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A Much Better Algorithm to Help You Get Ahead
From Baltimore – The weakest link in our personal investment decision making is usually us.
On today’s Market Wake-Up Call, we learn how easy it is to employ quantitative algorithms in our portfolios to achieve bigger profits.
Nicholas Vardy, The Oxford Club’s Quantitative Strategist and Editor of the new Oxford Swing Trader, discusses “the good life as a quant” with Associate Franchise Publisher and host Rachel Gearhart. In this brief discussion, he explains how Wall Street quants have a substantial leg up on fundamental analysts like Warren Buffett. As Nicholas states, Buffett’s Berkshire Hathaway has lagged the S&P 500 for 15 years now, while the leading quant hedge fund has posted a jaw-dropping 66% return (before fees) per year since 1988.
This stark difference in returns is why about 90% of trades are calculated by machines using computer algorithms today. (Only about 10% of money managers still rely solely on fundamental analysis.)
I used to be intimidated and irritated by the constant use of the word “algorithm,” and I certainly don’t like to hear that machines are replacing humans on Wall Street. But really, algorithm is just a fancy word for any problem-solving operation that follows a step-by-step process and a set of rules. Have you ever carefully followed a recipe to cook anything? Well, then you have followed an algorithm.
Algorithms do not “think in stories” as we humans do. From the dawn of time, we’ve thought and communicated that way. Unfortunately, we have proven to be unreliable narrators. As Nicholas points out today, our cognitive biases make it difficult to compete with machines. We do use an algorithmic process in our brains to solve problems, but we have very slow computing power relative to machines.
Computers not only are faster, but also are now using algorithms to apply human emotion when it comes to the markets by calculating probabilities and recognizing patterns over time in varying investment, economic and political environments.
To profit from this, Nicholas has evolved a superior quantitative system that screens more than 4,100 stocks – every day. And as you’ll see, the results are outstanding.
On May 20, Nicholas is holding a free webinar he’s calling The Swing Trader Summit. He’ll talk about the screens he is employing in this highly effective profit system and how you can use it to get your own market-beating edge. Watch today’s Market Wake-Up Call to get an introduction to his new quant approach, and sign up for his free event on May 20 to learn even more.
Quantitative analysis has taken over Wall Street, beating fundamental analysis hands down. This is a wake-up call to any investor who wants to gain the immense edge that computing power can grant them, especially in this period of high volatility.
Enjoy your Sunday,
Julia