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AI Trading: Evaluating Large Language Models for Technical Market Analysis

arXiv 2607.15414 ↗First posted 16 Jul 2026cs.LG cs.AI q-fin.CPcited by 0

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Abstract (arXiv)

Large Language Models (LLMs) have emerged as powerful tools for processing the heterogeneous information environments of modern financial markets. This paper presents a systematic, comparative evaluation of five prominent LLMs: GPT-4 Turbo, Claude 3 Opus, Gemini 1.5 Pro, Llama 3 70B, and the domain-specialized FinGPT, with respect to their capacity for technical market analysis. The evaluation spans four structured tasks: candlestick pattern recognition from OHLCV data, directional signal generation (BUY/SELL/HOLD), backtesting of signal quality through a simulated execution pipeline, and financial report comprehension. Our experimental framework employs rigorous quantitative metrics, including Sharpe ratio, maximum drawdown, Sortino ratio, information coefficient, F1-score, and BLEU score. Findings from simulated backtesting indicate that GPT-4 Turbo achieves the highest annualized return and Sharpe ratio among general-purpose models, while FinGPT demonstrates competitive risk-adjusted performance due to domain-specific fine-tuning. Both models outperform a passive S&P 500 benchmark under the tested conditions. The study identifies persistent failure modes across all evaluated models, including numerical hallucination, context-window limitations, and inconsistent performance in sideways market regimes. We conclude that while LLMs hold genuine promise within AI trading systems, robust deployment requires careful task decomposition, rigorous backtesting protocols, and domain-aware fine-tuning strategies.

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References · 19

  1. 2017Attention Is All You Needcited by 59,932
  2. 2023GPT-4 Technical Reportcited by 18,132
  3. 2023Lost in the Middle: How Language Models Use Long Contextscited by 3,383
  4. 2023Self-Refine: Iterative Refinement with Self-Feedbackcited by 3,317
  5. 2024Gemini 1.5: Unlocking multimodal understanding across millions of tokens of contextcited by 3,175
  6. 2023A Survey of Large Language Modelscited by 2,537
  7. 2023BloombergGPT: A Large Language Model for Financecited by 923
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  10. 2021TAT-QA: A Question Answering Benchmark on a Hybrid of Tabular and Textual Content in Financecited by 402
  11. 2019FinBERT: Financial Sentiment Analysis with Pre-trained Language Modelscited by 378
  12. 2023FinanceBench: A New Benchmark for Financial Question Answeringcited by 261
7 more
  1. 2023FinGPT: Open-Source Financial Large Language Modelscited by 244
  2. 2023FinMem: A Performance-Enhanced LLM Trading Agent with Layered Memory and Character Designcited by 163
  3. 2024FinBen: A Holistic Financial Benchmark for Large Language Modelscited by 140
  4. 2023Can ChatGPT Forecast Stock Price Movements? Return Predictability and Large Language Modelscited by 125
  5. 2020FinRL: A Deep Reinforcement Learning Library for Automated Stock Trading in Quantitative Financecited by 86
  6. 2023Temporal Data Meets LLM -- Explainable Financial Time Series Forecastingcited by 77
  7. 2024Learning to Generate Explainable Stock Predictions using Self-Reflective Large Language Modelscited by 35

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