Stephen Cole CV

Artificial Intelligence

There is no doubt that A.I. has 'come of age'. We see its use in many applications from web sites to keyboards to robots.

Can it be used for Trading Systems? More important, can it improve results? The obvious answer is yes however with some human caveats.

A.I. in itself is often thought of as a replacement for 'human' intelligence. Actually the truth is that A.I. is often used in such roles, e.g. robotics and chess games, however its real strength is analysis in terms of sheer speed and volume.

And it's here that the majority of commercially successful applications have been established. 'Big Data' is the bedrock of these applications. Being able to correlate millions of data points in a few seconds, visualise where hidden associations lie and make use of the information is perhaps the most important part of A.I.

While working with a US Hedge Fund, I also found that there are successful traders who have found a way to make Financial Trading pay. Certainly a in a minority, and as we all know the vast majority of ‘day traders’ lose money, the select few continue to make significant returns.

They almost act like mini Hedge Funds, quietly making money, and accumulating cash on a regular basis. In fact I discovered ‘Hedge funds that use AI to drive their investment decisions have outperformed average industry returns every year for the past seven, except for 2012’ Source: according to industry data provider Eurekahedge

However, I also found that their methods all differed. While they all achieved financial success, the route there was very different. What they all had in common was a determination to win and often paid heavily to achieve that goal.

So yes, it can be done. And I believe that A.I. could significantly enhance that ability. For example, a trader who covers 8 or 10 markets (and that’s a lot) is about at the limit of human assimilation. More than that and the trader is overwhelmed.

This is the A.I. advantage. Take the successful methodology and A.I.’ enable’ it, cover hundreds of markets and automatically inform the trader where the very best opportunities lay.

By bringing successful trading methods to a wider audience and especially those that have never seen the public domain is perhaps an opportunity to consider.