Watch: ChatGPT and Stock Picking: A Hedge Fund Manager Shares His AI Trading Strategy | The Crypto Mile
Trading and investing techniques are overloaded with AI apps like ChatGPT, now a hedge fund manager is sharing their AI trading strategies with Yahoo Finance UK.
On this week's episode of Yahoo Finance's The Crypto Mile, hedge fund manager Alpesh Patel discussed the use of artificial intelligence for trading and investing strategies. Patel highlighted the transformative power of AI in investment decisions and talked about ChatGPT's ability to analyze more data than an individual could alone. He explained how investors can outsource deep reading and understanding to ChatGPT, resulting in more informed decision-making.
"ChatGPT can look up a lot more financial information than you could ever digest on your own," Patel said.
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He added that financial data can be added to ChatGPT through plugins that will allow the app to read and understand financial data spreadsheets and stock charts.
The importance of the right prompt
Patel emphasized the need to ask the right questions, or prompts, to get the most out of AI applications. He gave examples of prompts and plugins to facilitate successful investment decisions.
The hedge fund manager gave a specific example of a prompt he uses. "I ask ChatGPT to imagine it's Nobel Prize-winning economist Eugene Fama and select the most undervalued stocks with the best growth potential, which are most likely to do well over the course of the year. for the next 12 months," he said.
He also mentioned the use of plugins for data entry and those to improve the prompts that are given to ChatGPT. "I use an app called 'Prompt Perfect' to fine-tune the prompts," he added.
Creating prompts for ChatGPT often involves assigning a role to the AI, Patel added. For example, an analyst can ask ChatGPT to assume the role of a senior analyst at Goldman Sachs and summarize key points for a report. Once the financial report is added to the app, Patel gives a specific prompt to use.
"Ask ChatGPT to imagine that he is the top analyst at Goldman Sachs and has a doctorate in economics, and reads the PDF report that was typed in. Then ask him produce a 500-word summary of the report with the most important highlights of the information it contains.Then tell him to give investment and stock advice as if he were a manager of hedge funds making decisions for the company,” he said.
Learn more: Could AI trading lead to market 'flash crashes'? — The Crypto Mile
Patel advised using a conversational process with ChatGPT, refining the questions and information you give him. "Like most things in life, it's about asking the right question of the right person, and now we have the right person in AI. However, we have to give them the right information and ask them the right question, you need to get the correct prompt,” Patel added.
Bypass ChatGPT Information Shutdown in 2021
The standard version of ChatGPT has a knowledge limit from September 2021. However, you can overcome this limitation by using the new browsing mode with the GPT-4 model. This means you can access the internet in ChatGPT. Patel also revealed that using GPT4-plus allows users to plug in their data. This capability allows investors to use ChatGPT to analyze the latest financial data on, for example, the Dow 30 stock index (^DJI). Thus working around the cutting off of information.
ChatGPT as a co-pilot, not a crystal ball
Patel said ChatGPT is best suited for medium to long-term investing, as opposed to day-trading. He warned that artificial intelligence is not a crystal ball and cannot guarantee future stock performance. Patel concluded that while ChatGPT is a valuable tool, it will not replace humans in fund management. Instead, he envisioned AI as a co-pilot that helps make informed investment decisions.
Watch: Could AI trading lead to market 'flash crashes'?
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