Fred says sell USD/NOK here at the open

FX PAIRS

I have added FX . Compared to equities, generating fx triggers is far more simplistic for Fred .

Fred has suggested a NZD/JPY short at 66.70ish (now)

Pairs Trading

Sorry for my absence but sometimes real life does get in the way ...!

Fred has had a rather poor start opening his career with some awful long picks at what may possibly be a long term market top. The shorts although a little in the green have not performed enough to make up for the longs and hence Fred is down to date.

It is still very early days yet...I am excited about this. Generating trading signals from out of the www fascinates me and is a project I will continue with regardless of any short term failures and lack of interest from anyone else I talk to about this endeavour (eyes glaze over at the mere mention of the word 'stock'!)

I have made a few adjustments to Fred in order to refine the quality of the signal. From now on all trades will be paired (same sector, long short). Unlike most pairs trading however I will not be looking for price to converge to the mean but rather will be trying to predict their divergence. A rather crude neural network has been 'bolted' on to Fred. The idea behind this being Fred will be able to select what he deems to be high probability trades...

So for every trade Fred selects ,an opposite trade in the same sector also needs to be selected. If Fred can not find a pair then no trade will be taken. Also note that a component of the DJI30 will on most occasions make up one half of the pair.I have done this in order to keep the vast memory requirements down to a couple of  TB's

Right ,with that in mind, here are the pairs to be opened on Monday 27/6.

PSMT long / WMT short
BMY long / PFE short
PTR long / XOM short
HANS long / KO short
BEAV long / BA short


Regards,

Cruncher

Monday 6/6 Open

The following should be sold at the open on Monday 6/6

EBAY

LRCX

GRMN

PCLN

VRSN

The following should be bought at the open

NFLX

Still holding all of last weeks trades

Regards,

Cruncher

Week 1

Well that was a less than mind blowing first week for Fred! After a nice pop on Tuesday it’s been all downhill, outperforming the benchmarks to the down side...

I was hoping some close signals would get generated  on Thursday and today but Fred says hold these longs.

This is how the end of the first week looks;

AKAM / -3.18%

CA/ -2.08%

CELG/ -2.08%

CMCSA/ -3%

JPM/ -3.12%

SNDK/ -4.93%

DD/ -4.55%

I would like to say that Fred at least called all 7 of these up on Tuesday, but fact of the matter is if dog shit had a price, even that would have gone up on Tuesday!

Anyway Sunday will bring a fresh batch of signals. I will post them then.

Hope you all had a good week.

Regards,

Cruncher

Nice Start!!

Well all 7 picks are are up. SNDK and CA have done especially well today. Holding all positions.

In a Nutshell

web crawler-> selected websites-> data process-> load algorithm-> print chart-> enter/exit trade.

31/5 Open

All the below should be bought on the 31/05 at the open:

AKAM

CA

CELG

CMCSA

JPM

SNDK

DD

So on his debut Fred decides to generate 7 longs for the same week...I really can’t say I agree as going long equities at this point really goes against my grain. 

Before We Start...

Before I post the signals generated by ‘FRED’ I want to go over a few points about the markets that I will be focusing on. Theoretically any and every market should apply. However with limited time resources to cover every market I will be focused on the Dow and Nasdaq 100 constituents.

Equity signals are generated on a Sunday and for the purposes of this experiment will be hypothetically entered in to at the Monday Open. The position will be closed at the close of the day on which the closing signal is generated.

The time horizons for the trades are unknown   and may last from 1 day to many weeks.

I should point out that I am not a trader and no discretion shall be used on my part. All entries and exits shall be picked by ‘FRED’.

Regards,

Cruncher

The Critical Masses

THE CRITICAL MASSES

(Using Web 2.0 to Predict Financial Markets)

I was recently reading about Derwent Capital. When I say reading I mean mostly skimming headlines and ‘’Key Wording’’articles.This constitutes reading in our brave new world.

But back to Derwent or the ‘’Twitter Hedge Fund’’ as they have become known as. By taking a 10% sample of daily tweets Derwent attempt to ascertain the mood and sentiment of the population. They believe that by knowing if the cats going to get kicked when you get home may help them predict which way the market is going to go in the next few days. Brilliant!

After a quick internet search it turns out that quite a bit of research has gone into market psychology, opinion mining, efficient markets and irrational humans. I tried reading a few of the papers but was bored instantly. I expect they discovered that it does not work. That, or they are all billionaires now...But this Derwent thing got me thinking and even kept me up at night for about 5 minutes .

My big idea is this: What if you could build a chart that uses sentiment instead of price? Yes I know these charts exist already in the form of business and consumer confidence surveys etc... BUT what if you could search for key words across Twitter and Facebook, use Google search volumes and Google Trends and by using different weightings on your data input the values into a model that would give sentiment in a SPECIFIC security a value? Would my ‘sentiment chart’ mirror the price chart? You would think it should. Good sentiment=market up, bad sentiment=market down.

So after a few minutes of intense work and concentration I developed my trading algorithm which I have rather imaginatively called ‘Fred'.

What I have found is that the charts I create for a particular security look nothing like their price chart. For the most part they flat line with spikes in either direction. More importantly they spike BEFORE a price move making them a useful leading indicator. Spike up is a buy signal, spike down is a sell signal.

Back testing is too difficult .I have been forward testing and the results have been surprisingly good. Having the attention span a little less than a kid suffering from Ritalin withdrawal symptoms, I have not been diligent in recording these results. So let this blog be my Official Record. I shall endeavour to post all the trades Fred triggers. Obviously I’m not going to put real money into this because I’m not a complete crackpot! But do join me in this experiment into market psychology and the wisdom of crowds.

Regards to all, 

Cruncher

(If you are from the Nobel Prize bunch pm me)