Commodities & Gold Trading Using Algorithms: Algorithmic Forecast Performance Analysis from July 18th – October 18th

Stock and commodities analysts and investors are quickly being substituted by powerful computerized algorithms. Unlike traditional algorithms, todays advancements utilize advanced self-learning algorithms to analyze, model and predict markets. Unlike analysts who look mainly at the specific company’s performance they are analyzing, the algorithm supervises the movement of money in all markets. This allows it to forecast not only stocks, but also ETF’s, world indices, gold, currencies, interest rates, and commodities. It holds a significant advantage over analysts in many ways, such as:

• Algorithms can continuously look at the money movement between markets, they require no sleep and no rest.
• Algorithms never forget any information they have gathered, and past lessons they have learned.
• Algorithms are never biased, corrupt, or serve hidden interest.

One of the fastest growing among these is the I Know First Algorithm. It is unique in that it predicts the flow of money in almost 2,000 markets from 3-days to a year.  It is managed by I Know First holding, which is attempting to break the stigma of HFT (high frequency trading) to show that an accurate long term forecast can yield similar earnings with much lower risks than HFT. These long term predictions are also much more suitable for long term investors such as pension funds, insurance companies, and banks. Clients receive an output table with three indicators: the ticker, the signal, and the predictability.

IKF analysts ask the Algorithm for a particular commodity, or set of commodities, with a particular time period.  A client looking to invest in the Gold for the one month July 18^th – October 18^th requested a breakdown of the systems forecast. The algorithms then generates a table, and sorts the tickers by signal strength (from positive to negative) for that particular time period. When assets do not reach the necessary predictability threshold (the algorithm is not confident enough in its own results) they get filtered out of the table.  Below is the actual forecast table.

The July 18^th 3 months forecast recommends the client the following commodities as investment options (short): Prediction table for the commodities (right) Explanation of the commodities (Left)

Commodities Summary:

Physical Gold (XAU)

XAU refers to the trading/exchange value for pure gold in international trading markets. For example “XAU/USD” means Price of 1 Troy Ounce Gold in US Dollars. (One Troy Ounce is equivalent to 0.0311034768 kg or 31.1034768 g)

Gold ETF (GLD)

GLD is a trust which  reflect the price performance of gold bullion by holding gold bars and issuing shares backed by their holdings of physical metal. GLD debuted on Nov. 12, 2004, it has risen more than 280% to over $170 a share.The gold bars are held in HSBC’s vault in London

Physical Silver (XAG)

XAG refers to the trading/exchange value for pure silver in international trading markets. For example “XAG/USD” means Price of 1 Troy Ounce Silver in US Dollars.

Actual Forecast from I Know First performance review:

What has the algorithm forecast right:

• An investor who invested all his money in the forecasts strongest signal (short XAG) would have made a return of 18.28% in 3 months.
• An investor who spread his money evenly between the top 3 signals (short position) would have made a return of 10.34% in 3 months.

Conclusion

The impressive results are only a small fraction of what the IKF Algorithm can do. Technology has been taking over every problem humans had over the last century. It was only the high unpredictability of financial markets that prevented computers from replacing human traders and analysts; however, with the advancement of neurological and DNA programming it is now a new era for financial trading. Although IKF is the most advanced and accurate algorithm yet, it is interesting to see when large trading firms and banks enter the market of long term algorithmic forecasting, and if they do so, if it wont be too late (Neurological and DNA algorithms require many years to evolve themselves into an accurate consistent trading algorithm).

I Know First Research is the analytic branch of I Know First, a financial start up company that specializes in quantitatively predicting the stock market. This article was written by Daniel Hai one of our interns. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article.