data mining stocks
Dr. Keith Wade

Dr. Keith Wade

Utilizing Data Mining to Find High Probability Trades for Stocks

For a lot of people, trading stocks is a game of chance, where the erratic and unpredictable market has a will of its own, and only the lucky ones get to experience gains. However, there are also many who disagree. To them, it all revolves around following trends, gaining knowledge, and being aware of new information as soon as it surfaces, and using this data to modify their trading moves.

It is the second kind of traders that are seeking to find patterns and use as much available information as possible to make a move, rather than relying on luck. So far, it would appear that this type of traders might have a point and that the ‘unpredictable’ market can be at least somewhat tamed by knowing the right things at the right time.

This is why data mining for the purpose of successful trading has become quite huge in recent years.

 

What is data mining and how does it help?

As many likely know, the internet is a goldmine of information of all kinds. However, none of this data comes on a silver platter to those who need it. It is there, but those who need to find it and use it have to work for it, collect it from different sources, and piece useful information together in order to be able to use it.

The process of doing so is called data mining, where individuals, companies, organizations, and other entities use certain kinds of software to browse the web and collect potentially useful information. The information then gets analyzed, and useful bits get grouped and studied.

Traders then draw conclusions from this information and use their newly-gained insights for developing and using different techniques and strategies for trading purposes.

Most of the time, this comes down to automatic trigger buying/selling orders, which are made by various decision-making algorithms. In a way, the entire process can be explained by saying that it is an intelligent treatment of present and past financial data. The data is then used for predicting the future behavior of the stock market.

In other words, the algorithm is trying to spot patterns that stock prices may have followed in the past and calculate the likelihood of repeating the same behavior. If the likelihood is high, the algorithm acts on these predictions, thus making a profit for its trader.

Simply put, stock trading can be viewed as an AI problem, which can be solved by data mining and analysis done with competent software.

Does it work?

When you think about it, this procedure is not much different from what stock experts and analysts do when they are writing their own forecasts and predictions on the price of the stock. They view the past behavior of the price and try to find patterns. After that, they use different bits of data they have collected, such as the stock price’s behavior during the same period over a number of years, some outside elements, the market sentiment, and alike.

The algorithm would do the same, only it would have collected a lot more information from a lot more sources, and it would analyze data and make conclusions without emotion, and therefore, it should come up with more precise results. In theory, the process should be able to work, even if not with a 100% success rate, as some aspects of trading truly are unpredictable.

There are also stock market’s limitations that may influence the outcome, such as a major price change after closing time, or on weekends and holidays. However, the negative effects of such limitations could still be minimized by using appropriate trading strategies, and it all depends on the type of risk the trader is willing to take.

 

Conclusion

In the end, it is likely that data mining can help traders make better decisions and earn a better profit by applying information collected and analyzed by competent algorithms. Of course, there are some aspects of the trading world that are, and will always be unpredictable.

However, when the markets are relatively calm, the data analyzing software should have significantly greater chances of making the accurate prediction, and helping you, the trader, see larger gains and minimize the risks.

If you purchase my data mining, you are going to increase your odds greatly of not only making money but staying on the right side of the trade!

 

Dr. Keith

Photo by Burak K from Pexels

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