Artificial Intelligence (AI) systems have had varying degrees of success when measured against humans. In problems such as chess, which succumb to sheer computational firepower, the machines have advanced greatly in a short time.
Like chess, financial markets operate under the supposition of rational participants. Humans are supposed to be calculating the odds, maximizing return and minimizing risk.
If this were indeed the case, artificial intelligence trading software would stand a good chance at bettering its human counterparts in making and capitalizing on market decisions. Unfortunately, rationality is not always the best assumption for either humans or markets. One needs to look no further than the current economic situation to observe how irrational human traits like confidence, fear and greed play out in market dynamics. The uncertainty injected by the human participants makes the markets much harder to predict.
Back Propagation Neural Network
However, artificial intelligence trading software can be successfully applied to certain trading functions, specifically intermarket analysis. An invention by Louis Mendelsohn relates to methods and systems for performing intermarket analysis using neural networks. A neural network is a system of programs and data structures that approximates the operation of the human brain. (Learn more about Neural Networks here.)
Mendelsohn’s invention details proprietary methods and processes for selecting from a large pool of available global financial markets. These are the related markets that have the highest relevance in training neural networks to make market forecasts for each ‘primary’ market with a high degree of predictive accuracy. This selection process includes determining ‘key’ intermarkets, ‘general’ intermarkets, and ‘predictive’ intermarkets from the pool of available markets that correspond to each ‘primary’ market.
Neural Network Software
Market data for each of the key intermarkets, the general intermarkets and the predictive intermarkets can then be processed to train neural networks so that when the neural networks process this input data, predictive output data generated by the neural networks for each primary market are as accurate as possible.
After training the neural networks, all relevant market data for each primary market can be processed with the neural networks to predict future market data. That data is then used to arrive at a predictive technical indicator for use by the trader in making trading decisions.
This process drives the VantagePoint software so humans can make rational trading decisions to master the markets.
Getting ahead of market trends by spotting early trend reversals
Stock traders know that when a trend reversal is imminent, getting into position at the right time can make all the difference. Options traders can benefit from early indication of a trend change which tells them where to place calls and puts. But without a crystal ball, how can the average trader know what is going to happen in the market before it happens?
VantagePoint Software uses proprietary technology that forecasts the market and indicates trend reversals using 3 indicators: The Simple Moving Average (SMA), the Predicted Moving Average (PMA) and the Predicted Neural Index (PNI.) [Learn more about our indicators here]
Traders can rely on the 86% accuracy of our 1-3 day forecasts that show a very clear trend reversal when the blue predicted line crosses above or below the black line, indicating the trend will change direction. The Predicted Neural Index serves as confirmation – showing the overall strength of the trend. When it’s at the 1 position the trend is showing strength and when it’s at the 0 position it is showing weakness. Watch the video below to see 5 real examples of where VantagePoint’s leading forecasts accurately predicted these winning market moves.
Baidu.com ($BIU) 25-day move that resulted in 10.3% gain or $19.79/share
Williams Companies ($WMB) 20 day move to the downside that resulted in 9.18% gain or $4.87/share followed by a 4-day move to the upside that resulted in 25.88% gain or $12.53/share
EnCana ($ECA) 25-day move to the upside that resulted in 22.39% gain or $2.57/share followed by 33 days of a downtrend that resulted in 12.95% gain or $1.77/share
Alliance One Int ($AIO) 23 day move up that resulted in 78.7% gain or $1.06/share
Gilead Science ($GILD) A 30-day uptrend that resulted in 16.97% gain or $17.72/share.
For more on trend reversals check out: Global Market Analysis and Trend Reversals in VantagePoint
How to Time a Trade
and why it matters….
Timing and direction are the two most critical aspects to a traders success. Without knowledge in these two areas, a trader is doomed for failure. There’s a reason 95% of traders are either just breaking even or are losing money in the markets. By having the right tool that provides advanced notice of a trends direction and strength, traders can improve their entry and exit points, putting them in a position to capitalize on those big jumps up or down.
