How Algorithmic Trading Combines Market Noise and Trend Trading Stock investors are the individuals or bodies that are more commonly associated with the stock market. Investors buy shares of stocks based on fundamental analysis and recognize themselves as partial owner. On the other hand, stock traders have a much different approach. Traders rely more on information about the market as a whole. Traders aim to make money based off of a stock’s short-term price volatility. Investors rely on traders to create liquidity in the market which enables them to buy and sell shares. Conversely, traders rely on investors to create a basis from which they can buy and sell stocks. There are many different types of both of these market players and today we are focusing on traders.
There is an abundance of information that can be found and analyzed concerning the stock market. Noise refers to the random data that is produced and occurs within the market and the traders that primarily emphasize this aspect of an asset is called a noise trader. As noise traders act on random information, these traders tend to buy and sell shares based on fear or greed and can cause the price of a stock to drop, or rise, without any fundamental justification. In comparison, trend trading, just as it sounds, is trading based on a stock’s momentum in one direction, either increasing or decreasing. Trend traders use fundamental data and different indicators to determine whether a trend will continue or not. This form of trading relies on statistics and data analysis to determine when to buy and sell stocks, rather than paying attention to news stories or listening to rumors and analyst tips.
Algorithms are complex mathematical formulas that are designed to follow a set of instructions to carry out a certain process in order to solve a problem. The formulas are designed so that the algorithm is automatically monitoring market behavior, and in many cases can automatically buy and sell stocks at the best price without human emotion or error ever becoming a factor. The unique algorithm that I Know First has developed is a genetic algorithm that takes in 15 years’ worth of historical data and can then forecast what the market will do in the future. In this particular instance, algorithmic trading not only builds off of trend trading but quantitatively separates the trend from the noise and uses the noise to the traders’ advantage. The news-driven noise and the interaction between different kinds of investors and traders create waves of short and long duration. The I Know First algorithms find the opportunities for trading between such waves. Read more.
Winning World Indices Forecast: Algorithm Predicts ^VIX and ^S&P 500 On November 7th 2018, I Know First’s top stock predicting algorithm conducted it’s 1-Month World Indices Package Forecast. This particular package, which is offered as one of I Know First’s quantitative investment solutions, includes a daily forecast for a total of 20 indices with both bullish and bearish signals. The two most noteworthy performers of this particular forecast were ^VIX for the long position, and S&P 500 for the short position.
The market has been extremely volatile lately, hence the growth the ^VIX, the volatility index. Trade war tensions, a US government shutdown, slowing economic growth, and more have all contributed to the increase in volatility throughout the market. In accordance with the I Know First forecast, the VIX gained 16.68% over the predicted time period. Given the high volatility the market has encountered over the past week, I Know First’s Forecast performance is noteworthy. The I Know First algorithm creates its daily forecasts by finding the hidden relationships between various assets and indicators and one of the aspects it takes into account is volatility. And so, the machine learning algorithm produced a bearish outlook for the S&P 500, which proceeded to come true. However, just because the market as a whole has been struggling does not mean there are not any opportunities for gains. I Know First's self learning algorithm identifies stocks with potential as well at stocks to short, which can be extremely profitable in a bearish market. Read more.
I Know First Presents At The AI In Finance Summit: Video + Interview I Know First was honored to be chosen to present as one of the leaders of innovation through incorporation of machine learning & deep learning into the financial sector. The 2018 AI in Finance Summit New York, brought together data scientists, data engineers, CTOs, CEOs & leading financial corporations to explore the impact of machine learning & deep learning in the finance. The conference featured conversations on AI applications including bond trading tools, world trade, stock market prediction & chatbots from the likes of Morgan Stanley, National Bank of Canada, and ING Bank.
At the conference, I Know First co-founders presented: Investment Selection By Combining Chaos Theory with Artificial Intelligence. CEO Yaron Golgher explained how modeling the market as a complex chaotic system allows algorithms like I Know First’s to accurately predict the stock market. Chief scientist Dr. Lipa Roitman further elaborated and dissected a more technical view of the algorithm and how it was founded. Additionally, during the conference, RE:WORK sat down for an interview with CEO Yaron Golgher for an exclusive interview. They discussed things such as the future of deeper learning in the finance industry, special features of I Know First’s algorithm and current projects and developments in the company. Read more.
I Know First's Newest Solution For Family Offices At I Know First, we want to provide the most useful and personalized package possible. Therefore, we are excited to introduce the I Know First Office Solution. This new opportunity is an exclusive forecast designed to provide Family Offices with a competitive advantage by utilizing our advanced self-learning algorithm.
There are many benefits to the package. The algorithm will designate the best assets by the market prediction system specified precisely for your selected markets of interest & strategy. We can set almost any parameters you would like on the forecast table. Then, a unique customized forecast made specifically for you.You can further base them on a variety of factors such as liquidity, geographic location, market cap, volatility, dividends and more. We will work with you closely to customize the prediction table for best performance with your portfolio, with hardware designed to keep the system optimized to your trading environment. If preferences change, Family Offices are able to adjust their portfolio and we will add or subtract stocks from your forecast table according to your changing needs. Read more.
The latest negative trend in the market has not been a surprise at I Know First. The algorithm has been producing strong signals for the VIX while advising investors to be wary of the S&P 500 as a whole as shown in our winning World Index Forecast. However, these trends have been going for more than just the one month predicted in the aforementioned package. For over three months, our machine learning algorithm has foreseen negative outcomes for the S&P 500 and energy sector. However, not every market has been affected by the dip as the self learning algorithm has still identified markets with bullish prospects such as Brazil and South Africa.
Positive and negative feedback are a natural product of the market as a chaotic system. The market is a complex system which is what allows advanced machine learning algorithms like ours to make accurate predictions. In such a volatile time, as seen by the growth the the VIX, a primary volatility indicator, it is extremely important to hone in on assets that will still gain, rather than suffer with the majority of the market. This time has also produced many other interesting forecasts for the currency market, bitcoin, and more markets such as in India and Australia.
