Cherry.es@XEROX.ARPA (07/18/84)
Jan, The input of the wide areas of data (fundamental and technicial plus current new items) into a AI enviromnent for Stock/Commodity trading may be a little too much to start with. You can however, input only technicial data into the database and use a wide variety of technicial indicators to evaluate the trend for short term, long term, etc. This will also aid in making market projections using technicial indicators such as on-balance-volume ior OBV (Granville), Parabolic-Time-Price Curves (Wilder), etc. Due to the large number of different technicial indicators for the various markets (OBV is fine for Gold but not for Silver), AI could be very well suited for this kind of application. This is primarily due to hard data for technicial analysis (Open, Hi, Lo, Close, Settle, Volume, Open Interest, Interest rates, etc.) This information is also available from many dial-up data bases for automatic entry for the particular market. By utilizing an algorithm which would first use all methods programmed for each analysis and then take the results and utilize them for further analysis, a reasonably accurate projection may be possible based on only technicial indicators. Fundamental information is harder to deal with. Analysis based on fundamental knowledge requires that some effect either positive or negative be applied to a repeatable phenomenia. Since news items often do not repeat, the AI software would first have to separate the valid fundamental indicators from the other fundamental noise. Over a period of time, certain phenomenia may be evaluated as being pertinent to the trend of a given market. At this point, any tool could be written to search out this "signal" from the "noise". In order for any tool to be effective, the tool would be required to have a high signal to noise ratio. The tool must be able to ascertain, for example, if a member of the FRB says he thinks the discount rate will decline,what will be the immediate and future impoact on the price of soybeans? Since historically statments of this type have caused both higher and lower prices due to other fundamental variables, a fundamental formula would have to be derived which works with total unknown abstract concepts. The Technicial Analysis Group (TAG) has a very complete package of technicial software however, due to the immediacy of the markets, and the small systems (Apple, IBM-PC) which the programs run on, it is not feasible to do a complete analysis on every market on a daily basis. A multi-tasking AI environment would be able to take the results of each of these TAG tools and then work with those results. I would recommend that any attempt to utilize AI for the purpose of market analysis should start with only technicial analysis and that the AI environment gradually be fed only certain types of Fundamental data. Bob