From Vectors to Volatility: How AI Actually Applies to Trading (Not Magic, Just Math)

From First Principles: From AI’s Underlying Logic to AI Trading I. The Underlying Logic of Large Models Before delving into AI trading, it’s essential to clarify the computational essence of large models. Many people treat large language models (LLMs) as black boxes, assuming they “understand” language and can “think” through problems. In reality, when dissected, they operate on a set of vector operations. Core Idea: Represent Everything with Vectors Humans use words and grammar to convey meaning. Machines, however, only recognize numbers. The first step for large models is to map discrete tokens (which can be words or subwords) to …