The Online Investing AI Blog

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Super-secret dark money pools and High Frequency Trading firms or HFTs had no sooner gotten a bad rap when another form of trading is about to steal it’s crown.

Thanks to an almost villainous take on the Singularity, a new group of computer-driven, quant-guided traders are now getting their hands on market data before other investors have a chance to see it (subscription required).

What’s the big deal?

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They call it Wall Street for a reason…

According to Money Central at MSN.com, a ton of high-powered, high-tech equipment is turning the tide against the small investor. After all, the little guy has made some impressive strides in equaling the big investment firms.

Online trading and low-cost trading combined with increasingly powerful personal computers have helped the little guy take a few steps up in the Wall Street food chain. But, now high-speed trading and “dark pools,” that we mentioned in this post, are changing the momentum back in favor of investment firms.

According to Money Central, 7 percent of all trades are performed in “dark pools”–exclusive trading venues that independent investors can’t access. Trading firms that are using these dark pools also use lots of computing power and plenty of geeky guys and gals who are paid big bucks to exploit the system.

But, believe it or not, a smart individual does have advantages over these big firms.

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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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Business Strategy, Investing, Money, Online Investing AI, US Economy currency, dollar, euro, forex, franc, pound, trader, trading, wealth, yen

Of all the investment methods, Trend Following has one of the largest followings and a pretty solid track record.

The pioneer of trend following was Rich Dennis, a madcap investor from Chicago who turned a couple hundred bucks into a couple hundred million bucks by watching for well-defined trends. Instead of betting on each price movement, Dennis, and later his group of disciples called “The Turtles”, looked for solid movements that were indicated by breakouts.

Even though this sounds relatively easy, the group of Turtles interviewed for the book, The Complete Turtle Trader, by Michael W. Covel, admitted that it could be, at turns, boring and stressful–two emotions that lead to investment mistakes.

In the book, Dennis adds that technology has made it easier for trend following:

“Given what the computer can do today–compared to what it could do a few years ago, I just can’t see how any human could possibly compete with a well-designed computerized set of systems.”

One of our partners, INO has developed several applications for technical analysis that would help trend following traders. You can use a free analysis to determine possible buy and sell points, for example. You’ll have the report emailed to you. Other tools include educational videos and insights from professional traders.

Another powerful tool that can supplement and even hedge the activities of a trend follower is Automated Trading.

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Money isn’t the root of all evil; risk is.

Risk is an attempt to scientifically categorize the simple truth that, since a better analogy escapes me, shit happens.

Risk makes fortunes and destroys fortunes. It’s ruined banks and created them. Risk has sent traders to the mansion… and the poor house.

But, just as it never says in the Bible that money is the root of all evil, but the lack of money is the root of all evil, so my pithy phrase that risk is the root of all evil isn’t quite on target.

It’s the lack of understanding of risk that is the root of all evil for investors and traders.

So, how can you make friends with risk? Here are six tips to help you make risk your friend:

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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.

Accelerating Technology, Business Strategy, Investing, Money, Online Investing AI, US Economy AI, decisions, economy, finance, genetic programming, invest, Investing, long, market, neuronets, short, trader, trades, trading

I come not to praise the mutual fund industry, but to bury one of it’s most early pioneers and decent advocates.

John Templeton died today. You can read about him here.

I think over the years the mutual fund industry has strayed into lower returns, higher fees, and exorbinant bonuses, but that was never Sir John’s intention. He wanted to create an affordable investment vehicle for as many people as possible, not just the wealthy syndicates. The mutual fund did pool money together and helped lots of folks become investors.

His other good works are legendary. Sir John was deeply spiritual and probed deeply into our existence on the planet.

At the risk of sounding like a pitch, I’d like to think that if John Templeton was starting out in investing today, he might look at Online Investing AI as a way to help common investors and traders even the playing field with the big mutual funds, hedge funds, and private equity firms. Autotrading is designed for the regular investor, because he or she usually has a full-time job and doesn’t have time to study charts and figures like professional traders.

I think Sir John would have been amazed at the possibilities that autotrading might have. Indeed, Mr. Templeton may have gone away, but his spirit is right here.

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