Expect Grumman to move 20% higher…

Robo Street  – February 1, 2018

AI Closes the Gap Between the Individual Investor and Hedge Funds

The year ahead has a lot in store for the dedicated investor trying to gain an edge anywhere possible. One of the most talked about and promising areas for improving the probability of success is from the implementation of artificial intelligence, or AI. The technology is advancing rapidly- holding Moore’s Law true to form where the capacity of AI is doubling every two years, if not faster. Although adoption in many industries will take hold and dominate how certain things are made, adapting AI to the financial markets will require more time and sophistication than something like Siri finding information from your iPhone or your Amazon Alexa finding you a ride from Lyft.

With that said, the hedge fund community is investing vast sums of capital into AI to help generate consistent performance with lower volatility that has real potential of outpacing the benchmark indexes, year after year. For professionally managed funds, there are two interconnected factors that drive the adoption of AI. The first is the exponential advancement in computing power as data moves from on-site to off-site cloud data centers filled with servers loaded with cutting-edge processors priced at a fraction of the cost from just five years ago.

The second primary catalyst behind AI’s phenomenal growth is the sheer availability of data. If processing power is AI’s engine, then information is its fuel. It allows engineers to teach algorithms to adapt and learn skills without human interaction. This is what is called ‘machine learning’ and is exactly what we deploy at Tradespoon. Other code names for this science is ‘neural learning’ or ‘deep learning’. Training a machine to ferret out information where statistical data and content is relatively fixed is much easier that trying to coach a machine to adapt to a highly fluid environment.

Finance is perhaps AI’s most challenging space to achieve a high degree of accuracy. Training a computer to breakdown how a stock behaves against a multi-faceted trading landscape is highly sophisticated. Markets are influenced by economics, regulations, politics, news events and human judgement. To say the ground is always shifting under Wall Street is an understatement and all these variables impact how a computer spews out data to where it can lead to nowhere if its algorithms are constructed right.

If designed properly, AI goes to the point of enabling the stock selection system to adapt based on the information it receives. The software engineers set statistical parameters, designate asset classes, levels of volatility, risk exposure caps, technical filters and constraints within the DNA of the system they are creating. The model then seeks out patterns making connections among the millions of bits of data that humans cannot see and produces educated predictions based on historical evidence that in turn determine levels of probability.

This ability to assign an accurate level of probability is a key feature in Tradespoon’s Stock Forecast Toolbox and why I place so much emphasis on it with each of our stock or ETF recommendations. History has propensity of repeating itself in a static world, but within the investing world past behavior isn’t necessary a good guide to future performance and thus applying all the various data parameters within our proprietary model gives us a laser-like focus in asset selection and is why our system correctly predicts directional trades 80% of the time.

When applied to some of the most trusted stocks in the market, AI system identifies winning stocks registering high probability readings that are forecast to keep on winning during the next six months. Our model is truly bullish on Northrup Grumman (NOC), which just so happens to carry a probability rating of 100% accompanied by a very bullish trend indicator.

It’s not every day we find a stock with such powerful institutional sponsorship in which the near-term technical future is so bright that a near 20% move higher is anticipated for one of the most trusted names in the aerospace/defense sector. The bullish readout for Northrup Grumman affords the investor the ability to own the stock with confidence and use any pull backs in the shares to initiate and add to positions.

Having a market-tested AI model at your disposal is not just a handy tool, it’s an engine of constant information that provides what I call “a peek around the corner” of what to expect over the short and intermediate term. It’s exactly why, when you walk into the offices of the biggest hedge funds the in world, there is a growing presence of super bright software engineers working day and night on streamlining in-house AI models with the aim of bettering portfolio performance.

The problem for the individual investor is the price of entry into a hedge fund as a customer can run into the millions of dollars. Here at Tradespoon, we bring you the same AI capabilities where access to real time forecasting is available within a highly favorable price structure. When your AI toolbox pays for itself in the first month of investing, you’ve found the right system that will serve you well for months and years to come. That place is Tradespoon and the power of AI is right here at your fingertips.