This Platform Shows How AI Can Be Used In Predicting Markets

The “Black Monday” crash of 1987 was a lot of things to a lot of people. For Lou Mendelsohn, who by then had spent the better part of a decade pioneering technical analysis software, it was a screaming wake-up call: the financial markets are more interconnected than anybody had realized.

That realization inspired Mendelsohn to create a new type of software, one that did not just look at stocks in the vacuum of their balance sheets and could account for this global economy.

“When he started looking into that, he realized to effectively forecast what’s going to happen in a stock, we’re talking about thousands of pieces of data that would need to be analyzed to create this global market analysis,” said Lane Mendelsohn, Lou’s son. “He was trying to figure out how to analyze thousands of pieces of data and figure out how they work together to drive a stock like Apple Inc AAPL for example.”

To do that, the elder Mendelsohn dipped into his background in Artificial Intelligence, which he’d first been exposed to as a student at Carnegie Mellon in the 1960’s. After decades of research and development, Mendelsohn launched VantagePoint in 1991—a software designed to sift through global markets to generate predictive indicators. The indicators aim to highlight precisely when a stock is likely to make a trend reversal so users can make quick decisions.

Today, VantagePoint’s predictions can be accurate up to 86 percent, a feat which helped them win Technology Headlines’ 2017 Company of the Year. The accuracy stat relates to the software’s ability to forecast trend direction and changes 1-3 days in advance. It’s been verified by multiple independent studies and even held true during the financial crisis. They’ve also unveiled VantagePoint Version 10, an update that gives the software a completely new look and feel.

The Secret Sauce: Artificial Intelligence and Leading Indicators

VantagePoint’s core lies in something they call “Neural Networks,” an AI-based mathematical framework that looks for patterns in vast amounts of global data.

“Basically, you input data into neural networks, and there's an input layer where data goes in and it is transformed into a variety of ways,” Lou Mendelsohn said. “And then the output layer is what are you trying to predict. [The raw data] has to be looked at and examined thousands of times to find patterns.”

The result of all this math is several key leading indicators that offer insight into future price movement: predicted moving averages that indicate trend directions and potential trend changes 1-3 days in advance, a proprietary predictive neural index which indicates a trend’s short-term strength, and predictive trading ranges for the next day so users can pinpoint entries and exits.

How VantagePoint Works

VantagePoint’s latest version covers nearly 2,000 stocks, ETFs, futures, and Forex pairs. New to the platform is its cryptocurrency feature, which offers short, medium, and long-term predictions on Bitcoin, Ethereum, and Litecoin.

In practical terms, users can expect charts illustrating these predictive results. For example, below is a 3-month chart of Apple on the latest version of VantagePoint software.

On the chart above you have the black line, which is the stock’s actual 6-day moving average, and the blue line, which is what the artificial intelligence predicts the moving average will be in the next two days. This eliminates the lag traditionally associated with moving averages because the indicator is constructed using forecasted data as well as historical data.

On the chart, a trend change is predicted to occur whenever the two lines cross. This can provide users with an ideal entry or exit point to maximize profitability.

Also worth noting is the red/green bar at the bottom of the chart. That’s the proprietary Neural Index, which predicts whether the stock will move higher or lower in the next two days. Green indicates near-term bullishness, while red indicates bearishness.

The multi-colored lines at the bottom of the chart are also predictive and leading in nature. These show the difference between the actual price and the predicted price over the short, medium, and long-term. This offers users additional insight and confirmation of trend direction and trend changes that are likely to occur in the future.

Scanning For Profitable Trading Ideas

The IntelliScan feature allows users to scan for markets that fit certain short-term, medium-term, and long-term criteria. Here’s a sample IntelliScan of Apple, Facebook, Inc. FB, Netflix, Inc. NFLX and Alphabet Inc GOOGL.

Their latest version, Lane Mendelsohn says, makes it easier for users to benefit from the power of AI to help level the playing field with the big institutions.

“When we began utilizing A.I. and neural networks in particular back in the late 1980s for our VantagePoint software we knew that over time the need for A.I. would become even more evident,” he said. “Artificial intelligence solves a problem for traders and investors. The problem is that there is so much data that needs to be analyzed and that makes it a humanly impossible task. This stacks the odds against the retail trader and investor. We have been able to turn the tables through the use of A.I. and decades of research and development to stack the odds in favor of the everyday trader and investor”

VantagePoint is an editorial partner of Benzinga. For a free demo click here.