginner trader is to stay up-to-date with developing strategies in the trading world.

Understand what's moving certain markets. Understand the personality of the market you're trading.

That would be the first thing.

And a big part of your continuing education is to practice the virtues that got you there to begin with.

That would be discipline, risk management, and conscientiousness. 

Because those are the things you need to practice for the rest of your career. 

You must extol those virtues and manifest them every day. 

So my final thoughts on ChatGPT?

It’s awesome at plagiarizing 10th grade term papers on Catcher in the Rye, and they may be good virtual receptionists.

They may even help you cheat on that take-home trigonometry quiz.

But they are absolutely terrible for trading advice.

You will get zero value.

 I’m on team people for life.

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