The Online Investing AI Blog

Here is the second installment about my new investment system. So far, I explained some trades in silver and gold. This post is about trades in the currency markets.

Unlike many currency trading system, this system is not an intraday system. I expect the trades to last for several months, at least. They are based on global economic policy, and the massive printing of U.S. dollars. These trades are based on the belief that the Indian and Chinese economies will perform better than the U.S. economy in the near future. Read more…

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I first connected with Nick at Becoming Capitalist through this blog. When I read his intro, I liked the way Nick thought. He sees artificial intelligence and automated-algorithmic trading as a way to tap technology for personal financial freedom. We call that the Wealth Singularity. I’ve been reading Nick’s blog and communicating via email. I’m pretty impressed and thought you might want to see an Expert Profile on what Nick is up to and how he approaches automated trading.

What attracted you to automated or algorithmic trading? Why is this so important to you?

The attraction for me to automated trading was driven by the same desires I had getting into IT and software development. When I see a problem or a set of work, I look for ways to automate it and streamline it. And then of course I have a computer do it. This really provides endless satisfaction. Those who build or create anything understand the feeling of joy when there creation is finally complete.

For the programmer, this joy can be ongoing. Unlike a machine, once you’ve coded something it will execute perfectly again and again; never again requiring your input. I suppose the objective in trading then is for your AI to become a version of you without your bad qualities. No emotion, never tires, hungers, or needs a break, and can multi-task in ways you could only dream of.

Read more…

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With trillions of dollars in currencies exchanging hands each day, the market for money draws considerable interest for traders.

The currency market is becoming more democratized, as well. Online brokerages offer nearly limitless access to currency exchanges, like Forex. Trading currency is also popular because there’s a potential to make a lot of money quickly.

If you don’t adjust for risk and prepare for emotionless trades, you can lose a lot of money, too.

Here’s the Globe Mail list of the top eight tradable currencies.

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When the internet first started to develop, some entrepreneurs decided that there should be a currency just for online transactions. It made sense. People didn’t trust conducting transactions on the web and, of course, cash wouldn’t work.

Internet currencies, like Flooz and Beenz, were introduced. And dot-bombed.

Despite good intention and good ideas, online currencies never were adopted.

So that’s the end of the story, right? Not according to an article from Wired.

New currencies are starting to bubble up again. One currency is based on wireless phone minutes. Technology is literally becoming a currency. With less faith in paper currencies and a lack of malleability and portability of other forms of currency (gold and precious metals), a new currency–or new currencies–are more possible. In tightly controlled economies (China), new currencies will find a ready market, too.

And, if technology can create a currency, it can create technology to trade this currency.

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Technical Analysis seems to be more of an art than a science. Everyone seems to have their favorite indicators. However, there is one small problem with they way that people choose them. They choose them based on what seems to work, without really analyzing how well they work.

You can still make money using technical analysis. The trick is that the analysis is not really important. Other factors such as trading consistency and money management are far more important. But that is the subject of another post.

The subject of this post is how technical analysis is changing, and becoming more effective. Since everything in life is getting better, why shouldn’t technical analysis? Technological innovation has revolutionized our lives in the last 10 years, and we believe it will revolutionize how people trade as well.

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Have you ever met someone and asked what they did for work, and received the following response?

I trade for a living.

I don’t mean a stock broker or mutual fund salesperson that siphons money off other people’s accounts. I mean someone who makes enough money to live by buying and selling stocks, options or Forex. They don’t need a job and make money from guessing which way a certain asset is going to go.

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As Automated Trading becomes more and more popular, people are wondering exactly what it is and how it relates to investing. Can Automated Trading systems be used to create a viable investment portfolio?

First, let’s examine the difference between human trading and investing. Human trading is the process of buying and selling stocks, options, futures, or currencies (on the Forex market). The internet has brought the world of trading within reach of anyone with $1,000 and an internet connection. Yet trading is quite different from investing.

Investing is more of a long term process, when the investor consistently makes money over time. They may buy stocks, real estate, businesses, art, or anything else of value. The successful investor grows their net worth as the assets that they purchase increase in value. And, they many never sell the assets. Many successful investors such as Warren Buffett practically never sell.

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Although Automated Trading has yet to become well known and popular, it seems that before long it will become as common as mutual funds. Automated Trading systems have been developed to trade stocks, options and commodities. And, there is one market where we expect to see massive growth.

That market is the currencies market, or Forex. At this time, many people buy and sell different currencies, in an attempt to make money as the relative values fluctuate. There are even people who daytrade the currency markets. Forex is popular because it gives traders very fast executions, has tiny spreads and provides high leverage (100:1). Yet human traders are not the only ones who can benefit from these advantages.

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In our quest to find methods of providing residual income–money that reliably lands at your feet month after month and year after year–we finally arrive at the last one we’ll study in this series.

To recap, we talked about owning rental units, investing in dividend stocks, inventing products, and creating digital products to secure residual income and open the gates to financial freedom. Our last method may be the residual income wave of the future.

Automated trading uses computers to automatically place trades for you. These trades can be based on technical or fundamental factors, or any other stock-picking practice. Alternatively, a famous trader can send out position calls based on his or her own calls or methodology.

The calls are enacted nearly instantaneously through internet technology, so there’s very little lag between when the call is made and when the actual transaction takes place.

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Recently, the Forex market has really become popular among small investors. Before the internet, Forex trading was available only to large institutional traders. But, like so many other things, the internet has changed the way the game is played.

It’s interesting to note that one of the most popular assets traded these days is currencies. Before, it was mostly stocks. But now there is massive interest in the Forex market. Perhaps it is because people percieve the world as being much smaller, and they understand that each country’s economies and currencies are closely linked.

There is also a certain thrill provided by Forex trading. Typically, you can get 100:1 leverage. So that means you can buy $10,000 of a certain currency for $100. It also means that if the price of a currency that you buy increases by just 1%, you have just doubled your money.

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