“What if I told you that there was a computer algorithm, created by two physicists, that can predict future movements of the stock market?” The question asked by Dr. Murphy and Dr. Chu in their newest study has been answered with incredible accuracy.
This particular algorithm is based on an entirely new form of mathematics called nonlinear dynamics, which looks at how changes in one variable lead to changes in other variables over time – rather than simply looking at its current value. Marc Chaikin, a renowned and successful investor, has made his predictions, and you can read Chaikins prediction here.
What Is Computer Algorithm?
If you’ve seen Captain America, you will notice how Armin Zola, the German scientist, who was working for the Red Skull, had a computer in his lab that could read and predict people’s movements by decoding the electrical impulses in their brains.
This is essentially what a computer algorithm does. It takes in data, breaks it down into its simplest components, and looks for patterns. Once these patterns are found, the algorithm can then make predictions.
Wall Street and the Stock Market
The stock market is essentially a collection of stocks or shares in businesses bought and sold between investors. The price of these stocks goes up and down depending on how well the company is doing, how much people believe in it, etc.
When someone buys a stock, they are buying a piece of that company and, if the store goes up in price, they can sell it later for a profit. If the stock goes down, they may lose money on the investment.
The stock market often makes quick and easy money, but it’s also precarious. This is why it’s crucial to understand how it works and have a strategy before investing.
All of this is why predicting the stock market with computer algorithms has become so popular over the past decade – because people are looking for ways to make money without taking on too much risk.
Many different computer algorithms can be used in various situations, but the most popular ones for predicting Wall Street are neural networks and genetic algorithms.
Neural Networks
A neural network is a computer algorithm that tries to mimic how the human brain works. It takes in data, breaks it down into its simplest components, and looks for patterns. Once these patterns are found, they can make predictions.
The advantage of using a neural network is that it can learn independently. It will keep modifying its predictions as it gets more and more data, making it very accurate. The disadvantage is that it’s slow to train – meaning it takes a lot of data for the network to learn how to make accurate predictions.
The Bottom Line
Pretty neat, right? Now you can have better chances at making Wall Street bets that can help you grow your wealth. The next step is to contact a CFA to learn more about the stock market and how it works – just in case you’re interested.
