For value investors stock picks are often buy and hold decisions. Traders like signals, systems, algorithms and trading robots. Both miss the biggest opportunity.
The typical investor tends to ignore price action. He may end up as the buy and hope investor. Many traders concentrate on one or a few trading media. At its best they fall in love with a specific stock. But it could get worse, e.g., they get caught in the robotic trap named Forex.
So, what is the big opportunity? It is the combination of stock picks with trading signals!
Essentially the stock picker, a human investor, judges the chart, then the company of a stock and its products and makes finally the selection with human intelligence.
The machine, the trading robot, does what machines do best. With precision and emotionally detached it is easy for it to trade relentlessly in and out of a stock.
Doing this sort of swing trading is also trend trading. If a stock produces only volatility by swinging forth and back, be it. The swing trading algorithm of the trading robot will produce a profit. If a long-term trend shows up it will also produce a profit. Swing trading becomes short-term trend trading.
The human stock picker can chose a stock with a clear chart. Large swings and large trends and only small pullbacks are the right choice for swing trend traders. He also can try to find the fundamentally sound investment.
Perfect would be a stock pick that combines both virtues. If the company behind a stock enters a new growth phase and the chart reflects this with a nice trend start, we have one of the best stock pick setups for our trading ninja.
Why not letting the machine do everything? Reflecting about a company, its products, the economy with its possible financial crisis requires a human mind. This is far beyond the capability of a machine and it will stay this way for the foreseeable future, if not forever.
There are theories out there that strong AI – understanding the world by a machine like a human – is impossible. Whether these theories are correct or not, a computer with trading wisdom would have to be programmed. So far, all intelligence has to be put into it by the programmer, despite the many AI systems that are believed to be able to learn themselves. It is the framework that can only be built by human intelligence and that restricts what can be learned by the machine.
Seen practically, there is no investing program that invests better than a human investor. That’s why this part should be done by us.
The machine. Why is it better suited for trading? It has no emotions and no lack of trading discipline. It also doesn’t get exhausted. It is a robot.
The combination of both comes close to the best stock picking system. The trading has to be included!
For the mechanical part we are using a stock robot that resembles indeed a restricted human mind. A neural net that mimics our brains with regard to pattern matching and detecting hidden regularities. This sort of complex algorithm is able to adapt to a specific stock and deliver simple trading signals.
Such a self-adapting algorithm is about the best current AI has to offer for trading. The outcome are easy to follow trading signals for swing trading the shorter trend. Combine this thing with the stock picks of the Zen Trader and you may realize what our header promises!