Predictive Technology for Market Timing
Traders using traditional trend following techniques know the pain associated with getting into a hot trend a day or two after a big move. VantagePoint Trading Software uses proven predictive technology that analyzes markets from a global perspective and provides highly accurate forecasts of a market’s trend direction and strength 1-3 days in advance. This gives traders the insight into what will happen, not what has already happened in the market. In trading, one or two days can make all the difference to your bottom line.
In the video below we look at 3 real stock forecasts from Micron Technology ($MU), Green Mountain Coffee Roasters ($GMCR) and Skechers ($SKX) that demonstrate the added value offered by a predictive forecasting tool like VantagePoint – calculated in real dollars you could have made.
Where to Set Your Stops?
Entering and exiting trades is just the beginning. To stay in a position with unwavering confidence a trader must eliminate their risk through the use of stops. VantagePoint takes the analysis of trends one step further by providing traders with the next day’s predicted high and low, allowing traders to participate in the trade with increased confidence and limited losses. This strong combination of knowledge and accuracy is precisely the reason VantagePoint has over 15,000 customers worldwide.
What Are Trend Lines?
Trend lines can be used effectively by traders to gauge potential areas of support/resistance, which can help to determine the likelihood that the trend will continue. This strategic advantage is available to any trader willing to take the time to learn how to draw a basic trend line and incorporate it into his or her trading strategy.
Drawing Trend Lines on your Trading Charts
Not all trend lines are created equal. Like much of technical analysis, drawing trend lines is more art than science.
Here are five simple steps to help you draw proper trend lines.
- Don’t make the mistake of drawing trend likes from left to right. Always start with the current price.
- It takes at least two tops or bottoms to draw a valid trend line but it takes THREE to confirm a trend line.
- The STEEPER the trend line you draw, the less reliable it is going to be and the more likely it will break.
- Like horizontal support and resistance levels, trend lines become stronger the more times they are tested.
- And most importantly, DO NOT EVER draw trend lines by forcing them to fit the market. If they do not fit right, then that trend line isn’t a valid one!
Trend Lines for Better Trend Trading
So now that you know how to draw your trend lines, how can you incorporate this into your trading? Yes, it is essential to always know the trend of the market, but the problem is that most traders still rely on outdated technical indicators (like trend lines) that are generated by looking at prices alone and this is essentially informing you only where the market has been. Because these types of indicators lag behind the market, they cause traders to enter into positions far too late – missing out on potential profits. The trend line only helps you to identify the prevailing trend, it does not tell you when it’s about to change.
Along with drawing proper trend lines, you also need a tool to help you forecast future market direction like VantagePoint.
The proprietary research technologies are the underlying engine that drives VantagePoint’s unique ability to transform trend following, lagging indicators, into trend forecasting, leading indicators.
Today we’re looking at market reversals with the news out of Europe and Germany. We’ve seen major swings in the U.S. markets. If you’re not conducting a global market analysis on the markets you trade, if you’re not examining the relationships of these markets – how they push and pull each other in different directions, and to what effect, you may be missing out on major opportunities to make profitable trades.
VantagePoint analyzes 25-30 interconnected stocks/markets for each target market available in the software. The intermarket analysis that takes place behind the scenes gives traders the insight and edge they need to get ahead of these trends – making sure the trader does not miss a big opportunity.
Take a look at the below example of Alliance One Intl ($AOI) where VantagePoint’s predictive forecast alerted traders of a 30 day uptrend that resulted in 40% profits – followed by a 13 day downward trend with 2.25% profits and closed with a 16 day major move to the upside resulting in over 50% profits.
Ask yourself – do you have the tools and the confidence to make trades like this? That’s almost 100% profit in less than 60 days. It’s really no wonder this type of Global Market Analysis is helping traders all over the world.
For those of you looking to hold on to longer positions, we take a look at how VantagePoint’s Global Market Analysis alerted traders to 2 lucrative moves in Whole Foods Market ($WFM) that resulted in 46.48% in 90 days followed by a 66 move to the downside that resulted in 29%.
Lastly, check out this ongoing move in Skechers U.S.A. ($SKX) that is up almost 47% in the last 36 trading days. Are your trades panning out this well?