With one million new users on the first 5 days it was released, Chat GPT instantly wrote history. Suddenly the concept of artificial intelligence came rushing into the living rooms of ordinary people and their busy lives. DHF Capital uses artificial intelligence as well to help programmers or marketers, but from a trading perspective, AI is not replacing algorithmic trading. It can alert the company to take proper strategic actions for its clients in trading, and it is also watching the market for trends to anticipate. Will AI and investing work together? How can you teach computers something that is more considered to be a gut feeling than pure logic? Let’s dive into that.
Just like cooking, artificial intelligence comes with a lot of flavors and ways to put it into practice. The concept of algorithms aiding an investment strategy is not new at all and is not to be compared with a classic, recently become famous AI like Chat GPT. According to DHF Capital CEO Bas Kooijman, we should put it in a more predictive perspective in which the program follows preset rules and learns from the outcome. “Algorithms and algorithmic methods have been with us already now for a very long time,” he explains. “There is a clear difference between a commonly known AI like Chat GPT and an investment algorithm. What does ours do? See it this way. With predefined rules, we can program computers to explore the market for us. When those rules match reality, we get for example an alert in which a human analyst defines an action.” An action can be that a trade is put to the attention of the portfolio manager. Does the portfolio manager agree with the analyst? Then the trade is put in the portfolio of the customer’s account. Safe, double-checked, and secure.
The looks of automated investment tools So AI from DHF Capitals’ perspective is more used as basically an alert, indication, and attention system, as the company does not have an actual AI in the sense of a language model working on possible outcome logic. The automation of asset classes works therefore slightly different than an algorithm like for example Google or Mid Journey. DHF Capital’s strategic success is, besides it’s experts in every field, also based on the algorithm as it uses the programs for a long time, proofing its credibility. “Pure example,” Kooijman follows. “At this moment we put together an actual financial fully automatic transaction, that chooses the split percentage of the assets and moves the assets through portfolios to make them fully in sync. The supportive assets, support the less supportive ones to keep full balance.” Splitting assets means that an asset manager spreads a client’s portfolio into different types of asset classes like Forex, stock trading, precious metals, and many more. That minimizes risk and maximizes profit. Different countries are involved in choosing the percentage of this split, in which a client can possess stocks in Europe, but in the U.S. as well to secure any economic impact. With every class, a different department or expert is involved. “On monthly basis assets are being evaluated and internally discussed. Being a human, it takes a lot of work and costs a lot for hedge funds to shift these assets for all the clients every month. For an automatic, transactional algorithm not so much, while we stay on a high-class liquidity level.”
But how do you automate investing? The challenge to move human actions into computer-executed actions lies with IT experts who know everything about building robotic programs or APIs. “An API is basically a connection to a broker or a liquidity provider such as a bank. This communication and handling can be automated. We have APIs with really great brokers, which are able to automate comments including money that moves from one asset class to another.” In practice, this means that when DHF Capital invests 20 percent of a client’s portfolio in stock trading, a month later that amount can also become 18 or 22 percent of the total. The ever-changing financial environment seals all, automation anticipates making sure DHF Capital does what it has promised.
Rules of genuine trading on the market: giving portfolio managers ideas “AI is still very new at this moment, making it more a language model than a ‘prediction machine’,” Kooijman ensures. “That means that people may use it as a guide. Individuals use it, and companies use it as well. Did you know that even Bloomberg tested artificial intelligence to read reports and then suggest on what the market will do? It has a lot of data and knowledge which is used better and better. Technically you can make a financial decision on this AI-generated data and automate the trade yet we believe this is decision making is way too early to outsource to an AI system.” Where AI is now still alerting the analyst as the intermediate step between the AI and portfolio manager, chances are that this analyst might be replaced in the very future, Kooijman predicts. “Where analysts traditionally have a lot of work analyzing the data, instead, artificial intelligence shall provide portfolio managers ideas. We are a technology-heavy firm where AI robots are helping for example programmers to develop new rules, or marketers to support their content. We always look for the latest insights and developments.”
The benefits of AI-executed investing strategies Knowing the market is knowing the client. AI is used to spot trends in the market and support DHF Capital to offer the right need. Sniffing out all the data as a human is nearly impossible, but for an algorithm a piece of cake, in terms of knowing me, knowing you. “You can make computers do a lot of heavy lifting for you, so we can really focus on the client’s goals. We choose however to not have executional robots as a human employee always approves the settings before an order is done on the client’s account. We love the combination, not the frictional contradictions. The client is after all doing business with us as humans, not with robots. But algorithmic software can be a valuable help to make credible actions, only supporting the client’s profit.”
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