The Online Investing AI Blog

I just finished reading Automatic Quantum Computer Programming and it really got me thinking about the possibilities and promise of quantum computers. For those unawares, quantum computers have the potential to revolutionize our lives as much as the digital computer has. Why? Because they can solve problems that digital computers cannot solve.

How do they do it?

Quantum computers use the characteristics built into the quantum world such as superposition and entanglement to solve these difficult problems. In an ol’ skool digital computer, each bit can only have a value of 0 or 1. However, in a quantum computer, a single quantum bit can have a value of both 0 and 1, at the same time. This is stored as a probability of being a 0 or a 1. So, while the computer that you are reading this on can only store one piece of information in a single bit, a quantum computer can store much more information in a single quantum bit. This powerful ability is known as superposition.

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Earlier this week, we explored another possible technological revolution in the financial world. AlgoDeal is opening up the once secret world of quant funds to individual trading system developers.

This is just the beginning. Computing power is exponentially increasing and that means its ability to solve investment problems and search for investment opportunities is increasing with it.

According to to this article on how the computer will evolve in the next 100 years on the How Stuff Works site:

“Assuming microprocessor manufacturers can continue to live up to Moore’s Law, the processing power of our computers should double every two years. That would mean computers 100 years from now would be 33,554,432 times more powerful than the current models. That’s hard to imagine.”

We can start to imagine, though, what that means for finance.

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Automated Trading Systems use computer technology to find and make trades. The systems are further enhanced because they can send these trading signals to the brokerage account of a virtually unlimited number of clients or subscribers to make the same trades.

The advantages for an independent investor or trader are numerous. The primary one is that Automated Trading systems require little maintenance. The trader subscribes and then checks a few times to make sure the trading system is performing up to expectations. If it isn’t, the trader can simply unsubscribe and choose another system, or wait for the performance to be restored.

There are ways that a trader can optimize his or her returns:

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The Market–that big, broad general term for commerce and financial exchanges–affixes value on just about every bit of property and intellectual property in your life, from your house to your software code.

Each nanosecond, it’s tabulating this value.

But what does the market measure to arrive at this conclusion (value)? The market is actually calculating the intelligence of decisions and the validity of ideas. It may also be calculating the lack of wisdom behind other decisions or innovations.

The market uses rewards to improve intelligence and offers loss as a punishment for incorrect decisions.

For example, if a company creates a new and, as it turns out, wildly popular product, the market will assess it positively for this intelligence. Likewise, a company that makes a poor marketing move will be punished by the market.

This, critics will charge, is an idealized version of the market. Companies could cook their books and demonstrate fake intelligence.  Good companies will be ignored in a pack of more showy companies. Emotions–like greed and fear–can act like market blinders.

Those are all valid criticism, but, like the market itself, it is the rules, rather than the exceptions that govern profit.

That’s why we think our advanced trading technology, which will become available soon, will lead to more intelligent trading decisions.

It goes beyond making money. This is the first step to make the market more intelligent.

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According to this recent article, researchers have started to overcome the last challenge to unlimited Artificial Intelligence. They succeded in creating a very simple robot and use an evolutionary algorithm so that the robot can learn to walk (or jump, as the case may be) just like a human child learns. But then they added a little bit of magic:

MacLeod’s team took this idea a step further, however, and developed an incremental evolutionary algorithm (IEA) capable of adding new parts to its robot brain over time.

What this means is that when the robot’s performance and learning has stopped, then another system takes over and modifies the robot’s brain. This is an incredibly powerful and promising approach, and the challenge in the past has been limited computing power. The reason is that you need an exponentially faster processor to carry out this brain modification functionality.

Fortunately for us, accelerating technology will remove this challenge. Right now computer power is doubling approximately every year. The result is that in just three or four years we can buy a computer 10 times as powerful for the same money. The really exciting part is that it will make it possible to create artificial intelligence of unlimited power.

The researchers are working on creating a simple robot that moves along the tabletop. However, they will be able to apply the systems that control brain modification to all future robots that they create. It’s only a matter of time before this technology is applied to a more complex system such as vision recognition or stock trading. This will create a system that actually works better than the human counterpart.

Many of these ideas may sound silly today, but just 20 years ago our current level of technology could be imagined by only a few people. Anyone who is aware of the power of accelerating technology can visualize Artificial Intelligence systems that are more powerful and work much better than their human counterparts.

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