Challenge

With the advent of electronic exchanges, liquid markets have become a confusing cocktail of day-traders, institutional investors, fundamental producers and consumers, and high frequency algorithms. For even the most experienced trader, the complexity of modern markets represents a difficult puzzle. Price movements are now shaped by an unprecedented amount of real-time information which must be continually processed.

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Approach

In every sense, trading is a game. There is directly accessible fundamental information. There is important indirect information that must be handicapped. There are very specific rules of execution. And, most importantly, there is a score (ROI) to be kept. Despite all of the technological advances in trading, information is still processed through a human (or human directed) filter. Ultimately, it is the behavior of traders stimulated by data that dictates price movements.

Modern computing power can enable this game to be played at a very high speed with an enormous depth of data. Our methodology incorporates a “clean slate” analysis of plausibly causative factors in combination with advanced statistical, mathematical, machine learning and behavioral modeling techniques.

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Edge

Powerful tools require equally powerful discipline. Cognitive biases can disrupt the accuracy of apparently successful trading models. Through our multi-tiered validation approach, we can accurately assess the effects of randomness and provide compelling evidence of potential edge before the implementation of live trading.

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