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Algo-Trading for the Individual Investor
Algo-Trading’s place in a Sound Investment Strategy
Algo Trading for the Individual Investor• Raw Speculation has always been anyone’s game• Traditional tools and fundamental analysis is not a great answer to
compete with firms that use High Frequency Trading (HFT)
• Most traditional wisdom and tools are hard to use for a singular market like a stock
Humans just can’t beat High Frequency Trading without an aid of their own on a day to day basis!
Quantitative Trading
• The lesser known method of utilizing algorithm’s for trading – The popular version is HFT, which dominated markets but is marred
in controversy and growing less effective• Huge technological costs • Curbed usage by law in E.U and Canada
• Quantitative trading uses its own set of mathematical computer algorithms that:– Analyze the structure of the market
• Identifies Trends• Establishes Patterns
Quantitative Trading
Artificial Intelligence
Machine Learning
Neural Networks
Genetic Algorithm
www.iknowfirst.com
Machine Learning• Machine Learning is a subunit of computer
science that focuses on Pattern Recognition– Specific for forecasts!
• The hallmark is that it is Self Learning – The Algorithm adds code that are consistent with
patterns found– The Algorithm dumps the codes that are
unsuccessfulwww.iknowfirst.com
Neural Networks
1. Neural Networks are inspired by a living brain!
2. Each connection is assigned a weight that works with the input to arrive at an output. The Output is a function of the inputs and connections.
3. As a member of the artificial intelligence community, Neural Networks update their connections (the assigned weights within) according to what works and what doesn’t work.
Historical Data
4. Sounds a lot like Optimization! The algorithm, after all, is one giant function.
Genetic Algorithms • The glue that holds the theory behind the
algorithm together– A search function which eliminates bad solutions
and pieces together new ones out of the ashes
Genetic OperatorsCrossover Mutation
• Gives the algorithm the abilityto alter the data being crossed over. It has to be controlled, because it includes an element of randomness.
• Combines the parent data
together and builds it intoa recognizably similar solution www.iknowfirst.com
Artificial Intelligence • You can rely on good artificial intelligence– Hospitals, Air control centers, Toy Companies, and of
course Investment firms do all the time• Artificial Intelligence, almost by definition, is on the
up-and-up in the global market• The Stock Market it the best place to apply artificial
intelligence because it receives feedback a million times a day!
• I Know First’s algorithm is operational since 5 years and already has 25 years of learning under its belt!www.iknowfirst.com
Quantitative Trading
• Quantitative Trading gives off the best of both worlds:– Could be made fully automatic– Could be a forecast with suggested put and call
orders • Traders watch the market and place trades manually
• The Investors decide what to do with the forecast!
www.iknowfirst.com
Quantitative Trading• Every good portfolio stacks investments up with
counter-investments with curb losses (and gains)
Trade in USD Also trade in GBPHold interest bearing assets Hold assets with “static” valueInvest in Bank Stocks Invest in stocks in a different industryLook for assets that would perform well in a sudden downturn
Look for assets that would do well in a sudden expansion
Hold stocks on the TSX Hold stocks in different global marketsPick stocks based on emotion and gut-feelings
Pick socks free of emotion and gut-feelings- Algo-Trading!
www.iknowfirst.com
Algo-Trading Protection
Algo-Trading
Human Factors Psychological
Pressures
Noise (news) Miscalculations
Objective Valuation of
a Stock
Quantitative forecasting the
future stock trend
www.iknowfirst.com
Algo-Trading Protection• Our global world: Markets become more and more
integrated with each passing technological advancement• Stock Markets have always been interconnected
– Movements in one market affect all markets somehow
• Political events in Iran and Russia affect oil prices and the E.U, which have a profound effect on the Canadian economy which will harm the U.S economy…
• Algorithms quantify these effects and build them into predictions, much more extensively than a human can
Algo-Trading with I Know First
• The BIGGEST benefit of algo-trading with I Know First is that our algorithm is a proven success
The overall I Know First return in the one year period from July 1st, 2014 to June 30th, 2015 yielded and overall return of 83% while the S&P500 rose by 5.2% during the same period.
Algo-Trading with I Know FirstCheck out our website
IKnowFirst.com Market Forecasts and updates Daily
