Trade Ideas newly released version 4 of its Trade Ideas Pro software, featuring “Holly,” the AI powered Investment Discovery Engine, may be to Robo advisement what IBM’s Watson is to pocket calculators.
Benzinga spoke recently with Trade Ideas co-founders, David Aferiat and Dan Mirkin, managing partner and CEO, respectively, as well as with managing partner and COO, Brad Williams.
The story that emerged helps explain why “Holly” has shaken up the Financial Technology community. It may also explain how this equity-focused robo adviser underpins a technology that Mirkin boldly declares can “time the markets.”
Following is Part I of a two-part series.
Related: There's A New Robo-Advisor In Town
Benzinga: What is Trade Ideas?
Dan Mirkin: We are a technology company. We excel specifically where big data meets real-time messaging. We believe we are the best in the world at streaming real-time metadata.
David Aferiat: People who come to our service have pain related to trading the same stocks over and over or refuse to trade because of the volatility of the market. We seek to remedy that.
Brad Williams: Trade Ideas is connected to the stock exchanges, StockTwits and the Options Exchange. We consolidate all that information in a data center in San Diego where we create statistical baselines for every single stock on every timeframe in real time.
BEN: Ultimately what makes Trade Ideas unique?
Mirkin: For one thing, we make our own data. We have the only technology that can find supply and demand inefficiencies better than any human. Yes, we are saying we have technology that can time the markets.
Williams: Our AI hypothesizes how a given strategy will perform based upon the last quarter of data. It’s what we call “event-based back testing.”
We ask our computers to find the best strategies automatically overnight every day. That’s really the genesis of our artificial intelligence.
How is Trade Ideas different from a typical robo adviser?
Mirkin: People have been conditioned to give their money to others. Money managers have had terrible performance and charge high fees. Because of this, many people have started to go the route of robo adviser.
Trade Ideas is a natural extension of that concept. We are “robot opportunity detection and alpha capture.”
For most people the market seems kind of like magic. What we’re trying to do with Trade Ideas is take that away and say it’s not magic. It’s investing.
Aferiat: We bring robo Advisement down to the equity level. Our service is a lifeline to active investors who want to see tested, optimized trading plans that have percentages and statistics behind them.
How does Trade Ideas Pro determine trades for the next day?
Mirkin: Our AI is made up of 35 base strategies. We divide the day into thirds and figure out how to exploit the various ways things happen, much like the FBI profiles serial killers.
Our software learns the new odds every night. Those 35 strategies are automatically readjusted by software to give each base the best odds of success based on the new data.
The adjusted strategies compete among themselves for the top spots on the “team.” Those spots only go to the strategies that are more than 60 percent successful.
Williams: It’s important to note that the “team” doesn’t win every day. It does win the majority of days. There are, however, days when trading is difficult. It’s certainly not predictable from being correct 100 percent of the time.
When you say this technology can time the markets, how does that happen?
Mirkin: The notion that you can’t time the market has been around forever because technology has not caught up with the pace of the market. We think we’re the first to cross that barrier.
Our technology breaks up opportunities into simple concepts - buying or shorting the top, buying or shorting the middle and buying or shorting the bottom of a stock's trading range.
Our system is not trying to predict. It is actually a very sophisticated reactive system. It takes into account overall market conditions as well as stocks individually. The system knows when to take profits and when to implement technologically sound stop parameters. It does what Google Navigation does for you when you use it to drive.
So, is Trade Ideas for traders or investors?
Mirkin: Philosophically speaking at Trade Ideas we don’t really believe there’s a distinction in terms of what you do when you invest.
Individual investors are much more like modern day venture capitalists with the beauty of being able to get out.
There’s so much more alpha out there than people realize. At Trade Ideas we’re trying to say this is a new way to approach investing from what you were taught.
We’re not a day trading mechanism. We’re alpha hunters. We’re a supply and demand discrepancy AI.
Coming up in Part II: How Do Investors Interact With Trade Ideas’ “Holly?
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