Description: The contention surrounding trading robots is undeniable; while some champion doing away with the human element, the impact on livelihoods cannot be ignored. 

The AI revolution

Artificial Intelligence (AI) has given rise to a new way of doing things, both in our personal and professional lives. In part, AI is defined as “the theory and development of computer systems able to perform tasks normally requiring human intelligence.”

When it comes to the finance sector and trading, AI is already being phased in. One of the most notable examples of such, dating back to 2017, is Goldman Sachs’ headquarters in New York. The company automated some of its operations through replacing some 600 employees with 200 computer engineers, tasked with facilitating automated trading programs.

According to the company’s Deputy Chief Financial Officer at the time, Marty Chavez, “Goldman Sachs has already begun to automate currency trading, and has found consistently that four traders can be replaced by one computer engineer.” 

Given the advent of AI in the industry, there are already robots trading on the FTSE 100. These specialised so-called Expert Advisors are programs that are specifically created to trade on such indices. Moreover, they are designed so that they can be integrated into trading platforms and trade based on certain predetermined input parameters.

Currently, these trading tools are being used by corporations and elite traders, so they are still largely yet to be accessed by everyday traders.

Arguments for and against the use of robots

While automation makes business sense because it reduces operating costs, a lot can be said on how it is contributing to unemployment. This is quite possibly one of the biggest arguments by opponents of automation and robots infiltrating various aspects of our lives. Below are some more arguments for and against this phenomenon:

Arguments for

  • Does away with the human element and possible flaws or emotions that may impact trading, as people may sometimes act irrationally in the face of market changes.
  • Acts as a systematic and dependable way of ensuring consistent participation in the markets, based on the input parameters.
  • Cost-effective and significantly cuts down operating costs
  • Minimises risk of failure or losses as trading is based on historical data and analytics that project a certain outcome.

Arguments against

  • Only works well for repetitive trading elements, therefore, fails to sufficiently respond to unexpectedly lucrative fluctuations that may occur.
  • Contributes to unemployment as the need for human labour/resources is reduced, with Goldman Sachs’ restructuring being a key example thereof.
  • Could eventually lead to a complete reform of the trading industry, leading to predictable trading returns and a new type of market without new profits for the trader.
  • Could spark a new wave of scammers and trading robot manufacturers that are not reputable and take advantage of inexperienced or unaware traders.

Industry leaders and innovators, such as Tesla’s Elon Musk, continue to debate the matter at hand, with some claiming that automation and the use of trading robots may be taking things too far. While there is some merit to it, it is also worth noting that human judgement and immediate reaction to lucrative fluctuations remain key components of being a successful trader.

As such, the world should not be blinded into allowing financial and trading activity to rely solely on them.