AI Won’t Replace Traders. It Will Just Kill the Slow Ones
Last week, my accountant asked the question: “Will AI eventually replace traders?”
There is an old investing wisdom: when your Uber driver asks for stock tips, we are in a bubble. Similarly, when your accountant worries about AI taking over the trading floor, it is time to address the reality.
Here’s the short answer: No. AI won’t replace traders.
Not because AI isn’t powerful, but because trading is a zero-sum game.
This is the part everyone misses when they worry about AI replacing traders.
Even if you placed ten identical AIs to trade the same stock, some would make money and others would lose it. They’d compete against each other. The smarter ones would find edges the others missed.
Well what if all AIs had the same intelligence?
If all AIs were perfectly identical, if they all used the exact same models, training data, and decision rules then markets wouldn’t function at all.
Think about it. If every AI is programmed to buy Apple stock at $199.58, then there’s nobody to sell it to at that price. You’d have perfect agreement, which means no transaction. Markets require disagreement. They require someone to think the price should be higher and someone to think it should be lower.
It’s Still Zero-Sum (Only the Tools Change)
The competition doesn’t change. Only the tools change.
Wars used to be fought with swords and arrows. Now they’re fought with drones and planes. The objective remains the same: defeat your opponent. The tools evolved, but the competition is identical.
Trading is no different.
As more sophisticated AI enters markets, returns don’t disappear. The pie doesn’t shrink. It’s still zero-sum. For every dollar won, a dollar is lost. The only question is: who has the better tools and knows how to use them?
Those returns just come from taking money from worse traders, many of whom are now using AI too.
The traders who will be successful won’t be traders ignoring AI. They’ll be traders who use AI to trade.
However, the speed of each trade will change
Think about warfare throughout history. Wars that once lasted decades or even centuries (the Hundred Years’ War, the Thirty Years’ War) can now be decided in days or weeks. The objective hasn’t changed: defeat your opponent and achieve strategic goals. But the tools have evolved so dramatically that only the timescale of each war has decreased.
Think about what historically gave old hedge fund managers their trading edge:
They had access to information others didn’t
They had computational power too expensive for smaller players to own
They had the payroll to hire data scientists to make sense of the data
All of these created natural moats and time lags that allowed their edges to go undetected for long periods of time.
AI is simultaneously collapsing all of these moats.
A strategy older hedge funds were making money on for years may now last weeks, months, or even days. An edge that required months of quantitative research to identify can now be discovered, tested, and deployed in days.
The tools have evolved so dramatically that only the timescale of each trade has decreased.
The Verdict
So when my accountant asks “Will AI replace traders?” the answer is simple:
No. But it will replace traders who can’t adapt.