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Humans Can Still Generate Alpha

On Wall Street, the debate is ramping up: can humans compete with improving artificial intelligence, machine learning algorithms, automated trading, etc.?

I think the answer is yes.

Intuition, empathy and creativity are big human edges, but we need enhancements where computers can outperform our cognitive abilities.

Prostheses can help:

  • supplement memory
  • conduct bulk analysis
  • simplify and track complexity
  • reduce noise and elevate signals
  • shift action to proactive
  • reduce emotional reactions

We always had the freedom to override the system, mostly to take money off the table during extraordinary events that weren’t programmed. While the computer was much better than our brains in many ways, it didn’t have the imagination, understanding, and logic that we did. That’s why our brains working with the computer made such a great partnership.
— Ray Dalio, Principles (2017)

Dalio is renown for model building, testing, adjusting and repeating the cycle until trading outperformance is achieved. Then he keeps doing it.

He attributes his tremendous success to a voracious appetite for market/ systems knowledge, an aggressive nature, an analytical mind, challenging his own opinions and building parallel computer models to test his theories.

While most traders are far from being Ray Dalio, we can take a lot from his story, upgrade our human attributes and trade data-driven.

     by @JayBeckner



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