27 Jan Will Trading Become Obsolete?
Will Trading Become Obsolete?
Jan. 27, 2025
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Uh oh.
Have you heard the news?
Google released an article on quantum computing in December 2024 announcing the development of its new quantum chip, Willow.Â
Here’s the mind-melting part: Willow has the ability to perform computations that would take a supercomputer 10 septillion years to complete.Â
Wait, what?
A supercomputer right now is the most lightning-fast thing we’ve ever seen.
And yet Willow can reportedly do things that it would take a supercomputer 10,000,000,000,000,000,000,000,000 years to do?
Why is this good? There’s clearly a chance to figure out important things like cancer or other terrible diseases.
Why is this bad?
Think of it this way.
What was the prediction when ChatGPT showed up in 2022?
Here suddenly was something that could write an article on any subject in any voice instantaneously. It could also converse with lifelike capability. (And many other things.)
Clearly the prediction would be that copywriters and/or writers in general would be out of a job.
The other easy prediction would be that simple human interaction jobs like, say, the person in the Drive-Thru, would be eliminated.
If a computer can write anything faster and with more detail than a human, that human is in trouble.
And would that prediction have panned out? Yes. Many writers have lost their jobs.
If computer software can take our Dave’s Single With Cheese order the same way a human can, the human is in trouble.
Did that prediction pan out? Go to Wendy’s and find out.
Now, take ChatGPT’s revolutionary transformation and multiply by it a million.
Sorry, a septillion.
Holy moly.
So, what will that do to trading? Will it make trading as we know it obsolete?
Here’s a possible example.
Pit trading (standing in a pit and shouting orders) was popular for decades, all the way through the 1990s and early 2000s:
People optimized pit trading. They developed systems. They knew where to stand to get orders filled fastest. They knew to buy when certain instruments went up a certain amount. They knew which news releases would move the market.
And some pit traders made a fortune (tens of millions of dollars).
They had an edge. They had a tested system.
They were unstoppable.
And then a little basic computer came along.
Not a super computer.
A simple personal computer.
With just that little bit of technology, what happened to the pit trading systems?
They became useless.
What happened to the pits themselves?
They disappeared.
Now, I’m not a doom-and-gloom person. Not by a long shot.
The glass is always half-full for me.
But what do you think will happen to our little backtested trading edges when a quantum computer starts trading the market?
It will be like a caveman fighting a state-of-the-art fighter jet.
Actually, it will be much more lopsided than that–if Google is right about Willow.
Yikes.
Is there a bright side? Maybe.
Here’s how automated trading might not become obsolete.
One, famous people running NVDA and META have come out and said that quantum computers are 10-15 years away. So even if they do make trading obsolete, we could have a decade to make some money.
Two, maybe Willow isn’t what it seems and it’s just a hyper-effective form of the AI we already see now.
Three, quantum becomes the norm and everyone will have the same computing power. If that’s true, we can start over on a level playing field and create new systems that might last. For example, when one country has a nuclear bomb, the other countries are in big trouble. When several countries have a nuclear bomb, it’s a stalemate. It’s like no one has a nuclear bomb. We could possibly see that in automated trading.
But there’s a very easy way to avoid all this and make Willow itself obsolete.
High-income trading.
Let’s say Willow makes option-selling one million times more efficient. You know what that means to our monthly/weekly distribution payments from ETFs that sell options? They keep coming and probably get better.
Or let’s say Willow makes order entry one billion times faster. It doesn’t matter, not one bit.
We’re just buying income-producing assets with one button push or one thought in our head that’s executed by the chip we had planted in there.
Quantum calculations are completely irrelevant for one Buy order.
Which, of course, means long-term buying-and-holding of anything will work exactly the same– with Willow or without. This isn’t my favorite thing to do, but index-funders are definitely safe from the quantum menace.
Last, could we still keep our long-term trading systems with Willow? Possibly.
Any system that doesn’t require any detailed calculations has a chance to be fine.
The bottom line? Quantum computing is mind-blowing.
If it happens the way they say it will, there will be massive changes to the world and to any automated trading system.
How will we know we’re in trouble?
We watch our systems like a hawk. One drawdown or downturn that looks weird or excessive could mean it’s time to move on.
Of course, there’s a chance maybe quantum won’t kill us.
If it does, though, we need to know exactly the moment we’re shutting it down and starting over with new tools.
If that sounds scary or anxiety-inducing, remember: there’s a way prevent ever needing to worry about Willow.
We could start trading for income or for the very long term.
Those two options are unassailable.
Talk to you soon.
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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.