Ladies and gentlemen, meet the new king of Wall Street…
Yes, the dim-witted pigeon has the potential to be the prince of profits.
And I’m a little offended at the reason why.
Artificial intelligence is sweeping the globe. We’re obsessed with the notion that AI can do so many things faster and as good – if not better – than we can.
That includes investing. I’ve had great success with AI-like concepts going back 15 years now. So yeah, I’m a believer.
But according to a study from Ohio State University, if AI can do things better than we can, so can… a pigeon.
At least theoretically.
The study found that AI algorithms use the same problem-solving approach as this “dim-witted” bird. It’s called “associative learning” – a fancy term for “trial and error.”
We’re all familiar with trial and error, but we humans actually seek patterns or rules first to solve our problems. It’s called apophenia – the same phenomenon that led to mass acceptance of a face on Mars. It sure looks like a face from a long way away, but it’s actually a huge rock formation.
Source: NASA
The trouble is, we are emotional beings, and these emotions often lead us to assign patterns where there are none. To see what we want to see… or hope to see.
This is a serious and often costly flaw when it comes to buying and selling stocks. Our pattern-recognition may see things that aren’t actually there. But if we build a trial-and-error approach that sees only what is truly there – based on cold, emotionless data – we are much more likely to make money.
I built my entire Quantum Edge system to minimize emotional decisions when it comes to investing. And I did it because I realized earlier on how wrong my own pattern recognition was when my emotions got involved.
So I got to work leveraging technology to build an analytical system to do most of it for me. Through trial and error, I kept what worked and tossed out the errors. And that system has beaten the broad market by 600% over the long-term.
It’s easy to get trapped into making decisions based on flawed logic or faulty interpretation of data – thinking we see a face on Mars when it’s really rocks. After all, the stock market has limitless potential patterns and rules.
I knew I had to find a better way of investing and one that eliminates fear of missing out, fear of losing, the greed of chasing a hot stock, gut feelings, and anything else that might impact my pattern recognition.
In the end, the best way to invest came down to cold, hard data – the right data analyzed the right way.
When we study the past, analyze it without emotion, and identify through trial and error the factors that best predict the future, it’s much more like associative learning.
That’s the logic of AI… and pigeons apparently.
I think the pigeons would be happy with these results. And I think you will be, too.
The Beating Heart
My Quantum Edge system uses massive data collection, supercomputer number crunching, A.I., and “learning algorithms” – not human emotion – to pick the absolute best-of-the-best companies to build your wealth.
I’ve gone through the trial-and-error process, so all that’s left is using the system to make money.
It utilizes all that number crunching and algorithms I introduced to analyze 6,000 stocks every single day. That’s a lot of data.
And to help make sense of all that data, it gets boiled down to the “beating heart” of the system – the Quantum Score.
With this score, we’re able to put a single ranking to those roughly 6,000 stocks. And that score lets me know which ones are opportunities, dangers, or just not going anywhere.
The Quantum Score provides a key rating that accurately depicts a stock’s potential for big gains. Through all the years of use and back testing, it identifies winners roughly 70% of the time. That’s not a perfect score, but we all know a perfect score is completely unrealistic.
If you make money in seven out of every 10 stocks you invest in, you’re going to be more successful than almost every other investor on the planet.
Win more than you lose, and keep your winners bigger than your losses. Do that, and you can’t help but grow your wealth.
The Most Predictive Factors
If the Quantum Score is my system’s beating heart, then everything that goes into that score is the brains.
More than a million data points zoom through the system every day, but there are three main categories that are the primary building blocks of the Quantum Score.
Fundamentals tell us about the company itself and how strong it is.There are dozens of metrics to test a company’s financial health, but through analysis and back testing, I created a shorter list that help us spotlight the healthiest companies to buy.
Things like sales and earnings growth, profit margins (how much money a company keeps), debt levels, valuation, and more.
These fundamental measurements help us eliminate about 96.5% of those 6,000 stocks my system analyzes every day.
Technicals give us critical insights into a stock’s price movements and trading characteristics. Analyzing those technicals can help us generate bigger returns with less risk than just gauging the fundamentals along.
The Quantum Edge system analyzes 17 different factors for each stock every day. I can’t tell you what they are, but I can say that the common denominators are price movement and volume.
They narrow the process further to superior stocks (strong fundamentals) whose prices are rising on increasing volume. This tells us that investors are eagerly buying shares, and they’re “paying up” to do so.
Big Money is what you might call the “secret sauce” in our recipe for profits. Many investors also analyze fundamentals and technicals, though not in the same way I bring them all together. But nearly every other investor does not measure what institutions and hedge funds are doing with every stock – and the market as a whole, for that matter.
That’s because they don’t know how. But through my years running a trading desk for a major Wall Street firm, I learned the tricks of the trade – how Big Money deploys its massive assets while trying to keep it quiet.
I also learned the footprints of Big Money buying and selling, and I incorporated those footprints into my system.
On any given day, the institutions and hedge funds that manage trillions of dollars account for 70% to 90% of all trading volume in stocks. This is money that moves stocks, and it’s highly predictive of future prices.
As stocks rally – which I expect will continue well into the first quarter of next year – I encourage you to invest in stocks with superior fundamentals and strong technicals, and that Big Money loves.
These are the rare stocks with the highest probability of making you money. May as well own the best of the best.
We find these winners by relying on proven data that helps us minimize our emotions and avoid assigning false patterns.
This is the one-and-only time I am perfectly happy to be called a dim-witted pigeon.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
