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We gave 5 LLMs $100K to trade stocks for 8 months

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211–220 of 319 posts

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#211

“Everyone (including LLMs) is a genius in a bull market.”

I was thinking the same thing. A number of coworkers where trading stocks a few years ago and felt pretty good about their skills, until someone pointed out that making good stock picks was easy when everything is going up. Sure enough, when the market started to fail, they all lost money.

What could make this a bit more interesting is to tell the LLM to avoid the tech stocks, at least the largest ones. Then give it actual money, because your trades will affect the market.

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#212
post #62

I used to work for a brokerage API geared at algorithmic traders and in my experience anecdotal experience many strategies seem to work well when back-tested on paper but for various reasons can end up flopping when actually executed in the real market. Even testing a strategy in real time paper trading can end up differently than testing on the actual market where other parties are also viewing your trades and makin…

>but for various reasons can end up flopping when actually executed in the real market. 1. Your order can legally be “front run” by the lead or designated market maker who receives priority trade matching, bypassing the normal FIFO queue. Not all exchanges do this. 2. Market impact. Other participants will cancel their order, or increase their order size, based on your new order. And yes, the algos do care about your…

There is a big difference between back testing scalping and back testing buy 100 NVIDA at $103 and sell at $110.

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#213

OP here. We realized there are a ton of limitations with backtest and paper money but still wanted to do this experiment and share the results. By no means is this statistically significant on whether or not these models can beat the market in the long term. But wanted to give everyone a way to see how these models think about and interact with the financial markets.

I can almost guarantee you that these models will underperform the market in the long run, because they are simply not designed for this purpose. LLMs are designed to simulate a conversation, not predict forward returns of a time series. What's more, most of the widely disseminated knowledge out there on the topic is effectively worthless, because there is an entire cottage industry of fake trading gurus and grifters, and the LLMs have no ability to separate actual information from the BS.

If you really wanted to do this, you would have to train specialist models - not LLMs - for trading, which is what firms are doing, but those are strictly proprietary.

The only other option would be to train an LLM on actually correct information and then see if it can design the specialist model itself, but most of the information you would need for that purpose is effectively hidden and not found in public sources. It is also entirely possible that these trading firms have already been trying this: using their proprietary knowledge and data to attempt to train a model that can act as a quant researcher.

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#215

Earlier quoted context omitted.

Yeah I mean if you generally believe the tech sector is going to do well because it has been doing well you will beat the overall market. The problem is that you don’t know if and when there might be a correction. But since there is this one segment of the overall market that has this steady upwards trend and it hasn’t had a large crash, then yeah any pattern seeking system will identify “hey this line keeps going up…

> a hedge fund can beat the market for 2-4 years but at 10 years and up their chances of beating the market go to very close In that case the winning strategy would be to switch hedge funds every 3 years.

The problem is that you don't know in advance which will be doing well when.

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#216

Just one run per model? That isn't backtesting. I mean technically it is, but "testing" implies producing meaningful measures. Also just one time interval? Something as trivial as "buy AI" could do well in one interval, and given models are going to be pumped about AI, ... 100 independent runs on each model over 10 very different market behavior time intervals would producing meaningful results. Like actually credibl…

Not only just one run per model, but no metrics other than total return. If you pick stocks at random you have a very high chance of beating the S&P 500, so you need a bit more than that to make a good benchmark.

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#217
How much of this is just because the market as a whole is going up.

This same kind of mentality happened pre-2008. People thought they were great at being day-traders, and had all kinds of algorithms that were 'beating the market'.

But it was just that the entire market was going up. They weren't doing anything special.

Once the market turned downward, that was when it took talent to stay even.

   Show me these things beating a downward market.

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#218

Earlier quoted context omitted.

Grok would likely have an advantage there, as well - it's got better coupling to X/Twitter, a better web search index, fewer safety guardrails in pretraining and system prompt modification that distort reality. It's easy to envision random market realities that would trigger ChatGPT or Claude into adjusting the output to be more politically correct. DeepSeek would be subject to the most pretraining distortion, but ha…

I know that Musk deserving a lifetime achievement award at the Adult Video Network awards over Riley Reid is definitely an indication of minimal "system prompt modification that distort[s] reality."

for the folks unaware, he was nominated for sucking more dicks in a single shoot than anyone, while still producing great content. he also hit several holes-in-one golfing later that week.

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#219
> We also built a way to simulate what an agent would have seen at any point in the past. Each model gets access to market data, news APIs, company financials—but all time filtered: agents see only what would have been available on that specific day during the test period.

That's not going to work, these agents especially the larger ones, will have news about the companies embedded in their weights.

Re: We gave 5 LLMs $100K to trade stocks for 8 months

#220

1. Backtesting doesn’t mean very much. For lots of reasons real trading is different than backtesting. 2. 8 months is an incredibly short trading window. I care where the market will be in 8 years way more then 8 months.

It seems like back-testing an LLM is going to require significant white-washing of the test data to prevent the LLM from just trading on historical trends it is aware of.

Scrubbing symbol names wouldn't even be enough because I suspect some of these LLMs could "figure out" which stock is, say NVDA, based on the topology of its performance graph.

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