Chatbots for Trading and Investment: A Good Idea?

The notion of artificial intelligence is no longer a fictional concept. From user-friendly programs such as Siri to the complex algorithms included in Google Cloud Prediction, the software is becoming an important part of our daily lives.

One particularly interesting scenario can be seen in the rise of the “chatbot”. Through a series of complex computations, these systems are meant to supply human-like responses to their living counterparts. It can be argued that the most well-known online chatbot is a program known as Cleverbot. So, this naturally leads to the question as to whether or not these silicon-based algorithms are wise enough to be used within the world of complex, yet sensitive, user query led interactions.

The Ultimate Intention of a Chatbot

We should first be clear to note that a Chatbot cannot (presently) offer the same level of insightful interaction as demonstrated by HAL 9000 in the film 2001. They are intended to provide a user with answers to very specific questions. Product information is a common example. Having said this, the use of artificial intelligence will help the bot to appear more “human” as levels of interaction increase. In other words, these algorithms learn by experience. So can intelligent programs like this ever be employed within the world of online trading? Financial Times author, Kevin Rose wrote an article back in 2014 about retail trader, CMC Markets, who already use price pattern recognition which identifies up to 40,000 technical trade set-ups each month, impossible to do for a human – This begs the question how far are we from chatbots relaying highly sensitive bits of information?

The Current State of Play

You may be surprised to learn that there are already a number of trading-related chatbots in existence. AJ Bell youInvest and a Chinese firm known as Xiaoi are two notable examples. These and others such as PollyChat utilise Facebook Messenger to “speak” with the user, so there is already a heightened sense of familiarity. After a series of macro questions, a personalised profile will be created. It is therefore much easier to access the most relevant news and information based off of one’s trading preferences. Having said this, these bots are far less intuitive. They are primarily designed to help the trader make his or her own decisions as opposed to automatically generating investment calls to action.

Potential Implications

What types of conversations the traders could potentially encounter when using a chatbot? Current technology limits these exchanges to be somewhat rudimentary. Examples here may include:

  • What types of stocks would you like to see?
  • How can I help you formulate an investment plan?
  • Are there any sectors that interest you?

Besides these general queries, many conversations will revolve around the bot trying to understand the strategies of the user. This can again be accomplished through a question-and-answer session:

  • Do you think the United States will soon raise its interest rates?
  • Is the outlook for the euro bullish, bearish or neutral?

The answers to these and other questions will help the bot formulate appropriate recommendations.

A Wise Decision?

Are chatbots a good idea for traders? Yes and no. They can be a highly intuitive user interface for those who may be new to the industry. However, any discrete recommendations in the future will likely be based off of algorithms alone. This could lead to potentially erroneous trades and until technology advances, it is wise to employ chatbots as a supplement to any strategy as opposed to a strategy in and of itself.

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