Trading Education

What is the most predictive quantitative trading signal available right now?

Trade ideas by AI algos

What is a trading signal?

Before we speak about the most predictive quantitative trading signals available right now, let’s make sure that we understand what a trading signal is and how they are used. Trading signals are triggers that tell us to buy or sell based on different analyses.

The most common input for trading signals is technical analysis, but fundamental analysis and many other disciplines are also used. The main objective for a trade signal is to give investors automated, unemotional, triggers to buy or sell an asset. However, besides just buy and sell signals, trading signals can also identify where investors should buy more or lighten up on a specific sector or asset. Overall, trading signals are very helpful for investors to determine when to buy and sell based on different quantitative analyses. 

Why should we avoid trying to predict the future markets?

Using analysis, we can easily determine which trading signals were the most accurate for past markets. However, this does not mean that we can use these signals to predict future markets. We can do our best to create a logical trading plan using analysis from past market data, though, this is not necessarily predictive of the future. No one knows what the future holds, so it is best to have a consistent trading plan and solid risk management in place to account for any drastic market changes. Perfection in trading does not exist, but we can still optimize our profitability and gains by researching and implementing a trading plan. 

What is a signal that we can use?

While studies cannot be 100% accurate, we can get an idea of future market trends by following the news and staying up to date with current events. One signal that we can draw attention to is the abnormal market beater trends. Oftentimes, these can be explained by select investors gaining important knowledge about a company. Later, as the public learns this information the bull trend continues.

What does this mean? We want to follow these abnormal trends to be able to identify positions where investors have knowledge about a company that is not yet public. If we can stay ahead of the public, we can somewhat forecast how the markets will react. Again, using this idea as a signal is not 100% profitable, but it is something to keep in mind if you are interested. 

Summary

While this may not be the answer that you were looking for, it is important to understand the uncertainty of the future, and that we do not need to have perfection in our trading strategies. We can develop trading plans from performing different technical or fundamental analysis, which will contain unemotional trading signals for when to buy and sell. Remember, the markets are continuously changing, so what works now will likely need to be adjusted in the future. Stay optimistic and do not feel discouraged when your strategy is not 100% profitable.

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