Machine Learning trading, Stock Market, and Chaos

Differences in the concepts of randomness and chaos are crucial in our abilities to make predictions about a system with such properties. A random system is unpredictable, as a given outcome does not rely on any previous event. Real world processes may seem random to the untrained eye, but upon closer examination, we see that such processes are in fact chaotic and can thus be predicted.



Due to the complicated nature of modeling chaos using statistics, scientists look to computers to solve these types of problems. Artificial intelligence and machine learning have proven to be incredibly successful in modeling chaotic structures and ultimately in making predictions about these systems. Most financial time series exhibit classic chaotic behavior, so it is possible to make predictions about their future behavior using machine learning techniques. This artificial intelligence approach is in the root of the I Know First predictive algorithm.

IRBT Stock Prediction: iRobot Sweeps Up The Competition

Stock Market Forecast: Why The Market Is Predictable

The majority of people are incredulous about the prospect of using AI to correctly forecast the stock market. They believe the market is too random and therefore, unpredictable. However, the mistake these people make is that they fail to understand that the market is not simply a series of indiscriminate/ arbitrary actions, but rather the combination of all of these individual events form a chaotic system.

Chaotic systems are dynamical systems that are highly sensitive to initial conditions and arise from a multitude of reasons. One of the primary ways that market acts chaotically is because (despite one of the most basic economic assumptions) people do NOT always act rationally because of psychological concepts like risk aversion in which losses have a greater emotional impact than gains, trend lovers who follow the herd, news bias, and overreaction. I Know First uses these methods in order to create daily stock forecasts that not only include the predicted direction of the asset, but also a predictability indicator.



Read more.

I Know First Presents At AI In Finance Summit

This past weekend in New York City, I Know First co-founder’s Yaron Golgher and Dr. Lipa Roitman presented at the AI In Finance Summit hosted by RE:WORK. Their presentation was entitled “Investment Selection By Combining Chaos Theory With AI” and explained how modeling the market as a complex chaotic system allows algorithms like I Know First’s to accurately predict the stock market.



The I Know First presentation was well received by attendees. One of the pivotal moments of the talk was when they explained to the audience that “The historical correlation between past algorithm predictions and accrual market movement for each asset is the key to identify and focus on the most predictable markets and securities, enhancing the overall performance.” This assuaged many audience members’ doubts that the stock market can be predicted and explained to many how the I Know First unique machine learning algorithm hones in on the most predictable assets.

Read more. I Know First Algorithm Evaluation: By Country - India Stocks At I Know First we want to show our subscribers the accuracy of our stocks across markets. Therefore, we do routine evaluations to see how our stock picks are faring and compare those to a benchmark. Our stock picking method is very simple – we take the top X most predictable assets from the set, and from them we take the top Y highest signals and pick them. This allows us to focus on the most predictable assets on the one hand, and the ones with the highest signal on the other.



On May 15th, 2018, I Know First finished the implementation and the training period of its AI-based ranking and forecasting model for the main equities listed on the National Stock Exchange (NSE) of India, specifically a selection of 366 equally-weighted stocks and introduced our By Country- Indian Stocks package to our subscribers. Since then we have constantly been evaluating our algorithm to see how it is performing in this international market and found that from 3/1/2018 - 8/24/18 and found once again that our chosen stocks consistently outperform the NIFTY 200 benchmark significantly by over 200%. This shows that our newest package is thriving thanks to accurate forecasts. Read more.

You might also be interested in: