Stay Ahead Of The Curve: AI Weekly Medium Feature: Are Stock Markets as Unpredictable as We Think? Here at I Know First, we believe that markets are, to the contrary, largely predictable. An accuracy of 100% may indeed be mythical at this point, but consistent returns on AI-driven trading are still very much possible. Furthermore, you do not have to be a Wall Street moneybag to be able to gain access to advanced algorithmic stock predictions and make a profit off it. So what is it that makes the markets more predictable than we might think? Let us find out.



For now, a main issue is that AIs do not do well with data that tends to evolve on the go — and that is why they have to evolve with it. Enter reinforcement learning, a technique mimicking the way we, humans, interact with our world as we explore it. The idea is as follows: an AI is trying to maximize the reward (i.e. a parameter representative of the outcome that the humans want to obtain from this AI) through interactions with its environment. After each interaction, it reconfigures its models based on the information obtained from these interactions and tries again.



Read more. Stock Market Forecast: Chaos Theory Revealing How the Market Works Looking at the common fallacies about stock markets, we can see two major groups. The first group is connected to the classical economic theory, which claims that markets are 100% efficient, and as such unpredictable. However, trying to make a stock market forecast is useless anyway, as no stock can possibly be a better deal than another. Both of them are efficient and everybody in the market has perfect information available to them. From our daily lives, it is obvious that this does not truly reflect reality. There are people who actually profit trading stocks, which should not be possible in this idealistic market of economic theory. On the other hand, it is also not true that stock markets are completely chaotic, which claims the other big group of fallacies. Otherwise big trading houses such as Goldman Sachs are able to profit consistently, while in the chaotic market the profits and losses would always sum up to zero over a longer period of time. Where is the truth then? The complexity theory gives us an answer – markets are complex and chaotic systems and their behavior contains both a systemic and a random component. Therefore we can make a realistic stock market forecast, although it is precise only to a certain extent. Read more. AI in Forex Trading: Money Loves Smart Tech In essence, forex trading mimics traditional investment in the sense that both can be viewed as making a bet. An investor shorting a shock is making the bet that it is about to go on a nosedive, allowing them to profit off the difference between the price at which the stocks were sold initially versus the price at which they were bought back later, while a long position is a bet on a stock going up. Similarly, a forex trader makes a bet that a certain national currency is set to do well vis-à-vis another one, meaning that it’s longing o’clock, or vice versa, which calls for going short on it. The keywords to note are “vis-à-vis another one”, because this is where we can also touch upon the difference between investing in stocks and forex trading. As an investor, you can pick one stock among thousands and roll with it, but as a forex trader, your bet must always include two choices, albeit from a pool that is way smaller. The first one is your pick of the base currency, which is the currency you are buying or selling, and the other one is the selection of the quote currency – the currency that you will pay for it in.



Read more. Wisdom of the Crowd vs. Algorithmic Trading In his book “The Wisdom of Crowds,” James Surowiecki provides many promising and commonplace examples of a wise—and accurate—crowd. For example, at a town fair where visitors could guess the weight of an ox, the average of the crowd’s estimates often measured up to a reliable indicator of the ox’s true weight. At times, the “wisdom of the crowd” can fuel processes now crucial to our daily routines, such as Google searches. While Google displays search results in order of page popularity and crowd engagement, this method often ends up correctly arranging pages in order of relevancy to the query. Let’s inch closer to the realm of finance: consider political betting. In the US, well into the twentieth century, bets made on political candidates were considered the most accurate indicators of election outcomes—more so than results of public polls. Naturally, this brings us to a central question: can the “wisdom of the crowd” withstand the volatility, misdirection, and emotional pitfalls that so often characterize stock markets and other exchanges? Read more. MarketWatch Press Release: AI-Driven Algorithm Successfully Identifies Outperforming Stocks Live on TV The challenge was quite straightforward: a reporter showed up at I Know First’s Tel Aviv office to get a short presentation about the company and its main product - predictive algorithm for algorithmic trading on stock markets, and then to try structuring two independent investment portfolios using the daily AI stock market forecast. Top 20 US stock picks package was the basis for that experiment. The first portfolio was built for passive investment which remained the same structure throughout the review period. The second one was used for active investment, i.e. utilizing the daily predictions for buy and sell orders and overall active daily management of long and short positions. The reporters were not alone and reached to Tal Mofkadi, PhD at Interdisciplinary Center of Herzliya, who monitored the whole process as an external expert, checking the portfolios’ performance and comparing their features against the benchmark SandP 500 index. After two weeks, the passive investment portfolio provided 3.88% value growth. In its turn the active portfolio showed even higher performance it grew by 8.18% in value and beat SandP 500 by a wide margin as it only gained 1.37% in the review period, which is more than impressive. Tal Mofkadi, PhD at Interdisciplinary Center of Herzliya, provided an independent investment expertise to News 13 TV channel to confirm the portfolios’ performance and called them “magnificent”. Read more.

Want to learn more? How Using a Robo Advisor Will Make Your Portfolio More Valuable

FWO Trading Israel Derivatives Conference: Yaron Golgher at AI Panel Discussion

Digital Dream Technology Feature: How AI is Shaping Forex Trading