Profitably Using Generative AI ChatGPT As Your Stock Trading Tool
Stock picking and predicting stock prices accurately has been a long-time elusive goal. While many people use their gut instinct to make predictions, others try to employ the most sophisticated mathematical models using calculus to forecast stock prices. However, with the advent of Artificial Intelligence (AI), the game has changed.
Generative AI, the latest and hottest form of AI, is being used to predict stock prices. Although there are various kinds of generative AI - such as text-to-video or text-to-image - in their capabilities, today I will focus on text-to-text generative AI.
What is generative AI?
Generative AI is an AI technique that is capable of creating something entirely new and unique, such as a piece of art or text. It involves training the AI with a large dataset and allowing it to create new data that is similar to what it has learned. One of the most well-known generative AI models is ChatGPT by AI maker OpenAI.
Can ChatGPT be used to predict stock prices?
Yes, ChatGPT can be used to predict stock prices. However, it is important to exercise caution when using generative AI for stock picking and predictions. While ChatGPT is mainly a text-to-text or text-to-essay generator, it can still be useful for stock predictions due to the richness of the text.
We can reasonably assume that stock prices are, to some extent, shaped by what is being said about the stock. By examining the headlines about stocks, we could presumably predict which way a stock is likely to go. Headlines with a positive message about a stock could suggest a rise in the stock, while negative headlines could suggest a drop in price. This is where a text-oriented AI tool like ChatGPT comes in handy.
How does ChatGPT work for stock prediction?
Using generative AI, like ChatGPT, we can undertake sentiment analysis of text associated with stocks. The Natural Language Processing (NLP) facility of AI is able to parse words and attempt to glean what sentiment or expression is found within that text.
Individuals that are doing stock trading are turning to generative AI to give them another angle on sentiment analysis associated with stocks. You might choose to use ChatGPT alone or in conjunction with other indications. A variety of combinations and permutations exist.
What are the pitfalls?
There are many pitfalls associated with using generative AI like ChatGPT for stock prediction. Firstly, it is mainly text-based and may not be well-suited for dealing with the numeric realm of stock prices. Secondly, there is no ironclad guarantee that headlines or social media postings will affect stock prices in the predicted direction, as people may act contrary to the headline. Lastly, you should use prudent caution when using AI chatbots alone in the pursuit of wealth-building.
Conclusion
Generative AI like ChatGPT can be useful in predicting stock prices through sentiment analysis of text associated with stocks. Although there are many pitfalls and considerations, using AI chatbots alongside other numerical analysis tools can provide another angle on stock trading decisions. It is important, however, to exercise prudent caution when using generative AI alone and always keep in mind the inherent risks of trading in the stock market.
