The Bookshop
Guru
Making money trading
in stocks, shares, commodities, and currencies for the investment banks and
institutions in today’s cyberspace currently relies heavily on ‘algo-trading’.
Algo-trading is a term used to describe the algorithmic software which is used
to gain that alpha edge against an increasingly frenetic trading market where
milliseconds can mean millions in buy and sell decisions in veiled trading
markets.
There are a
host of different strategies deployed in ‘algo-trading’ to achieve that elusive
alpha edge. Some algorithms are designed to slice and dice trades into smaller
multiple trades in the hope that another algo system doesn't spot the pattern
and alert the opposition and lose the potentially profitable
edge. Pattern spotting software of all shades and colors is
deployed to gain the alpha edge and crunch huge amounts of data waiting for
the triggers to buy or sell.
The inherent
problem with algorithms whether their based on neural networks,
genetic algorithms, knowledge discovery systems, or any other type of pattern
recognition software is the paradox in automated pattern discovery systems in
extracting random data sets and the association of interestingness as a measure
of the usefulness of the data patterns revealed, because there is no prior
knowledge of the likely interesting data associations to be found before
automation. “If you do not expect it, you will not find the unexpected, for it
is hard to find and difficult.” (Padmanabhan & Tuzhilin, 1999)
The essence
of this is that it is easy, to spot a pattern, because it is already there –
so designing algorithms to look for certain criteria and predicting a pattern
would be more profitable.
The use of artificial intelligence is still in its infancy relative to how
much we really understand the capacity of the human brain. We only use
about 10% of our brain capacity, and the rest is mostly conjecture and
theories. The human brain has billions of neuron connections, yet even the most
advanced neural networks only use a handful of connections and they are used in
a wide range of applications such as stock market analysis and recognizing
trends, cancer screening classification, etc.
It’s not
about computer power like
the SETI project where spare computer processing power cycles are combined from
around the world, to number crunch and analyze segments of the night
sky. The problem is that artificial intelligence is based
essentially on learning, and adapting to the data sets, while at the same time,
using classification to modify its process – but, it’s not forward-thinking, it doesn't need more computer processing power or memory, it lacks perception –
the ability we humans call intuition.
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Some of the
most successful sage investors (like - Warren Buffet) have built fortunes
based largely on simple investment strategies, over the long
term. Short-term fluctuations, and gambling on the outcome, is the
global daily routine of investment institutions and banks, and how they make
their money, but, the paradox is that when one is making money, the other is
not. It remains to be seen if real transparency exists in these trades or is
hidden within veiled accountancy practices. We have seen the outcome of greed,
in cases like Enron and Barings Bank – when the light is switched on all is
revealed. Don't get mistaken, computers and software systems are
vital for a multitude of social and economic purposes, but they don’t have the
alpha edge, in my opinion.
The human
mind will always be more powerful than any computer because it
has that hidden element of perception. An example of this would be George Soros
who made a mint in the 1990s. Is anyone for polo?
Are you listening, what are you dreaming?
In my book “It’s Never Too Late” read how dreams do come true, but be careful what you wish for. Understand the secret of greed and you will attain one of the secrets of prosperity. The book will also take you on a journey and explores love, money, luck, and much more.
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Hey, Chuck. Did you bring any spending money? Viva la vida loca.
Conducting a Survey into Precognitive Choices
Which would you prefer half-price digital or paperback?
Read my book "It's Never Too Late" by Anthony Fox, published by Chipmunka Publishing
You always need someone or something to do the donkey work.
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