Wall Street Using AI To Trade

I heard this first on Bloomberg Radio and then found the article. It’s about the ever increasing use of data mining and AI in the financial markets.

In his cubicle overlooking the trading floor, Kearns, 44, consults with Lehman Brothers traders as Ph.D.s tap away at secret software. The programs they’re writing are designed to sift through billions of trades and spot subtle patterns in world markets.

Kearns, a computer scientist who has a doctorate from Harvard University, says the code is part of a dream he’s been chasing for more than two decades: to imbue computers with artificial intelligence, or AI. That’s precisely the strength of an AI model, the ability to find and learn subtle patterns and help you find an emerging (or ending) trend.

Financial service companies have already begun to deploy basic machine-learning programs, Kearns says. Such programs typically work in reverse to solve problems and learn from mistakes.

Like every move a player makes in a game of chess, every trade changes the potential outcome, Kearns says. Machine-learning algorithms are designed to examine possible scenarios at every point along the way, from beginning to middle to end, and figure out the best choice at each moment. [By Jason Kelly]

I firmly believe that data mining, AI, and machine learning trading will accelerate over the years. Who knows, maybe my little model will move markets one day! :)

Learn RapidMiner and Data Science

I used RapidMiner to do a lot of this time series analysis. If you want to learn more on how to use RapidMiner, I recommend the following books. I know the authors and they do a great job of breaking down how to use RapidMiner and apply it with the concepts of Data Science for your projects.

Learn Stock Trading, Investing, and Risk Management

There are a handful of financial and trading books that have made a HUGE impact on my investments. If you want to trade and learn about money and risk management then I suggest you get the Van Tharp book. If you want just focus on long term investing, get the Random Walk Down Wall Street book.

Hell, get them both. I owe my wealth to what I learned in those books.