The I Know First utilizes an advanced self-learning algorithm based on artificial intelligence, machine learning and incorporates elements of artificial neural networks as well as genetic algorithms in order to model and predict the flow of money between markets from 3 days to a year. It separates the predictable part from stochastic (random) noise and then creates a model that projects the future trajectory of the given market in the multi-dimensional space of other markets. The algorithm outputs the predicted trend as a number, which in turn, is used by traders to identify when to enter and exit the market. The market predictions system tracks and predicts over 1,400 different assets including Apple (AAPL) shares.
Here is a sample color-coded Apple (AAPL) forecast
- The Signal: This is the number flush right in the middle of the box and the predicted direction (not a specific number or target price) for that asset.
- The Predictability: This is the historical correlation between the prediction and the actual market movements.
In other words, the signal represents the forecasted strength of the prediction, while the predictability represents the level of confidence.
Predictability (P) is obtained by calculating the correlation between the current prediction and the actual asset movement for each discrete time period. The algorithm then averages the results of all the prediction points, while giving more weight to recent performance. As the machine keeps learning, the values of P generally increase.
Predictability ranges from negative 1 to positive 1; this metric is an adaptation of the Pearson correlation coefficient.
P=-1 means the actual market moved in the opposite direction than the algorithm predicted.
P=0 means that there is no correlation between the prediction and the actual market movement.
P=1 means that there is perfect correlation between the actual market movement and its predicted movement.
Any value of P above zero indicates a positive predictability, the higher the better.
For stocks we monitor and predict the Predictability P ranges generally between P=0.2 and P=0.7. Ticker symbols for other assets have been removed; however, you can still see their signal and predictability. It is recommended that investors consider both the signal strength and predictability, as a highly predictable stock that barely moves and an unpredictable stock that is projected to move drastically both make unattractive investments.
Note that longer-term forecasts (1-month and 3-month) tend to have higher predictabilities as the algorithm can more easily spot long-term trends. The forecast is color-coded, where green indicates a bullish signal and red indicates a bearish signal. Deeper greens signify that the algorithm is very bullish and vice-versa for deeper reds. These algorithmic forecasts are intended to be utilized in conjunction with traditional forms of analysis in order to reduce risk and optimize returns as one tool in your analysis toolbox.