​Trade Ideas AI Holly Offers Clear Market Analysis

Joel Anderson  |

Discovering alpha is increasingly difficult for individual investors, with more people opting for the safe, reliable beta found in index fund investing. With so many different factors and data points going into any decision, there’s an overwhelming array of information that could impact each and every trade. Even the shrewdest trader with institutional backing and every conceivable resource at her disposal can struggle to formulate a plan and execute it successfully.

Fortunately, the average investor has at least one idea every trading day in Trade Ideas, a company that has spent more than a decade committing itself to supporting individual traders as they try to navigate increasingly complicated markets.

“We've been in business for 13 years, and I would say we haven’t really deviated from our original mission,” says David Aferiat, co-founder and managing partner of Trade Ideas. “The mission is to provide our subscribers and our customers with informed decisions when making an investment or trading decision in the market. The technology, though, has certainly evolved quite a bit.”

And with its most-recent product, Trade Ideas is embracing the future and has created a tool that could prove invaluable to any trader looking to create real wealth and beat the market. Dubbed Holly, the new AI engine sifts through mountains of data overnight so that it can give precise, clear forecasts for traders each and every market morning.

Working in Tandem with Traders

For Trade Ideas, Holly combines the old and the new. The old is supporting the trading community with better ideas and better data, something Trade Ideas has been working at for a long time. The new is embracing automated advisement and data analysis and packaging them to serve its customers.

“Over the years, we realized we needed to do more powerful computing on behalf of our customers to find patterns and events for them, rather than give them the tools to find them on their own,” says Aferiat. “That eventually got us into automation and optimization exercises, the basis of our machine learning artificial intelligence system that we call Holly.”

Holly ultimately provides perspective that no human, no matter how diligent she may be, could ever hope to replicate.

“What Holly does is take about 35 base strategies that we've created along with some others we come up with on a daily basis, and it starts to optimize them on her own,” says Aferiat. “Holly goes through millions of calculations overnight to arrive at about 5 or 8 or sometimes 3 algorithms each morning that, after all the tests and scoring, she’s prepared to go to the market with on that day.”

By analyzing and interpreting more data than any one person could hope to sift through, Holly provides a clear view of where the markets stand before the trading day starts. However, the final decisions regarding trade execution remains in the hands of the individual trader.

“The system we created is not an automated trading system,” says Aferiat. “It’s like having a virtual analyst or a virtual PhD. It still relies on human judgment for the implementation of all the trading plans that have been optimized, measured, and tested overnight. It is much like what Gary Kasparov eventually did when he was beaten by Deep Blue. The first time he was beaten, he commented if he had access to the same database of all the possible chess moves, maybe he would have fared better. In subsequent matches, that is exactly what he did, starting what is called a freestyle form of chess where humans and AI come together to play chess. We’re very much in that same camp. Kasparov coined the term ‘centaur’ for a combination of human judgment and artificial intelligence resources. That is what we bring to the market.”

The Great Debate Between Active and Passive Investing

But does is work? There have certainly been any number of trading systems that have come and gone over the years, promising big results while supplying little better than market returns, or worse. However, in the months since it started working, Holly’s returns have shown the potential that she’s the real deal.

“The results speak for themselves,” says Aferiat. “Since we launched the technology at the beginning of 2016, we’ve measured the cumulative profit points of the S&P 500 and the Holly Artificial Intelligence system. As of early November, the S&P 500 was up 2 points and Holly was up 99 points. It’s a stark advantage, and these are real time results in the market. This is not holding Home Depot (HD) for three months and seeing 99 cumulative profit points be the result of one trade; this is the result of each day having to do this exercise from zero and either win or lose each day.”

With Holly’s performance to date, the next natural question then becomes why Trade Ideas isn’t managing its own hedge fund, keeping the returns for themselves. Aferiat acknowledges that it’s a question that he’s gotten a lot. In response, he begins by pointing out that the system isn’t completely automated, requiring human traders to actually execute the suggested strategies and trades.

However, he also points out that the decision to offer Holly as a product to consumers goes a little deeper than that.

“Even if it were automated, we'd be reluctant to take it off the market and use it just for ourselves,” says Aferiat. “Our company was built to provide customers with an information advantage. We’ve spent 13 years doing it, it’s in our DNA.”

Aferiat also points out that much of the shift towards robo-advisement is a function of the frustration traders and investors have felt in trying to beat the market.

“We’re in the trenches of the great debate between active and passive investment styles,” says Aferiat. “We see the rise of robo-advisement and the huge projections for assets under management (AUM) going there. Today, that number sits at about $18 billion, but I have estimates getting constantly revised upwards from half a trillion dollars to $3 trillion to $8 trillion in AUM by the year 2020. What that means is we see an enormous amount of redemptions and outflows from hedge funds, mutual funds, actively managed sources into these passive vehicles. You can see this enormous amount of pain that is being felt by the self-directed investor who has given up on trying to understand this market. The tools they have at their disposal no longer do the job and they feel like they no longer have any advantage in the market. So therefore the thinking is ‘I’m going to set it and forget and tie myself via robo advisement or passive investment vehicle to an index that says congratulations you'll never lose anything more than the index loses but you'll never also never gain anything more than the index gain.’ That is a fundamental shift in the purpose and reason for having the market in the first place. You will not generate wealth tied to an index.”

Digging Deeper into Market Drivers

So, for anyone interested in putting themselves to the test and trying to actually beat the market, it’s possible that Holly is just the tool you’re looking for. With her analysis and support, you can begin to actually dig deeper into what’s driving the market and make decisions informed by data rather than simply trying to take a stab in the dark.

You can return to Equities.com each and every morning to get a look at what strategies Holly is suggesting for that day, and get complete access to Holly’s predictive features at Trade-Ideas.com.

Editor's Note: This article was initially titled "Trade Ideas Holly Offers Clear Market Advice," but was changed to "Analysis" to better reflect the service offered by Holly.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.


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