Saturday, May 5, 2007

Trade on Financial Markets like a computer

Saw this interesting post which says, "Michael Kearns is trying to teach a computer to do something other machines can't: think like a Wall Street trader." Read the full post

Chess vs Markets

Take chess. Deep Blue, a chess-playing supercomputer developed by International Business Machines Corp., defeated world champion Garry Kasparov in 1997. The rules of chess never change, however. Players have one goal: to capture the opponent's king. There are only so many moves a player can make, and Deep Blue could evaluate 200 million such positions a second.

Financial markets, on the other hand, can be influenced by just about anything, from skirmishes in the Middle East to hurricanes in the Gulf of Mexico. In computerspeak, chess is a closed system and the market is an open one.

``AI is very effective when there's a specific solution,'' Hamilton says. ``The real challenge is where judgment is required, and that's where AI has largely failed.''

AI researchers have made progress over the years. Peek inside your Web browser or your car's cruise control, and you'll probably find AI at work.

Don't you think a computer will be able to overcome the greed and the fear that makes us fail in the markets? Or do you think that computer will not be able to understand the market fully?

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