Introduction
Artificial intelligence can be a tool to understand and comparing an uncomplete world. A tree can be drawn in infinite ways and likewise a pattern on the market can take a lot of different variable into account. Finding structure in imperfection is the main objective of artificial intelligence.
ASA Trading Software and artificial intelligence
To find structure and being able to compare patterns, crisscrossing in an imperfect world is a very central part of the next generation of trading software. With good reason, a lot of people will claim that well known robots or EAs (Expert Advisor) can not compare to humans. However, that is only because EAs are rule based system with no flexibility.
Let us take an example in a descending triangle, which is a pattern being traded upon by a lot of traders. In the figure below you can see an example of the pattern.
The assumption is that activity and volume will fall at some point in which the market will break down toward the horizontal resistance range. The resistance range is an area where the price has a hard time breaking through, which can be seen when the price reaches a certain point, it will be returned.
There are no rules in regards to how long a period of time, a descending triangle can be built up over. Furthermore, there are no rules for how many times it has to reach the horizontal line. There are no rules for how big fluctuations will be or how much they will have to fall towards in order to break through. However, that is a pattern which a human can learn to see relatively fast, but it is not as easy to identify with the help of traditional code.
Now, let make the example a little more complex. The third time its stops upwards it will break through the diagonal line and generate another known pattern known as a hammer. Here, a trader will say there is an obvious price deviation, and thereby get another confirmation that the market will go down. How a hammer looks can vary a lot. The more patterns involved, the greater advantage humans get compared to traditional EAs. Because EAs, as previously mentioned, can not handle too complex code because the system will break down.
Artificial intelligence is much different. As a starting point, it knows nothing. It can be compared to a child, or a completely new trader, who has never seen a descending triangle or a hammer. We will e.g. go through hundreds of different variants of descending triangles, and hundreds of different variants of what looks descending triangles but actually is not. Furthermore, we will ask our software to go through historic charts in order to find all the available descending triangles. By itself, it can go through 60.000 pictures a day. That means in a single currency pair such as e.g. EUR compared to USD, you will be able to check multiple descending triangles from the previous 15 years. So not enough with it quickly being able to identify descending triangles from the last 15 years extremely fast, it will also get an exact picture of the patterns historic success rate.
The next step is training it to know all other known and traded patterns. Any pattern is trained separately. So if it knows e.g. 10 patterns, it will be able to identify those patterns from a picture instantaneous. Furthermore, it will be able to go through and find success rate across all the different patterns. There will very quickly arise infinite possibilities for combinations, which required heavy processing power.
Luckily, this processing power is available on cloud based systems from the big IT mastodons such as IBM, Microsoft, Google, Amazon and such.
So every time a pattern is added, the required processing power increases exponentially. Therefore ASA Trading Software will quickly learn to perform better than humans. Because no human can work with the exponential curves while simultaneously reflecting on it historically. The man with years of experience can be surpassed in a matter of minutes on a supercomputer. E.g. Jeopardy, Chess, Quick-Draw, Google-Search and Poker has all been beat by artificial intelligence.
ASA Trading Software is constantly being fed more and more patterns whereafter it starts teaching itself meanwhile building a database. The database uses the same access as search engines, so the results are accessible fast and with a relatively low use of computing power. The lower the use of computing power, the closer to real time you will get.
Search engine technology actually uses artificial intelligence. Therefore, ASA Trading Software actually contains a search engine. So we are using the artificial intelligence to build a structured search engine in a imperfect world, that can deliver probability calculations in real time.
It costs ressources, knowhow, time and money. This is why we sell our trading software, so all expenses can be divided amongst its users.
