Using ChatGPT to Trade Stocks - Let's Talk

Summary

The video discusses the rise of AI, specifically ChatGPT, in the stock trading world. While some research suggests ChatGPT has outperformed certain funds and strategies, the video highlights key limitations. ChatGPT is not designed for stock picking, and its trading success is often due to randomness, outdated data, and simplistic analysis. The video cautions against relying on AI for investments, noting that many claims of AI-driven success in trading are either flawed or scams. Ultimately, while AI has its uses, it's unlikely to replace expert trading strategies.

Takeaways

• 😲 AI, specifically chat GPT, has been a dominant topic in 2023, especially in the realm of investing.
• 📈 There's been a surge in people using chat GPT to trade stocks, either by asking for strategies or directly for stock picks.
• 📊 Research suggests that chat GPT could potentially earn excess returns, with some studies claiming it outperformed traditional funds.
• 🚫 Despite initial impressions, chat GPT is not a stock analyzing system and its data is only up to 2021, making it potentially unreliable for current stock picks.
• 🔍 Chat GPT's stock picks are based on web pages and not on economic forecasts or financial variables, limiting its effectiveness.
• 📝 The University of Florida's research that showed a 500% return by chat GPT involved analyzing headlines, not actual stock picking.
• 💸 The impressive returns reported in studies do not account for transaction costs, taxes, or liquidity issues, which could significantly reduce actual gains.
• ❌ The success of chat GPT in the study might be attributed to chance rather than a superior strategy, as even the researchers gave it only a 51% accuracy rate.
• 📉 Other AI-based ETFs and funds that claim to use similar strategies have generally underperformed the S&P 500.
• ⚠️ There's a risk of scams and misinformation surrounding chat GPT trading, with many examples likely being due to chance or misrepresentation.
• 💡 Chat GPT should be used as a supplementary tool in investing, not as a primary method for making financial decisions.

Q & A

What is the main topic discussed in the 'Plain Bagel' video?

The main topic discussed in the 'Plain Bagel' video is the use of AI, specifically Chat GPT, in stock trading and whether it can be used to make money.

What is Chat GPT's role in stock trading according to the video?

Chat GPT is used by some to provide stock trading strategies, code for trading bots, or stock picks. However, the video suggests that Chat GPT is not a reliable tool for stock picking.

What does the video mention about the research from the University of Florida regarding Chat GPT and stock returns?

The video mentions that a research report from the University of Florida showed Chat GPT could earn a 500% return in just over a year using sentiment analysis, but this figure is questioned for its reliability and practicality.

How does Chat GPT work in the context of the video?

Chat GPT is described as a large language model that uses vast amounts of text data to develop a neural network for understanding natural language. It is good at language-focused tasks but not specifically designed for stock analysis.

What are the limitations of using Chat GPT for stock picking as outlined in the video?

The limitations include the use of outdated data, the inability to perform complex financial analysis, and the reliance on web page summaries rather than in-depth economic forecasting.

What is the significance of the 500% figure mentioned in the video?

The 500% figure is significant as it represents the return claimed by the University of Florida's research report when using Chat GPT for stock trading. However, the video suggests that this figure may be misleading due to omitted factors like transaction costs and taxes.

What does the video suggest about the replicability of the performance seen in the research report?

The video suggests that the performance seen in the research report is not easily replicable due to factors like transaction costs, taxes, liquidity issues, and the lack of peer review and detailed calculations in the report.

How does the video explain the potential for chance in Chat GPT's stock picking success?

The video explains that the success of Chat GPT in stock picking could be due to chance, as the system is not consistent in its accuracy and the results could be similar to random selection.

What is the video's stance on the use of Chat GPT for trading bots?

The video's stance is that while Chat GPT can generate code for trading bots, the strategies it provides are often based on simple prompts and can be prone to errors, making it unreliable for actual trading.

What advice does the video give regarding the use of Chat GPT for financial decisions?

The video advises against relying on Chat GPT for financial decisions, suggesting that it's better to view it as a technological breakthrough rather than a get-rich-quick scheme.

What is the video's final conclusion about Chat GPT's role in the stock market?

The video concludes that Chat GPT is not a reliable tool for stock picking and that its use should be supplemental rather than a primary method for trading stocks.