Stock Picking Strategies and Trading Methods with I Know First Algorithm

I Know First Research Team LogoThis article was written by the I Know First Research Team.


  • Introduction to the I Know First predictive algorithm.
  • How to read and use the algorithmic forecast signals.
  • Examples of stock picking strategies and trading methods.

The I Know First algorithm is an advanced tool for identifying opportunities in any given market situation. Not only does it detect opportunities for buying stocks (long positions) but also for selling them (short positions). Given the predictive power of the algorithm’s forecast, does this mean that you should buy any stock that it recommends? Of course not! To figure out what trades to make, we need to employ stock picking strategies and trading methods.

Introduction to the Algorithm

The I Know First predictive stock forecast algorithm is based on artificial intelligence and machine learning methods. This system includes elements of artificial neural networks and genetic algorithms. Using historical asset data, the algorithm creates, modifies, and deletes relationships between financial assets as it seems fit, outputting a final forecast for its users. With every error and success, the algorithm employs a bootstrapping method of continuous self-learning to improve its success rate with every subsequent prediction.

Given that the algorithm is completely empirical, it avoids the pitfalls associated with human-error judgment. Humans only account for the initial building of the mathematical framework and starting inputs. Otherwise, the algorithm has free reign to make judgment calls.

How to Read and Use Forecast

Each forecast provides two indicators for an asset, the predictability and the signal. Predictability, also known as the security or confidence level, represents the feasibility of the forecast. Ranging from -1 to 1, the number calculates the correlation between past predictions and the actual asset movement, with -1 showing the asset moved opposite to the prediction, 0 showing no correlation between asset movement and prediction, and 1 showing a perfect correlation between asset movement and prediction. The closer to 1 the indicator is, the more probable the prediction is to occur.

Assets with a high predictability should be the top focus of investors, since they have the highest likelihood of being correct. A forecast, regardless of how strong the signal, is only as good as the probability that it will actually happen.

The signal indicator represents the predicted movement or direction of the asset. It is not a percentage or specific target price. Instead, it indicates how much the current price deviates from what the algorithm consider a “fair” price. The value itself is a relative number that indicates the magnitude of the movement.

After sorting by predictability, investors should focus on string signals to maximize the potential of asset price movements.

Stock Picking Strategies

Forecast Consistency

When subscribing for a specific package, you receive a forecast for six time frames. These time frames are for three days, one week, two weeks, one month, three months, and one year.

The more time frames a specific asset shows up, the more likely that the forecast for that asset is accurate. Even if the desired hold period is short-term, the asset’s presence in long-term time frames strengthens the legitimacy of the short-term prediction.

Let’s take BVXV in the above forecast as an example. We want to buy BVXV for a three day long hold. Looking at every other time frame, we can see that BVXV has a strong bullish indicator in each one. Despite only wanting a short-term hold, the presence of the same prediction for BVXV in long-term forecasts validates our short-term speculation. In this case, BVXV would be a strong buy.

The same logic applies for consistency across packages. If an asset’s forecast is visible across several different packages, the probability of an accurate forecast increases with each subsequent occurrence.

General Market Trend

Before choosing any assets, investors should check the general trend of the market. This includes futures contracts on the specific asset and the forecast for the market index itself. In “Top Pick” packages and certain country oriented packages like the Israeli Stock package, a stock index forecast is also given.

In the example forecast above, the S&P 500 index forecast is included alongside the stock predictions. With predictability of 0.37 and a signal of 0.24, the S&P 500 has a slightly bullish forecast. This suggests that the market as a whole is predicted to be bullish for the time frame of the forecast.

Another way to assess the general trend of the market is to see direction that most assets in the forecast are leaning towards. In each forecast, the cells which store asset predictions are colored either green for bullish or red for bearish, with darker colors signifying stronger signals.

Given the short-term forecast above, we can see that the majority of cells are colored red for all time frames. This suggests a bearish market, since most assets are predicted to decline in value over the specific time period. Giving the impression of a bearish market, this forecast gives additional perspective on a future decision to either enter a long or short position.

Patience and Perspective in Stock Picking Strategies

The algorithm sometimes locates stocks that jumped in price either at the start or end of the trading day. Furthermore, the forecast is based off the closing prices of assets of the previous trading day. Due to these facts, it is advised that investors wait until the next forecast before acting on a forecast they wish to base a trade on. If the next forecast verifies initial speculation then the investor should commence their trade. This strategy also works for short recommendations.

Knowing When to Get Out in Stock Picking Strategies

Subscribers that use volatile packages like the Aggressive Stocks package are advised to take profit frequently. Packages that monitor volatile or aggressive stocks often fluctuate in price even after the initial forecast. For this reason, traders should exercise taking profit once a forecast time frame has passed in order to avoid losing returns over an opposite direction price correction.

Investors should note also that the algorithm does not take news or fundamental reports into account. As such, dates for important releases like reports, news, quarterly statements, or declarations of bankruptcy, should be monitored. Since price might become volatile after the release of one of these sources, investors should avoid entering or staying in a position close to one of these reporting dates.

Stock picking strategies are only as good as the trading methods which use them. To maximize their effect, we must look at the various techniques that exist when trading the asset markets.

Techniques for Trading

Passive Strategy

This strategy dictates that an investor buy an asset from the top of the forecast and hold it for the entire time frame of the forecast. Especially suitable for long-term investors, passive investing has the investor hold the asset from purchase date to the end of forecast time period, without any change in assets.

Investors sometimes use periodic reviews alongside this method. A weekly review for example, can check if most of the assets held are still positive in the forecast for a one-year time frame. In this case, if some exceptional event throws off the probability of the initial bullish one-year forecast, the investor can exit the trade before taking on too much risk.

Conservative Strategy

The conservative strategy is good for investors who enjoy the lowest possible risk. It advises them to only select assets with the highest probability indicator. The higher the predictability, the more likely the asset’s price will move in that direction.

Trend Signal Strategy

The trend signal strategy is for investors who seek higher returns regardless of risk. It advises them to only select assets with the highest trend signal. The higher the trend signal, the higher the price movement according to the algorithm.

Integrated Strategy

The integrated strategy is for investors who enjoy a balanced approach to return and risk. It advises them to use both predictability and trend signals to filter out the top assets. Investors should select a number of assets with a high predictability first, in order to select those which are more likely to occur. Out of the ones picked, the investor should filter to the ones with the highest trend signal. The end ‘portfolio’ will be a selection of assets that have high probability and relatively high price movement signals. This strategy gives a balanced and high potential for success.

First we select the top 5 predictability assets (CC, DAN, HUN, SAN, MRVL).
Then we filter to the top 3 of those with high trend signals (CC, DAN, HUN).

Short-Term Strategy

The short-term strategy is for investors who like to day-trade or trade in short time frames. It advises them to select assets at the top or end of the forecast table and hold them as long as they are still in that recommended part of the forecast table. This strategy works well with packages like Aggressive Stocks, Small Stocks, or Options.

Here at I Know First, our algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we have been providing daily predictions for more than 10,500 assets, including forex forecastgold price forecast, world indices, and individual stocks. Additionally, we provide special coverage for the latest Apple stock news. Our forecasts generated by our algorithmic trading tool are used by institutional clients, as well as private investors and traders who use stock picking strategies with the algorithm to identify the top stocks to buy in the market and exercise the trade faster than the other market players.

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Please note-for trading decisions use the most recent forecast.