Algorithms Prove No Match For Market Tumble

from the all-in-the-data dept

Earlier this year, famed inventor (among other things) Ray Kurzweil announced that he was getting set to launch a new investment company that would employ advanced mathematical techniques to discern patterns in the stock market. Of course, just because Kurzweil is widely considered to be a genius, it doesn't mean he'd have any midas touch when it comes to the stock market. Furthermore, quant funds, as they're known, aren't novel. Lately, in fact, they've been getting slaughtered as the market swings about in unpredictable ways. Top tier investment bank Goldman Sachs has announced that its closing one of its premier quant funds in light of recent losses. Obviously computers have become an indispensable tools in modern day investing, but no algorithm or mathematical genius can guarantee good performance in all markets.

Filed Under: algorithm, quant

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  1. identicon
    StrataGenie, 10 Aug 2007 @ 4:04pm

    Algorithmic Trading

    There are some institutions in the algorithmic trading business that turn a substantial profit every year - for nearly the past twenty years. (for example, A good algorithm senses market direction continuously, moves into and out of positions faster than you can hit a single key, and profits directly from the fear and greed that make investing notoriously difficult for humans.

    StrataGenie is a new system which draws together the combined power of multiple computers over the internet to form a grid working to find trading strategies. The more people that join, the better the trading strategy. It's currently providing trading signals profiting about 60% per year, but it's expected to go higher over time. Forget about searching for aliens, let your computer turn a profit for you!

    While nobody can predict the future, you can actually predict the statistical likelihood of the stock prices over a short term. Using that knowledge, you can trade in and out while the market is behaving "normally". In the event of a rapid departure from normal, the unusual activity is seen as "volatility" and algorithms can react accordingly.

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