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14 Feb, 2015 23:28

Rats of Wall Street: Rodents taught to trade in foreign exchange markets

Rats of Wall Street: Rodents taught to trade in foreign exchange markets

Believe it or not, 'Rattraders' is an actual experiment that teaches lab rats to trade in the foreign exchange and commodity futures markets – and in some cases, the rodents outperform the world’s leading fund managers.

Marco Morovici – the CEO of Rattraders, who headed up the project – said that his motivation was to see what kind of highly paid jobs could be replaced by machines in the future. In the case of brokers, their job is almost entirely based on pattern recognition capabilities and the ability to avoid distractions. He says rats are capable of learning those same skills.

“Rats have a significant ability to recognize patterns of all different kinds – in music, in images. And I have used this ability of the rats to identify those patterns in market prices,” he told RT.

Morovici created what he calls “ticker tracks.” He obtained information from futures and foreign exchange markets, and then generated sounds that would correspond to the price data.

Rats respond well to the piano, so Morovici used this instrument for the audio clips, which changed in connection with the price movement. When the price went up, the pitch rose. When the price went down, the pitch fell.

To begin with, there were 80 Sprague-Dawley lab rats; 40 males and 40 females. The rats trained separately for five hours a day, so they wouldn't become overly tired. They took about three months to learn the ropes.

Morovici produced ticker tracks for around 800 different market situations, and played 100 of them to the rats every day.

When the rats heard a sound, they pressed a green button if they expected the price to rise, and a red one if they expected it to fall. When they were right, they were given a small amount of food. When they were wrong, they were given a small electric shock.

Some of the rats were soon performing very well; better than their human counterparts, in fact. Four of the rats were so talented that their performances were comparable to the world’s best fund managers.

Watch Lehman the rat trading gold futures:

Morovici decided to breed these top rats – which the team nicknamed Ms. Kleinworth, Ms. Coutts, Mr. Morgan, and Mr. Lehman, after famous bankers and traders – with each other. The result was that the second generation of trading rats was even better than the first.

However, Morovivi has warned that further research is needed.

An earlier study found that monkeys also do significantly better at choosing stocks at random than humans, which Morovici says is not surprising.

“Monkeys and rats have a certain advantage over humans, and that is they do not read the newspaper and do not look into the news, and they do not get fooled by that; they really just look for randomness or technical signals,” he told RT.

Image from rattraders.com

Image from rattraders.com

Image from rattraders.com