Leveraging Artificial Intelligence For Swing Trading Outperformance
Much has been written and celebrated in the press about the combination of Man + Machine to outperform the markets. And no software application has done it better than HOLLY, the artificially intelligent virtual trading assistant designed by the team at Trade Ideas, LLC and launched for public access in January 2016.
HOLLY, an application within TI Pro AI, is the only model providing actionable AI-derived trading ideas in a SAAS model, available to both retail and professional subscribers, at a fraction of the cost of traditional research models.
The numbers speak for themselves. Here is a snapshot of alpha captured so far in 2018, measured against the S&P 500 ETF ($SPY):
The trading model employed by the AI as currently constructed goes completely to cash by the close (if not before) of each trading day. No positions are carried over night. Commonly referred to as “day trading,” this process of trading can have lucrative risk versus reward characteristics — at the expense of being time-consuming.
In a nutshell, trade suggestions along with profit target and stop loss levels are served to subscribers in real time. These trades are derived from one of nearly 50 algorithms designed by the team of trading experts at Trade Ideas. Only a handful of available algorithms are set to be active on any given trading day, depending on market conditions as read by the AI. Each night the HOLLY AI engine runs backtests of all 50 strategies, does a deep dive into each strategy’s performance metrics, and decides on tweaks to each algorithm so each strategy can perform best in the current market environment. For brief overviews of each HOLLY strategy, view Trade Ideas Strategy Descriptions page.
On any given trading day, HOLLY might serve up anywhere from 5 trades to as many as 50 trades or more, depending on market conditions. And while these trades offer statistically significant trading edges for active intraday traders, perhaps a more powerful application of the HOLLY trade ideas might be in service to Traders with longer time frames in which to operate.
How Swing Traders Exploit HOLLY AI signals.
Each trading day, the trades entered by HOLLY become an expertly curated watchlist of trades with existing catalysts present that offer the potential to catapult a stock over the course of several days or weeks in the direction of today’s trade signal. These catalysts can range from anything like a new high breakout, to a moving average crossover, to an explosion of trading volume, to a volatility trigger. And these catalysts don’t simply expire at 4pm ET when the stock market closes. Closing trades by the end of the trading day is an artificial constraint we’ve placed on the system in service of intraday traders. Swing traders with longer time frames do not suffer these limitations.
Each night after the market closes, a savvy swing trader will review the daily charts of HOLLY’s new trades today, identifying the charts that look promising. She’ll then build a smart risk management plan (appropriate position size and stop loss) for each stock, and then enter her trades to execute at the open of the next trading day.
Following a simple routine like this can put you in position to leverage the power of Trade Ideas’ AI to identify statistically significant edges and gain potentially large profits. Here is an example. Back in September of 2017, Holly issued a buy on Marriot International $MAR at $109.39. The stock then went on to climb north of $148 in just five months with very little pullbacks. A dream hold for patient swing traders.
And swing trades generated by AI are not limited only to the long (or bullish) side of the market. In the summer of 2018, swing traders were offered a treat in iQIYI $IQ. In May, HOLLY issued a buy at $20.97. The stock then went on to gain 119% in just four weeks with very little in the way of pullbacks. And as if that weren’t enough, HOLLY also issued a short sale entry on June 19th at $44.63 and the stock then collapsed nearly 31% in just two weeks! A swing trader’s paradise:
Of course, not all trades work out exactly as above, nor are all trades winners. But nobody can guarantee you that. There are no guarantees in the stock market.
Here’s an example of a stock that had two great signals sandwiching a busted trade. In April of 2018, HOLLY issued a buy in Curo Group Holdings $CURO at $18.51. The stock then went on to rip 32% higher in just three weeks. Then in late June, HOLLY issued a buy $26.85 where the stock promptly dropped 16% in two days. Ouch. But then at the end of July, HOLLY issued another buy $25.36 and as of the time of this writing, the stock is currently up 20% and climbing since this most recent signal:
As with any kind of trading, risk management and position sizing are of paramount consideration when entering trades. One has to know where they plan to get out, and how much they are willing to risk if they are wrong.
Leveraging the power of the Trade Ideas HOLLY engine, Trade Ideas AI offers suggested entries based on statistically significant criteria that is backtested, vetted, and re-optimized before each trading day. Traders operate in an unpredictable world. The best we can hope for is to stack favorable edges and let them compound over time. We feel using Trade Ideas AI to generate signal entry offers a meaningful boost to long term performance results.