Something’s been bothering me lately: the growing blind faith in AI trading systems. After three decades in finance, I’ve learned that every revolutionary tool comes with its own set of risks. Let’s talk about what nobody’s mentioning.

The Illusion of Perfection

I recently met with a tech startup founder who proudly claimed their AI trading system was “foolproof.” Those of us who survived the 2008 crisis know there’s no such thing. Here’s what keeps me up at night:

• AI systems learning from relatively peaceful market periods
• The assumption that past patterns guarantee future behavior
• Over-optimization leading to fragility in unexpected scenarios

The Echo Chamber Effect

Here’s what’s fascinating: when multiple AI systems learn from similar data sets, they tend to develop similar biases. Think about it – what happens when they all react the same way to market stress?

A Balanced Approach

Don’t get me wrong – AI in trading is here to stay, and it should be. But wisdom lies in understanding its limitations. At Horizon Capital, we’re exploring hybrid approaches that combine AI capabilities with human judgment.

Looking Forward

The real opportunity isn’t in building a perfect AI system, but in creating frameworks that leverage both technological capabilities and human experience. More thoughts on this balance in my next post.