Automated Stock Picking - Using Artificial Intelligence For Stock Selection

For a lot of years, Institutional Investors such as insurance companies banks, and money managers have used Artificial Intelligence for picking stocks. These Automated Stock Picks are accomplished using Artificial Neural Networks.

Artificial neural networks are made up of interconnecting artificial neurons which simulate the neural connections in our brains, which in turn take the data accessible in the trading markets and try to instantaneously predict the future movements of these trading markets. These artificial neural networks are used to try to solve artificial intelligence problems, such as individual stock or general market projections, without necessarily depending on the real biological systems, our brains, which are highly complex and include some features that may seem unnecessary and in reality impede the decisions to be made.


This technology has created extreme volatility in the financial markets. The resulting volatility has been a detriment to the markets and especially to individual investors, since they've been unable to make the best of the fluctuations created by these institutional trades. Historically, individual investors have made their money in the markets by buying low and holding their investment for the long term to make the best of the fundamentals of an individual company, such as continued improvement in earnings and the tax benefits of holding an investment for the long term (as defined by the US Tax Code).

The artificial intelligence software used in determining the probable movement in the markets and individual stocks doesn't usually take corporate earnings, growth rates, dividends or other fundamental factors into account when picking investments. The software works primarily on technical parameters and only looks for short term trades that show immediate results. These immediate results are demanded by institutions so they are able to be shown to their investors without the regular loses that may have been shown in historical methods of investing. Immediate gratification is demanded by these institutions.

For investors that are concerned in trying to compete with the institutions, there are now software programs accessible to the individual investor which helps to level the playing field. These software programs follow the trends and patterns associated with a stock or market and use artificial intelligence to project the expected immediate movement in direction for each stock in its universe. These patterns and trends are defined by various indicators such as trendlines, stochastics, candlesticks, moving averages, trading bands, convergences, on-balance volume, relative strength, and a lot of other specialized techniques to help determine the time to buy and sell a particular investment.

Automated stock selection software has recently fallen in price and creates an excellent entry point for using Artificial Intelligence to help compete for short term profits with the Institutional Investors.